What does a 32% reduction in power plant CO2 emissions by 2030 that really mean?

Let’s start with the data.

The U.S. Energy Information Agency (EIA) has published its “Analysis of the Impacts of the Clean Power Plan”, and within it, It has evaluated a number of scenarios and included the relevant 2005 and 2013 historical data used as the referenced starting points.

The scenarios of most interest include the Reference Case (AEO), as published in the Annual Energy Outlook 2015 (AEO2015), and the Base Policy (CPP) reflecting the full implementation of the Clean Power Plan.

Two sensitivities for these cases are presented; the High Economic Growth (AEOHEG), and the High Oil and Gas Resource (AEOHOGR). These sensitivities are shown for both the AEO Reference Case and for the CPP Policy Case. The combination of High Economic Growth AND High Oil and Gas Resource is not presented. The red numbers in the following tables are my best guess at the combined effects.

The 2005 reference value for Electricity Production is 2416Mt. Therefore, a 32% reduction would mean a target of 1643Mt by 2030. (Mt) is the abbreviation for million metric tonnes (2416Mt = 2.416Gt).

The base CPP case allows existing coal-fired plants to operate at a higher utilization rate, rising from a low of 60% in 2024 to 71% in 2040.

There is a Policy Extension case (CPPEXT) which extends CO2 reduction targets beyond 2030 and assumes a further reduction in CO2 emissions from the power sector to 45% below 2005 levels by 2040. The 2040 target for the Policy Extension case is 1329Mt and is presumed to be met with by a further shifting of power generation from coal to natural gas.

Here are the 2030 values, presented in the AEO2015 along with the new target just announced by President Obama. I have also presented the AEO 2040 cases.There are no 2050 cases in the AEO2015.

CO2 Emissions from Electricity Production - Values are Million metric tonnes (Mt)

Does a 32% reduction in Electricity Production by 2030 get us to a 2°C/450ppm target by 2050?

Firstly, no one is asking this question.

The following charts were presented by the EPA at a Supercritical CO2 Conference in 2014.They are the results of a road-mapping exercise that looked at the CO2 emissions issue through 2050.

Source: DOE SCO2 Conference 2014, as presented by EPA

The Baseline Scenario lines up with the roughly 5600 – 6000Mt levels for the U.S. baseline for all sectors, depending on which data set is being used. The Baseline Scenario is ~2200Mt level for Electricity Production and shows an early 10% decline in 2030, but then remaining relatively constant at 2000Mt through 2050.

The 50% reduction strategy indicates the 5600Mt dropping to 4400Mt by 2030, and to just under 3000Mt by 2050. The previously reported MIT-Mike Orcott analysis indicated a U.S. goal of 1300Mt, shown as 1.3Gt, would be required to achieve a 2°C/450ppm target. This seems consistent with the 50% CO2 Reduction road-mapping data.

In the 50% reduction scenario, the Electricity Production contribution is 1000Mt by 2030, dropping to 200Mt by 2050. The 2030 value appears to be a 38%, “fair share” value for Power Generation, while the 200Mt in 2050 indicates a disproportionately larger contribution from Electricity Production, consistent with its ability to capture carbon at its large point sources. On a proportionate basis, CO2 from Electricity Production in 2050 might be 500Mt.

These two values, 200 and 500Mt, represent the 2050 target range for Electricity Production to achieve its share of a 2°C/450ppm target.

The Obama 2015 goal of 1643Mt by 2030 is not materially different from the two CPP sensitivity cases, shown either individually, or with the combined effect.And, it does not matter whether the 2030 or the 2040 comparison is used. In all but the Policy Extension case, the emissions from the Electricity production is still 3-4X what would be required to achieve a 2°C/450ppm target by 2050.

The Policy Extension case, which presumes a continued shift from coal to gas but lacks specifics, is still 3X what would be required. Some would call this “magical thinking”.

So, the short answer is that 32% by 2030 is a start, but these actions alone and their simple extensions are not nearly good enough!

The Policy Extension is almost entirely dependent on a further shift from coal to natural gas generation, plus added renewables. As reported earlier, the effect of the coal-to-gas shift may be overstated. In addition, all these cases seem to ignore any shift to electric vehicles and the attendant increase in power generation required to support it.

Simply stated, in order to achieve a 2°C/450ppm 2050 goal, we have to address the emissions from NGCC power plants. We can certainly apply CCS to NGCC power plants before 2030, but the EPA has chosen to defer this opportunity through their 1000 lb- CO2/MWh emissions standard threshold, which allows NGCC power plants to operate completely unabated.

The most direct approach would be to apply CCS to NGCC and use the lower cost of natural gas to offset the added cost of CCS. This approach would not require an entirely new power plant concept, as is the case with IGCC or whatever, and we would actually then be on the CCS learning curve.

It appears that the EPA is avoiding the “opportunity” to implement CCS by setting the regulations at a level that does not require it, banking on fuel-switching to make progress. And, yes, progress is being made, but we are knowingly not on a trajectory that will deliver 2°C/450ppm by 2050.

I think that this is why all the targets are expressed as percentage reductions rather than progress toward a defined end goal.

EPA Clean Power Plan 2015 Rev4.pdf

You may recall all the hoopla surrounding the reduction in the U.S. CO2 emissions in 2013, coincident with new-found shale gas resources. We had turned the corner on CO2 emissions…a true eureka moment!

This is what the U.S. Energy Information Agency published at the time. The 2416Mt and the 2053Mt values still exist in EIA’s May 2015 Analysis of the Impacts of the Clean Power Plan.

Note: million metric tonnes (Mt) is sometimes abbreviated as MMmt as in the graphic above.

On July 21, 2015, Nature Communications published a fascinating analysis of U.S. CO2 emissions during same 1997-2013 period. The study was led by University of Maryland’s Klaus Hubacek in cooperation with Steven Davis, UC Irvine; Kuishuang Feng and Laixiang Sun.

Here is the graphic that they published, summarizing their findings. Fuel mix is the orange bar:

A few of their conclusions:

“Commentators in the CO2 scientific community and media have linked the two trends, celebrating the climate benefits of the gas boom…..

Recently, the Third National Climate Assessment of the United States Global Change Research Program also adopted this conclusion, stating that the decrease in US CO2 emissions was ‘largely due to a shift from coal to less CO2-intensive natural gas for electricity production’.

Yet, despite potentially significant implications for US climate and energy policy, there has been no quantitative analysis of whether the gas boom and changes in the fuel mix of the power sector are indeed driving the decrease in US CO2 emissions…..

….We conclude that substitution of gas for coal has had a relatively minor role in the emissions reduction of US CO2 emissions since 2007.

…. The large decrease (9.9%) in US CO2 emissions between 2007 and 2009 was primarily the result of the economic recession…

……the modest effect of changes in the fuel mix of the energy sector on emissions in recent years suggests that further increase in the use of natural gas may be of limited benefit in decreasing emissions. This is because barring technology-specific policies (for example, Renewable Portfolio Standards); recent studies have shown that gas does not substitute for coal only…

….. Growth of emission-free technologies such as solar, wind and nuclear energy is also limited while gas is cheap…. In these studies, future increases in natural gas use act to both reduce domestic coal use and slow the growth of renewable energy, resulting in little net change to cumulative CO2 emissions.

…..a growing number of studies also show that increased leakage of methane from new natural gas infrastructure can offset CO2 reductions relative to coal…

…..Decreases in residential gas prices may lead to rebound effects if people spend some of the money they saved heating their home on carbon- and energy-intensive goods….

…..And finally, decreased domestic demand for coal has enabled an increase in US coal exports to eager and growing overseas markets.”

The new EPA Clean Power Plan is largely built on fuel switching and renewables deployment.

The article may be found here:

http://www.nature.com/ncomms/2015/150721/ncomms8714/full/ncomms8714.html

Impact of Fuel Switching on CO2 Emissions Rev3.pdf

There is ample information on various DOE websites defining cost and performance baselines for the various types of power plant options currently in today’s available mix. I used DOE/NETL- Baseline 341/082312, August 2012, and DOE/NETL- Baseline 2010/1397, November 2010.

The competitive scenario is totally dictated by the 1000 lb-CO2/MWh emissions standard promulgated in the EPA New Source Performance Standard (NSPS), first released in 2014. Under that requirement a new Supercritical Pulverized Coal plant (SCPC) with Carbon Capture (CCS), Case 12, is competing against a Natural Gas Combined Cycle (NGCC) plant without CCS, Case 13.

I use the term “competition” loosely, because given this threshold level; it is hardly a fair fight. How un-level is it?

Grossly unlevel.

Look at Cases 12, the SCPC w/CCS and compare it to Case 13, the NGCC w/out CCS.

• The SCPC w/CCS plant is 5X the first cost
• And, the efficiency of an SCPC w/CCS is ½ at 28.4% vs. 50.2%
• The Levelized Cost of Electricity (LCOE) for the NGCC without/CCS is ½ that of the SCPC w/CCS and this is based on $6.13/mmBtu cost for natural gas.
• If the current price for natural gas is considered, the LCOE is 1/3 that of the SCPC

And, you wonder why gas turbines have had record levels of sales??

There are some who would have you believe that this is purely the result of low gas prices, and that this is “just the market place exerting itself”. This is hardly the case. Yes, the price of gas is a factor, but the real driver is that CCS is required in Case 12, but not for Case 13. Yes, the price of natural gas is a huge accelerant, but still that of an accelerant.

The Coal Industry has been spending its political capital trying to make the NSPS threshold simply go away, in which case the competitive comparison would be Case 11 vs. Case 13. In such a comparison, the first cost for the SCPC is 3X and the efficiency at 39.3% vs. 50.2%.

The Coal Industry might want to consider a strategy to push full CCS, which would then position their Case 12 against the NGCC Case 14. The first cost difference would be 2.5X and the efficiency would be 28.4% for the SCPC w/CCS vs. 42.8% for the NGCC w/CCS. Not pretty, but they could actually have the environmentalist community on their side.

The recently announced Clean Power Plan pretends to be agnostic on how each of the states reach their assigned targets, but behind the targets themselves is the built-in assumption that NGCC’s without will provide a ~70% contribution, which would then be driven by the same 1000 lb-CO2/MWh threshold.

The unanswered question in all of this is whether or not this 1000 lb-CO2/MWh threshold, either explicit or implied, reaches the presumed target of 2°C/450ppm. It should be noted that neither the NSPS nor the CPP mention a target, let alone a target of 2°C/450ppm.

It is hard to reach a target if you don’t have one, but on second thought it is actually easier to reach a target if you don’t have one!

Current Competitive Positioning - Rev4.pdf

The recent Intergovernmental Panel on Climate Change (IPCC) issued its Annual Review - AR5 with a graphic that may help frame the Climate Change issue.

The notion of a CO2 Budget has always existed, but the published information is usually expressed in percentages, or a 2°C/450 ppm temperature/CO2 concentration combination that creates a scientific aura around the issue.

This aura allows cover for those who hide behind the “I am not a scientist” mantra.

Since many of those in “hiding” usually profess great competency in planning and budgeting, one would think that the notion of a CO2 Budget would be in their “wheelhouse”.

The following table is extracted from BP’s Annual Statistical Review of Worldwide Energy – 2015, available as a downloadable Excel spreadsheet…..thank you BP. The full table provides a consistent basis for the annual CO2 Emissions by country back through 1965. I have extracted the most recent data for the U.S., China and India to help put this budget into perspective.

The percentages are the 4-year compounded growth rate of the total.

The big take-away is that the world released 35.5Gt (35,498.7 Mt) of CO2 in 2014, increasing at almost 1.88% per year, averaging the averages. At this rate we will reach the 2900Gt budget in 2035 and on an increasing trajectory, headed toward 69Gt by 2050.

The following graphic indicates a 58Gt, 6°C trajectory, which we are currently exceeding, as well as 40Gt and 16Gt trajectories associated with 4°C and 2°C, respectively.

To reach the 16Gt level by 2050 requires a 2.19% per year reduction and, of course, would be on a declining trajectory. The U.S. component of this 16Gt target is shown as 1.3Gt. The power generation component of this 1.3Gt U.S. total is 0.5Gt, or 500Mt, based on its historical 38% contribution.

It should also be noted that The U.S., China and India, the three biggest offenders are responsible for 50% of the CO2 released.

These numbers are useful in understanding and analyzing the various regulatory and administrative initiatives currently being discussed.

The CO2 Budget - Lets Talk Numbers Rev3.pdf

This is where we are on the atmospheric CO2, according to the recent IPCC 5th Assessment Report.

The worldwide CO2 emissions in 2013 were 36.1 Gt. The chart shown below models a full spectrum of scenarios included in the assessment along with a 2014 estimate. Currently, we appear to be tracking on the RCP8.5 trajectory.

This is where that CO2 came from in 2011 and an associated forecast:

The U.S. emissions from Electric Power were 2023 Mmt (2.023 Gt) in 2012. The overall U.S. total was 6363 Mmt (6.363 Gt) emitted, but a 979 Mmt (0.979 Gt) credit for land use is an applied, yielding a U.S net of 5383 Mmt (5.383 Gt).

Power plants accounted for 37.5% of the net, with the land use credit or 31.8% of the overall CO2 produced.

There are those who advocate that renewables are the way forward, and they are correct, but appreciate neither the scale of the problem, nor the path toward that realization.

Renewables represented less than 2.0% of the world energy consumption in 2012, while the U.S. alone is slightly higher at 2.2%. Natural gas and coal represented 50% of the U.S. total.

We have to deal with these emissions as we transition to the renewables future, and we have a long way to go.

The gas industry and their advocates have “sold” the notion that natural gas is that “bridge” and therefore, the answer.

Natural gas is a fuel.When burned in a power plant it produces huge amounts of CO2, albeit “½ of coal”, but huge amounts nonetheless.

The U.S Energy Information Agency produced a generation mix forecast for their Annual Energy Outlook 2014. Their Reference Case scenario shown below and indicates coal-fired resources producing approximately 1,600 billion kilowatt-hours, with natural gas-fired units producing at, more or less the similar level.

There are High & Low Resource companion cases, as well.

The following table approximates the Gt CO2/year emissions by type of fuel and in total for each of the three cases. It also indicates the power produced for each case.

The estimates include the EPA emissions targets of 1000 lb-CO2/MWh for Natural Gas Combined Cycle Power Plants and 1100 lb-CO2/MWh for Simple Cycle variants, as well as the assumption that these NGCC power plants are “half of dirty coal”. Coal is therefore approximately 2000 lb-CO2/MWh.

In all three cases, the CO2 emitted remain above 2.0 Gt per year in 2040, under the current & proposed regulatory framework.

If you believe the Carbon Conundrum, as presented below, the U.S. needs to limit CO2 output to 1.3 Gt in total in order to meet the 2°C/450 ppm target according the Mike Orcutt, as published in the M.I.T Technology Review.

Power Plants represented 37.5% of the net CO2 output in 2012. At this rate, their 2040 contribution would need to be 0.5 Gt.

To make the 0.5 Gt target with any of these EIA 2040 projections, power plants of all types need to capture approximately 80% of their CO2 emissions.

The “bridge” to a renewables future is Carbon Capture & Storage, not natural gas.

McKinsey Cost Curve, published in 2007, provides a useful roadmap for action. The curve presents a set of actions available to reach 450 ppm, including coal-to-gas conversions, CCS and nuclear. It is important to notice that the magnitude of these other options dwarf the coal-to-gas shift.

Unfortunately, the current/proposed EPA Power Plant Standards, as described below, have effectively eliminated CCS and nuclear from consideration.

The IPCC AR5 report specifically indicates that many scenarios cannot reach 450 ppm CO2 equivalent concentration by 2100 in the absence of Carbon Capture and Storage (CCS) and nuclear, reinforcing what the cost curve indicates.

We must address two overriding issues in order to meet any kind of Climate goal assuming there is one:

• Any regulatory standards must be technology neutral and not distort the competitive balance with “pet ideas” or favored solutions, nor provide dispatch order preference. The market mechanisms must be allowed to work without biasing outcomes.
• We need to establish a price/cost for CO2. Today, the price/cost is zero

There is a built-in assumption that if the EPA is involved, their requirements are likely to be way too stringent on behalf of the public interest. In this case, however, the EPA is implementing a set of regulations that appear to be little more than self-serving.

Based on the emission thresholds established in their recent regulatory initiatives, the EPA, with the help of “the Gas Team”, has made it clear that they have no interest in capturing CO2, most likely because they have no viable plan to deal with CO2, if captured. Instead, the EPA has written a standard that is so obviously skewed toward natural gas-fired units without CCS, that they have effectively made their CO2 problem “disappear”. They have done very little about our CO2 problem.

Specifically:

• The EPA levels of 1100 & 1000 lb-CO2/MWh for Natural Gas Simple and Combined Cycle gas turbine power plants respectively, allow all these plants to be built without doing anything about their CO2 emissions.
• These regulatory levels are the same levels of the current technology level Natural Gas powered units. They offer that these levels are consistent with the “Best Available Commercial Technology” or BACT, but this is the same thing as saying “Business as Usual”.
• Under these standards, a coal-fired power plant would have to be equipped with CCS and would be 4-5x more expensive with half the efficiency of a natural gas-fired power plant without CCS, completely distorting any semblance of a “level playing field”. The Gas Team likes this part.
• The EPA would have you believe that the price of natural gas is the underlying cause of the shift away from coal. Although convenient in deflecting criticism, such claims are disingenuous. The regulatory thresholds are the principal drivers.
• Neither the EPA New Source Performance Standard and nor its companion Clean Power Plan make mention of Climate Change, except in the abstract.
• There is no notion of a “CO2 target” to act as a driving force for improvement.
• In addition, there is no mechanism to establish a cost for emitting CO2.
• Unfortunately, this “Business as Usual” approach, is only dressed up to look like action and progress, but in that process, the approach is completely undermining the development of CCS and nuclear technologies, the very technologies essential to meeting a 2°C/450 ppm target .
• There is always discussion about driving the cost down with learning curve effects….We are not on the learning curve!

There is broad consensus among those that take Climate Change seriously that one of the most important actions we can take is to establish and allocate the true cost associated with CO2 emissions.

Two commonly discussed options include:

• Cap and Trade
• Carbon Tax

Cap and Trade comes in two parts. The “Trade” is easy. The “Cap” is arbitrary, political and given to political influence. Does anyone really trust politicians to set “Caps” objectively and in a timely manner?

Really?

There are issues with the Carbon Tax approach, as well:

• What do we call it… and is it a “tax”?
• How is the tax established? By whom?
• Where in the process is the tax assessed?
• In addition, what do we do with the money?

The “Fee & Dividend” is one Carbon Tax approach. This concept returns any tax proceeds, minus any administrative costs, back to individuals and businesses in the form of a dividend or rebate. Politicians favor this concept for the obvious reasons. Some variations on this theme can also include a disproportionate re-distribution of wealth element.

Unfortunately, the proceeds in the “Fee & Dividend” concept are not used to address the problem. The rebate is not an incentive to drive conservation efforts and in some cases may have the reverse effect. At best, the approach relies on some sort of politically contrived fuel price to influence behavior, but then only indirectly.

The approach is too complicated and requires political involvement to implement. We need to use the money to fix the problem.

I would like to propose an approach where the carbon tax is actually used address the problem directly. The principal elements of the approach are:

• Implement a “CO2 Waste Disposal Fee” that actually reflects the cost of dealing with the CO2 life cycle.
• Use the proceeds to build and operate CO2 pipelines to remote locations for underground storage in perpetuity.
• Federal Government assumes the role of Operator in Perpetuity using some form of a “Cemetery” business model.
• The “CO2 Waste Disposal Fees” are assessed where the CO2 is generated, i.e., the power plant or refinery. These organizations have well document and proven cost models that can serve a basis to objectively assess cost and needed cost recovery fees.
• The costs will be absorbed into the energy price, either in raw or converted form, and thereby influence both investment decision and consumer choice.
• “CO2 Off-take Agreements” for productive use of CO2 are encouraged and become credit to system cost.
• There is no such thing as “Clean CO2”. It is just CO2. The Waste Disposal Fee has to be fuel agnostic…no favorites allowed.
• The Renewable Energy Portfolio and accompanying dispatch order preferences must be earned in the competitive process, without subsidies or preferences, allowing load factors to be sorted out in the market place.

Professor David Victor, University of California made the comment:

“We are the first generation to experience the effects of Climate Change…..…..and, the last generation to be able to do something about it!”

I believe that this approach is where we will end up. The only question is how long will it take us to get there and how many other approaches we will have tried first.

CO2 Waste Disposal Fee.pdf