COMPLIANCE COSTS

 

Given the huge costs involved in the CCS deployment, the most interesting thing is that EPA believes the proposed rule will have no notable compliance costs associated with it. This is  because electric power companies would be expected to build new EGUs that comply with the regulatory requirements of the EPA proposal even in the absence of the proposal, “due to existing and expected market conditions”.

 

Because of the economics of the energy sector, the EPA and others project that NGCC will be the predominant choice for new fossil fuel-fired generation even absent the new EPA rule.

 

It may be surprising but in its base case analysis, EPA does not project any new coal-fired EGUs without CCS to be built in the absence of EPA proposal through 2030.

 

This is the explanation for the EPA assertion that the proposed rule will not impose additional costs by 2030. It appears that everything depends on the appropriate assumptions...

 

To be strict EPA also examined a scenario with both increased future natural gas prices and increased future electric demand. In this sensitivity case, EPA saw small amounts of coal-fired generation being built in 2030. Even under this sensitivity analysis with small amounts of new coal generation under conditions of high natural gas prices and simultaneously high electricity demand in 2030, EPA however does not project that the proposed rule will impose notable costs upon sources.

 

It is obvious that the above assessments are US-specific. This is due to the relative abundance of the shale gas in that country.

 

INDUSTRY REACTION

 

So, the new standard will generally require that new power plants emit CO2 at a rate no greater than that of a natural-gas-fired power plant. Such plants emit about 60 percent less greenhouse gases than coal plants.

 

It is pointed out that the only coal plant to break ground during the Obama administration is a carbon capture and sequestration plant — Southern Co.’s Kemper County plant in Mississippi (which is federally-subsidized).

As the Post reports, “utility companies have announced that they plan to shut down more than 300 boilers, representing more than 42 gigawatts of electricity generation — nearly 13 percent of the nation’s coal-fired electricity— rather than upgrade them with pollution-control technology.”

The new EPA rule is now open for public comment for 60 days.



New coal-fired power plants without CCS banned in the US

See the review of the basic parameters for the new carbon standard.

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THRESHOLDS

Environmental Protection Agency (EPA) Standards of Performance for Greenhouse Gas Emissions for New Stationary Sources: Electric Utility Generating Units (EGU) represents the first-ever limit on greenhouse gas emissions in the United States that would require new fossil fuel-fired EGUs greater than 25 megawatt electric (MWe) to meet an output-based standard of 1,000 pounds of CO2 per megawatt-hour (lb CO2/MWh), based on the performance of widely used natural gas combined cycle (NGCC) technology.

The proposed standard is based on the demonstrated performance of natural gas combined cycle (NGCC) units, which are currently in wide use throughout US.

It may be useful to recall in this place that the average US natural gas plant, which emits 800 to 850 pounds of CO2 per megawatt, meets that standard; coal plants emit an average of 1,768 pounds of carbon dioxide per megawatt.

New coal-, coal refuse-, oil- and petroleum coke-fired boilers and IGCC units should also be able to meet the new standard, however, by employing carbon capture and storage (CCS) technology.

APPLICABILITY TO NEW SOURCES ONLY

The EPA new requirements are strictly limited to new sources and stopped short of imposing any restrictions on the US existing coal-fired fleet.

ALTERNATIVE OPTION FOR COMPLIANCE

New coal-fired or pet coke-fired units could meet the standard either by employing carbon capture and storage (CCS) of approximately 50% of the CO2 in the exhaust gas at startup, or through later application of more effective CCS to meet the standard on average over a 30-year period.

According to EPA the 30-year averaging option could provide flexibility for owners and operators of coal or pet coke units implementing CCS at the outset of the unit’s operation that were designed and operated to emit at less than 1,000 lb CO2/MWh to address startup concerns or short term interruptions in their ability to sequester captured carbon dioxide.

Coal- and pet coke-fired EGUs that use this compliance alternative must meet an immediate performance standard of 1,800 lb CO2/MWh (gross) on a 12-month annual average basis, which can be achieved by a “supercritical” efficiency level, during the period before installation of CCS.

By no later than the beginning of the 11th year, the facility would be required to meet a reduced CO2 emission limit of no more than 600 lb CO2/MWh (gross) on a 12-month annual average basis for the remaining 20 years of the 30-year period, such that the weighted average CO2 emissions rate from the facility over the 30-year time period would be equivalent to the proposed standard of performance of 1,000 lb CO2/MWh.

TRANSITIONAL RULES

EPA is not proposing standards of performance for existing EGUs whose CO2 emissions increase as a result of installation of pollution controls for conventional pollutants, or for proposed EGUs, which are referred to as transitional sources, that have acquired a complete preconstruction permit by the time of this proposal and that commence construction within 12 months of the EPA proposal.

As a result, those transitional sources would not be subject to the standards of performance proposed in the rules.

Approximately 15 proposed EGUs have received permitting authority approval for their preconstruction permits, but may not have “commenced construction” by the date of the proposed rulemaking.

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COMPLIANCE COSTS

Given the huge costs involved in the CCS deployment, the most interesting thing is that EPA believes the proposed rule will have no notable compliance costs associated with it. This is because electric power companies would be expected to build new EGUs that comply with the regulatory requirements of the EPA proposal even in the absence of the proposal, “due to existing and expected market conditions”.

Because of the economics of the energy sector, the EPA and others project that NGCC will be the predominant choice for new fossil fuel-fired generation even absent the new EPA rule.

It may be surprising but in its base case analysis, EPA does not project any new coal-fired EGUs without CCS to be built in the absence of EPA proposal through 2030.

This is the explanation for the EPA assertion that the proposed rule will not impose additional costs by 2030. It appears that everything depends on the appropriate assumptions...

To be strict EPA also examined a scenario with both increased future natural gas prices and increased future electric demand. In this sensitivity case, EPA saw small amounts of coal-fired generation being built in 2030. Even under this sensitivity analysis with small amounts of new coal generation under conditions of high natural gas prices and simultaneously high electricity demand in 2030, EPA however does not project that the proposed rule will impose notable costs upon sources.

It is obvious that the above assessments are US-specific. This is due to the relative abundance of the shale gas in that country.

INDUSTRY REACTION

So, the new standard will generally require that new power plants emit CO2 at a rate no greater than that of a natural-gas-fired power plant. Such plants emit about 60 percent less greenhouse gases than coal plants.

It is pointed out that the only coal plant to break ground during the Obama administration is a carbon capture and sequestration plant — Southern Co.’s Kemper County plant in Mississippi (which is federally-subsidized).

As the Post reports, “utility companies have announced that they plan to shut down more than 300 boilers, representing more than 42 gigawatts of electricity generation — nearly 13 percent of the nation’s coal-fired electricity— rather than upgrade them with pollution-control technology.”

The new EPA rule is now open for public comment for 60 days.