Capture at Coal-Fired Power Plants Hint: It doesnt appear to be - - PowerPoint PPT Presentation

Observations on Carbon Capture at Coal-Fired Power Plants

Hint: It doesn’t appear to be economic and there are significant risks for investors and ratepayers

David Schlissel June 17, 2020

Introduction

▪ There are now 21 of what the industry terms “large-scale” carbon capture facilities in the world ▪ However, only 2 of these capture CO2 from operating coal-fired power plants:

▪ Boundary Dam Unit 3 in Saskatchewan, Canada, and ▪ Petra Nova near Houston, TX, which is designed to capture the CO2 from a 240 MW portion of the flue gas from W.A. Parish Unit 8

▪ Seven new carbon capture projects have been proposed for existing U.S. coal plants.

Observations on Carbon Capture at Coal-Fired Power Plants 2

IEEFA’s Work Evaluating the Economic and Financial Viability of Capturing CO2 from Coal Plants

▪ IEEFA’s carbon capture team (myself, Dennis Wamsted and Karl Cates) has investigated several proposed coal plant carbon capture retrofit projects in depth and reviewed the limited publicly available information on the remaining proposals. In addition, we have reviewed the scientific and engineering literature on carbon capture. ▪ The evidence we have seen has led us to conclude that:

1. capturing CO2 from existing coal plants is uneconomic and the market in the U.S. for doing so, already limited, is shrinking fast. 2. retrofitting existing coal-fired power plants for carbon capture will prolong the operating lives of some units; instead of capturing CO2 from aging and uneconomic coal plants, the same money would be better spent on developing new renewable resources and on energy efficiency and thereby not produce the CO2 in the first place. 3. continuing to do research on capturing CO2 from non-coal sources is important, including from gas-fired power plants, industrial sources, as well as direct air capture.

3 Observations on Carbon Capture at Coal-Fired Power Plants

Plant-Specific Issues Determine the Financial Viability

• f Proposed Retrofit Projects

▪ What will it cost to retrofit existing coal plants for CO2 capture? ▪ How much CO2 will the retrofitted plant produce? ▪ How much of the CO2 will be captured? ▪ What will it cost to capture the CO2? ▪ What will it cost to generate electricity at the plant after it is retrofitted and will that cost be competitive with renewable and gas- fired resources? ▪ What revenues, if any, can be produced from selling the captured CO2 for enhanced oil recovery? ▪ Is it feasible to permanently store captured CO2 in underground repositories? ▪ How much of the costs will be subsidized by federal & state govt’s?

4 Observations on Carbon Capture at Coal-Fired Power Plants

The Federal Government is Heavily Subsidizing Carbon Capture in an Effort to Save to Coal Industry

▪ The federal government is spending well over one hundred million dollars to support site specific analyses and front-end engineering design (FEED) studies for proposed carbon capture retrofits at existing coal-fired power plants. ▪ The 2018 federal tax act increased the credits for carbon capture to $35 per metric ton for captured CO2 used in EOR and $50 per metric ton for CO2 permanently stored at an underground repository. ▪ However, our analyses show that even these subsidies will not be enough (1) to cover the full cost of carbon capture retrofits; (2) to protect investors from the full range of risks associated with operating coal plants after they are retrofitted for carbon capture; or (3) to protect ratepayers against the risk of higher electricity prices.

5 Observations on Carbon Capture at Coal-Fired Power Plants

U.S. Market for Carbon Capture Retrofits is Very Limited as Use of Coal is Declining Rapidly

Observations on Carbon Capture at Coal-Fired Power Plants 6

Moody’s projects coal will generate just 11% of U.S. electricity by 2030 – IEEFA believes this could happen even sooner. Very unlikely new coal plants will be built in the U.S., even with carbon capture.

Current Retrofit Proposals Assume Dramatic and Rapid Reductions in Capital Costs

▪ Proponents claim that capital costs of carbon capture retrofits will decline due to lessons learned from previous projects and economies of scale as project sizes increase. ▪ This has been the experience with some, but not all, new power generation technologies. ▪ For example, the cost of installing new utility-scale solar resources declining by nearly 70% between 2010 and 2018 as a result of the lessons learned and economies of scale in the manufacture and installation of 24.7 GW of new solar capacity. ▪ Similarly, the price of installing new wind capacity fell by 40% between 2009-2010 and2018 as a result of the lessons learned and economies of scale from the installation of 56 GW of new wind capacity. ▪ However, the promoters and supporters of retrofitting existing coal plants with carbon capture assume dramatic reductions in capital costs will be achieved in the very next plants to be built. ▪ In fact, some claim that reductions in capital costs already have been achieved even though no new plants actually have been built since Petra Nova. These claims are based on the results of pre-construction studies not actual cost experience.

Observations on Carbon Capture at Coal-Fired Power Plants

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Current Retrofit Proposals Assume Dramatic and Rapid Reductions in Capital Costs

Observations on Carbon Capture at Coal-Fired Power Plants 8

$3,354 $2,096 $1,417 $1,455 $2,969 $2,346

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 Project Tundra Highest CCS Capital Cost Estimate Project Tundra Lowest CCS Capital Cost Estimate Corrected San Juan CCS Capital Cost Estimate Dave Johnson Unit 4 CCS Capital Cost Estimate Dry Fork Highest CCS Capital Cost Estimate Dry Fork Lowest CCS Capital Cost Estimate 2026 US Dollars per KW

Claimed $/kilowatt Capital Costs

Actual Petra Nova Capital Cost - $4987 per kW in 30% Below Petra Nova Cost - $3491 per kW in 2026$

• 33%
• 58%
• 72%
• 71%
• 40%
• 53%
• 80%
• 70%
• 60%
• 50%
• 40%
• 30%
• 20%
• 10%

0% Project Tundra Highest CCS Capital Cost Estimate Project Tundra Lowest CCS Capital Cost Estimate Corrected San Juan CCS Capital Cost Estimate Dave Johnson Unit 4 CCS Capital Cost Estimate Dry Fork Highest CCS Capital Cost Estimate Dry Fork Lowest CCS Capital Cost Estimate

Projected Declines in $/Kilowatt Capital Costs from Petra Nova

IEA Estimate that next generation of capture capture projects (after Petra Nova) will cost 25%- 30% less NRG Estimate that building a 2nd Petra Nova would be 10%- 20% Less Expensive

Actual Costs of Scaling Up Power Plant Projects, Especially Those Involving New Technologies, Often Greatly Exceed Estimates

Scaling up technologies, especially new ones, almost always leads to unanticipated problems and additional costs, both during construction and operation.

$2.0 $3.5 $3.0 $7.5

$0 $1 $2 $3 $4 $5 $6 $7 $8 Edwardsport IGCC Estimated Capital Cost Actual Edwardsport Capital Cost Kemper IGCC Estimated Capital Cost Actual Kemper Capital Cost Billions of US Dollars

Observations on Carbon Capture at Coal-Fired Power Plants 9

90% CO2 Capture Has Not Been Demonstrated over the long term, or Proven to be Economically Feasible

▪ A 90% CO2 capture rate is the holy grail of carbon capture. However, evidence shows neither Petra Nova or Boundary Dam has achieved this goal on a sustained basis. ▪ In fact, both Petra Nova and Boundary Dam have captured far less CO2 than their owners projected they would.

10 Observations on Carbon Capture from Coal-Fired Power Plants

2.80 4.20 2.18 3.54

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 January 2017-December 2018 January 2017-December 2019 Millions of Metric Tons of CO2

Petra Nova

Target CO2 Capture Actual CO2 Captured

1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 426,100 792,500 506,848 625,996 616,119 200,000 400,000 600,000 800,000 1,000,000 1,200,000

2015 2016 2017 2018 2019 Metric Tons of C02

Boundary Dam Unit 3

Projected CO2 Capture Actual CO2 Capture

90% CO2 Capture Has Not Been Demonstrated or Proven to be Economically Feasible

▪ It is unclear how much of the difference between the projected and the actual CO2 capture rates at Petra Nova has been due to problems with the technology and how much was due to management decisions that capture was uneconomic. Boundary Dam clearly experienced technology problems. ▪ The builder and the owners of Petra Nova have not released any information at all on how much CO2 it has processed and captured; what

• perational problems it has experienced; why it has captured less CO2 than

projected; or how much the CO2 capture has cost. All vital information. ▪ An IEEFA analysis based on the CO2 emissions data NRG has filed with the U.S. EPA shows that it far more likely Petra Nova has captured somewhere between 80% and 82% of the CO2 it has processed, not 90%. Nevertheless, CCS proponents repeatedly claim, without citing any supporting evidence, that it has achieved a 90% or higher capture rate. ▪ Bottom line, there is no evidence to accept the claim/assertion of proponents that retrofit projects will be able to consistently capture 90% of the CO2 they produce for periods of between 12 and 40 years.

11 Observations on Carbon Capture at Coal-Fired Power Plants

Retrofitted Coal Plants Are Unlikely to Produce Enough CO2 to Make Them Financially Viable – Example San Juan

70% 63% 75% 85%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Average Capacity Factor Over the Past Decade Average Capacity Factor Since Units 2 & 3 Retired at End of 2017 Entire Plant Capacity Factor if Carbon Capture Facility Runs at 85% Capacity Factor Enchant's Assumed Future Annual Capacity Factor for the Entire Plant

Observations on Carbon Capture at from Coal-Fired Power Plants. 12

6 5.3 4.9

1 2 3 4 5 6 7

Amount of CO2 That Enchant Claims San Juan would capture each year at annual 85% Capacity Factors Amount of CO2 That San Juan could potentially capture each year if it operates at annual 75% Capacity Factors Amount of CO2 That San Juan could potentially capture each year if it operates at annual 70% Capacity Factors

Millions of Metric Tons per Year

Future San Juan capacity factors are likely to decline even further due to (a) availability of low-cost gas; (b) increased competition from declining cost renewables; and (c) increasing integration of the Western U.S. grid.

Retrofitting A Coal Plant for Carbon Capture Will Lead to Higher Electricity Prices for Ratepayers

Observations on Carbon Capture at coal-fired power plants

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Carbon capture requires a significant amount of power. As a result a plant’s net

• utput post-retrofit will be lower and the per-MWh production cost will be higher.

What this means is that the cost to ratepayers will increase or, if the power is sold in wholesale markets, it will become much less competitive.

$44.90 $63.29 $15.00 $30.37 $26.58

$0 $10 $20 $30 $40 $50 $60 $70 San Juan 2019 Average Electricity Production Price Illustrative Cost

• f Producing

Electricity at San Juan if Plant Had Been Retrofitted New El Paso Electric Solar PPA Price New El Paso Electric Solar + Storage PPA Price Palo Verde Hub 2019 Average Market Price Dollars per Net Megawatt Hour

Illustrative Example of Impact of Retrofitting on Cost of Producing Electricity

847 601 67 313 100 200 300 400 500 600 700 800 900 1000 No Carbon Capture With Carbon Capture Megawatts

Illustrative Impact of Retrofit on Coal Plant's Net Output

Net Output Internal Loads Gross Output 914 MW Gross Output 914 MW

For More Information

Contact

David Schlissel at David@schlissel-technical.com Dennis Wamsted at dwamsted@ieefa.org Karl Cates at kcates@ieefa.org www.ieefa.org

14 False Promises and Major Risks