Carbon Capture & Seriously Need a Price on Carbon Emissions

Posted on August 5, 2011 by Amy Boyd

The Environmental Protection Agency proposed a rule yesterday that would exempt carbon dioxide injected into underground carbon capture & storage (CCS) wells from regulation as hazardous waste, so long as the CO2 is held in wells designated for that purpose under the Safe Drinking Water Act.  In its press release announcing the program, EPA noted that the purpose of the regulation -- as well as its prior rulemakings under the Clean Air Act to require emissions reporting by CCS facilities, and the Safe Drinking Water Act to require appropriate siting, construction and monitoring of CCS wells -- was to reduce barriers to the use of CCS and promote the technology, which has yet to be proven at a commercial scale.  If the EPA is behind it, what more could CCS need? 

The interagency task force charged with evaluating barriers to CCS concluded in a report released last year that the chief obstacle for CCS was regulatory uncertainty, since most of our environmental laws do not contemplate such a technology.  The task force recommended that EPA implement regulatory changes such as this hazardous waste clarification. 

But the biggest barrier remains -- without comprehensive climate legislation and a price on carbon, there is no stable framework to encourage investment.  And this barrier is taking its toll.  This uncertainty is why AEP recently shelved plans to build a $668 million CCS retrofit on its Mountaineer coal-fired electric plant in West Virginia.

Although the outlook for CCS projects within the U.S. is thus uncertain, the United Nations' support of the technology could prompt some CCS projects in developing nations.  E&E reports today that a decision to allow CCS projects to be eligible for credits under the Clean Development Mechanism may soon be forthcoming, if technical issues such as monitoring and verifying reductions, and environmental safety and insurance coverage can be resolved.  

Other international organizations are also jumping on the CCS bandwagon.  A recent report by the International Energy Agency's Greenhouse Gas R&D Program touts the potential benefits of combining CCS with biomass facilities, particularly in Asia and Latin America.  The IEA theorizes that because the plant life used to make biomass fuels absorbs CO2 from the atmosphere, subsequent storage of the CO2 released from highly efficient biomass processes could actually reduce global atmospheric concentrations of carbon.  It's like how celery has negative calories.

The report asserts that we technically have the potential to annually remove from the atmosphere up to 10 gigatons of CO2 -- or about 1/3 of annual global emissions -- through the use of biomass integrated gasification combined cycle plants and CCS.  A more economically-feasible implementation of these nascent technologies would still lead to reductions of 3.5 metric gigatons of CO2 annually.  Notably, even this "feasible" scenario assumes that CO2 will be priced at 50 euros ($71) per ton, worldwide.  Even in dreams of what could be, the development of CCS still has to face the obstacle of the price on carbon.

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EPA Releases Rules for Carbon Capture and Storage

Posted on November 24, 2010 by Amy Boyd

One thing supporters of coal will be thankful for tomorrow is this week's announcement by the Environmental Protection Agency (EPA) that it has finalized two rules governing the underground sequestration of carbon dioxide.  Both rules are designed to support and facilitate the commercial development of safe, large-scale carbon capture and storage (CCS) technologies, perceived by many to be the best hope for the future use of coal.

The first rule creates a new "Class VI" injection well under EPA's Underground Injection Control Program through the the Safe Drinking Water Act.  Elements of the rule are based on the existing regulatory framework, but tailored to address the unique issues carbon dioxide can create, such as the fact that it floats and moves within subsurface formations, and corrodes its surroundings when combined with water.   Although CCS has been used on a smaller scale for years, such as to facilitate enhanced recovery of oil, the large volumes that are anticipated to be injected as part of a full-scale deployment of the technology present different issues entirely.

The rule provides guidance on some, but not all, of the areas highlighted as in need of further support in the August report of the Interagency Task Force on CCS.  For instance, the rule outlines characteristics for siting CCS wells, requirements for construction and operations, automatic shutoff systems.  It also provides a recommended 50-year monitoring program post-injection as well as clarifying financial responsibility requirements for emergencies, site closure and cleanup.  The rule also provides considerations for transitioning Class II permits for existing enhanced recovery wells to Class VI, based primarily on whether the primary purpose is assisting with the recovery of oil or long-term storage of the CO2 itself.

The second rule finalizes the requirements for CCS ventures under the mandatory greenhouse gas reporting rule (Subparts RR and UU of 40 CFR Part 98).  The rule requires permit holders to create a plan to monitor, report and verify the amount of CO2 sequestered, using a mass-balance approach, and could lay the groundwork for those captured tons to become valuable offsets under future policies.  The reporting requirement begins in 2011.

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The House Climate Bill: Details on the Energy Provisions

Posted on April 6, 2009 by Eric Macaux

 As we have already noted, Representatives Waxman and Markey released a 648-page discussion draft energy bill last week that provides the first comprehensive look at how Congress may approach the nexus of energy, job creation, and the environment. Although this bill is only being released in discussion draft form, as the first major energy volley by Congressional Democrats, it will undoubtedly have a major influence on the debate in Washington. 

In addition to the global warming provisions that we posted about last week, clean and renewable energy occupies a significant place in the draft bill.  The first 157 pages are dedicated to energy, with additional provisions scattered throughout. 

Title I, the clean energy section, addresses four broad policy areas: (1) creation of a national renewable energy standard, (2) carbon capture and geologic sequestration (“CCS”), (3) low-carbon vehicles and transportation fuels, and (4) electricity transmission including smart grid technologies. In addition, the draft creates a State Energy and Environment Development Fund ("SEED Fund") to act as a repository for monies received through federal energy programs.  Each of these provisions is an example of how policy leaders are beginning to see synergies between job creation and environmental stewardship. 

We take a deeper dive into the energy provisions after the jump.

National Renewable Energy Standard

The centerpiece of the renewable energy provisions is the creation of a new renewable energy standard ("RES"). The RES would operate like a national version of the renewable energy portfolio standards already in place in many states. Load-serving entities such as utilities would be required to purchase an escalating minimum percentage of their load from qualified renewable resources. Compliance is demonstrated through the buying and selling of renewable energy certificates ("RECs"), where each certificate represents 1 MW of renewable power. If an entity fails to buy enough RECs to meet its compliance obligation, it may make alternative compliance payments on a dollar-per-MWh basis. Banking RECs for up to three years is allowed. 

State-run renewable portfolio standards have been a major driver of growth in the renewables space, but whether a federal RES can be as successful on a national scale is a hotly-debated question. 

Although the mechanics of the RES may sound familiar, several details are particularly noteworthy:

·         The draft establishes an aggressive RES goal, beginning with 6% of load in 2012 and 2013 and increasing to 25% of load by 2025. By way of comparison, the Energy Information Administration reports that renewable energy represented approximately 3% of electricity sales in 2007.

·         State governors may elect to meet one fifth of the RES goal though energy efficiency measures if the compliance entities within the state are subject to the Federal Energy Efficiency Resource Standard (established by Title II of the draft)

·         The price at which federal RECs will trade is unknowable at this point, but the alternative compliance payment provisions at least provide a sense of what the price cap is. The RES sets the alternative compliance payment at the lesser of 200% of the average price of a federal REC or $50 per MWh (adjusted annually for inflation).

·         Distributed generation facilities may benefit from a 3x REC multiplier, meaning they receive 3 RECs for each MWh generated.

·         The draft creates a Renewable Energy Deployment Fund to receive alternative compliance payments and distribute the proceeds back to retail electric suppliers that met - at least in part - their RES obligations through the purchase of RECs. A supplier would receive these funds in proportion to number of RECs it purchased.

·         Judicial review includes a citizen suit provision, which gives standing to "any person who will be adversely affected by a final action taken by the Secretary [of Energy]".

·         If a renewable generator has an existing power sales contract with a retail supplier that does not specify which party owns any RECs that may be created, the draft provides that all RECs will be issued to the supplier and not the generator.

Carbon Capture and Geologic Sequestration

·         The Secretary of Energy, Administrator of the Environmental Protection Agency, and other agency heads, are directed to prepare a report that details the legal and regulatory barriers to wide-scale deployment of CCS. 

·         Creates the Carbon Storage Research Corporation, which would operate within the Electric Power Research Institute and be lead by a board of directors that is comprised of representatives from utility companies, consumer groups, generators, fossil fuel producers, and environmental organizations. The Corporation would be allowed to collect between $1.0 and 1.1 billion annually through utility assessments, and the funds would be used to provide grants and other assistance to projects that promote CCS commercialization.

Transportation: Biofuels and Electric Vehicles

·         A new low-carbon fuel standard for transportation fuels, emphasizing advanced bio-fuels.

·         Requirements that state regulators and utility companies develop plans to better accommodate hybrid-electric vehicles, with special emphasis on the development of a charging or batter-exchange infrastructure and integrating hybrid vehicles into the distribution system.

·         Financial support for car companies retooling their manufacturing lines to build plug-in electric vehicles and purchase domestically-produced vehicle batteries.

Smart Grid and Transmission

·         The draft requires the EPA and DOE to evaluate the cost-effectiveness of integrating smart-grid technologies into Energy Star products.

·         Requires the development of peak demand reduction goals for load-serving entities beginning in 2012. Although the draft allows states or utilities to establish the percentage reduction goals, it specifies that the goal should be that which is “realistically achievable with an aggressive effort to deploy Smart Grid and peak demand reduction technologies and methods”.

·         Directs FERC to adopt comprehensive planning principles for a national electric grid and coordinate with regional transmission organizations such as ISO-NE.
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