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BARRIERS AND INCENTIVES FOR DEPLOYMENT OF CARBON CAPTURE
UTILIZATION AND STORAGE Herbert Wheary
Michael KarmisGerald HillNino Ripepi
Environmental Considerations in Energy Production
September 21, 2015
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Benefits of CCUS Controls emission of carbon dioxide • Utilization of CO2 helps offset cost of carbon capture
• Extends life of existing fossil plants, esp. coal• Helps maintain a diverse and balanced power generation portfolio
• Can enhance recovery of domestic oil and natural gas
• May provide a safer medium for fracking, etc.
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Why target the Investor Owned Utilities?
• Utility sector produces about 30% of CO2• IOUs are largest component of that sector• Already highly regulated • Historically highly dependent on coal• Generally inventive and responsive in achieving compliance
• Agenda to convert them to renewables
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Electric Utility Business Model• Investor-owned, publicly traded• Mostly monopolies with franchised areas• Generally vertically integrated• Highly regulated by: FERC, EPA, PUC, etc.• Very capital intensive • Long term planning and investments• Taxed similarly to other industries• Subject to transparency
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Public Utility Commission• State regulation of Public Service Companies• Protects the “Public Interest”• Seeks balance between consumers and utility• Usually composed of three or five “judges”• Uses a “quasi-judicial” process with public participation
• Utility investments subject to prior review• Determines cost recovery & earnings allowed for utilities (sets rates)
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Major factors to consider• Uncertainty• National Policy• Financial• Legal• State Regulatory• Technology & Timing• Competing Technologies & Fuels• Infrastructure• Environmental Regulations• Public Participation
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Dealing with Barriers
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Factor: Uncertainty
Barrier/Impediment• Difficult for utilities and businesses to commit to
CCUS due to multiple open issues
Incentive/Remedy• Resolve outstanding issues to create confidence and
enable decision making on CCUS
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Dealing with Uncertainty
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Factor: National Policy
Barrier:• Lack of settled national policy on CO2 emission limits and controls
Incentive:• Work for reasonable CPP and SIP that embodies banking and trading of emission credits and allows time for CCUS to mature
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The Carrot and Stick Approach to Incentives
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Factor: Financial Barrier/Impediment:• High capital and unknown O&M costs• Gap between capture & transport cost, and its value to user• Possibly complex business structures
Incentive/Remedy:• Grants and cost sharing• Cost recovery from CO2 sales• State or local government bonds• Tax credits and exemptions• Assurance of recovery through electric rates• Sale of carbon credits or allowances
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More Barriers
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Factor: Legal
Barrier:• Unresolved questions of ownership, liability and risks
Incentive:• States should enact legislation clarifying/assigning ownership & liability until national policy in place
• Support uniform national policy
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Factor: State Regulatory Policy
Barrier:• Risk of PUC disapproval of CCUS project or denial of
cost recovery via ratesIncentive:• Make case for importance of coal in a balanced
energy portfolio• State legislation could guarantee cost recovery for
IOUs and other incentives for CCUS to reduce risk
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Compliance Timing is Critical
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Factor: Technology & Timing
Barrier:• Immaturity of emerging CCUS technologies and likely early CPP compliance dates
Incentive:• Work to extend compliance dates in CPP/SIP• Accelerate and proliferate scaled-up demos by providing federal grants and state support for cost sharing
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Competing Energy Sources
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Factor: Competing technologies and Fuels
Barrier:• Replacement of existing coal capacity by gas, etc. • Alternatives to CCUS, especially renewables
Incentive:• Work to target and reserve the coal units most
suitable for CCUS• Provide RPS-type incentives via legislation giving
CCUS parity with other low carbon options
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Factor: Infrastructure
Barrier:• Need for suitable user for CO2 for EOR/EGR and pipelines or other means for delivery
Incentive:• Support business model that includes incentives that facilitate third party as CO2 user and facilitates CO2 pipeline routing and permitting
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Factor: Other Environmental Regulations
Barrier:• Concern for impact of CO2 injection and possible contaminants from CCUS used for EOR/EGR
Incentive:• EPA already has rules in place under UIC• Develop/support long-term monitoring
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Factor: Public Participation
Barrier:• Activists and others may intervene in opposition to CCUS
and the continued use of fossil fuels• Utilities are subject to public scrutiny
Incentive:• Accelerate large-scale demos to develop track record • Use outreach and education to convey
understanding and benefits of project• Rally stakeholders and communities in support of
CCUS
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ConclusionThe NRDC calls CCUS a “win-win-win”BUT…• CPP compliance may be needed before CCUS is ready• Decommissioning of coal units reduces opportunities• Abundant natural gas and cheap oil blunt incentives• Large scale CCUS demos are needed now• Other barriers must be addressed• States need to play a larger role• Objective: reduce risk and UNCERTAINTY• The barriers can be overcome
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Barriers can be broken!
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BARRIERS AND INCENTIVES FOR DEPLOYMENT OF CARBON CAPTURE
UTILIZATION AND STORAGE Herbert Wheary
[email protected] [email protected]
Gerald [email protected]
Nino [email protected]