This year’s Coal-Gen 2008 conference in Louisville, Kentucky, was attended by 4,000 members of the power industry. There was so much information at this three-day conference that I thought I’d break my comments into two blog articles: one on the keynote address and another on the CAIR panel. This post focuses on the former, and is the first of two posts.
Common themes quickly emerged, CO2 dominated
I was thankful that the keynote address didn’t start until 10:00 AM, allowing for a bit of a catching up on rest after a busy start to the week and the seemingly ever-worsening travel delays in getting to the conference.
Several perspectives were represented in the keynote, but common themes quickly emerged. One overriding theme was that to meet the growing electricity demand, we’ll need all available resources, including supply-side options and aggressive demand-side management. Constraints on developing nuclear plants, the intermittent nature and geographic variability of wind, the retirement of existing plants now reaching the end of their lifespan, and continued high gas prices all contribute to the challenge. These circumstances also indicate that coal will continue playing a central role in providing the reliable and affordable electricity upon which our economy and way of life depends.
I was somewhat surprised that CO2 dominated the keynote discussion, with the recent US Appeals Court’s decision overturning CAIR only being mentioned a few times. And here, CAIR was referenced in the context of New Source Review and fuel efficiency, not NOx, SO2, or particulates. Maybe the speakers were deferring this topic to the special panel on the CAIR. Or maybe it was because of the belief that the “CAIR problem” will be fixed, whether by legislative, legal or administrative remedy, and that this fix is primarily a matter of time. Finding ways to burn coal while meeting the CO2 reductions embodied in the proposed climate change bills represents enormous unsolved technical challenges.
Keynote Speakers
Dr. Leonard Peters, Secretary of Energy and Environment for the State of Kentucky, emphasized the state’s dependence on coal and its commitment to continuing to cost-effectively use coal in the face of immanent federal cap & trade legislation. He described the state’s collaboration with E.ON, Conoco-Phillips, and Peabody coal in advancing CO2 capture technologies and sequestration/utilization vehicles.
Steve Blankenship, Associate Editor of Power Engineering Magazine, highlighted some of the global conflicts and contradictions among large developing economies. These countries, such as China and India, are making the fastest growing contributions to global CO2 levels but are at the same time calling for the G-8 countries to reduce overall levels by 45 percent in the next four years, and 90 percent by 2025. Steve also discussed the naïveté associated with thinking that natural gas can solve the CO2 problem, given its high price, diminishing domestic supply, and the fact that natural gas plants emit 60 percent the CO2 of existing coal plants, but have only twice the capacity factor of wind. He linked the greenhouse gas issue to the recent CAIR ruling, noting that the latter contained an important “fix” for the current New Source Review (NSR) regulations, which in their current form impose a strong disincentive for investing in efficiency improvements at existing plants.
Victor Staffieri, Chairman, CEO and President of E.ON U.S. welcomed attendees to Louisville, and then handed over the floor to E.ON U.S. Senior Vice President of Energy Services Paul Thompson, who described E.ON’s global operations, with generation assets in 30 countries, 75 gigawatts of total capacity, operating generating plants that burn 50 million tons of coal per year. Mr. Thompson described E.ON’s massive three-pronged R&D effort toward the company’s objective to provide a 50 percent reduction in CO2 over the next 22 years. The three prongs include 1) pre-combustion capture, being addressed through the FutureGen initiative; 2) post-combustion capture, through chilled ammonia technology being developed and demonstrated in collaboration with Alstom and We Energies; and 3) Oxy-fuel generation, which produces a far more concentrated stream of CO2 which is thus more amenable to capture.
Readers might be surprised at E.ON’s plans to rely on Future-Gen, given that the US DOE recently withdrew federal funding for the project. Apparently the 13 domestic and international companies comprising the FutureGen industry alliance remain committed to the initiative, are working with the US Congress, and are confident that federal funding will be restored by the next presidential administration.
Frank Maisano, a Principal at the energy-focused law firm of Bracewell & Giuliani spoke of the many challenges faced in siting new coal-fired power plants, not only due to CO2, but mercury as well. While the repeal of the CAMR rule and associated reversion to existing command and control hazardous pollutants (HAPs) regulation requires 90 percent mercury removal, the new plants his firm is helping to get permitted meet this requirement. But environmental advocates are now demanding that 98 percent removal be required in the siting permits. This is an example of how every time a new level of emissions control is required, that level becomes the starting point for the next round of regulation.
Steve Miller, President and CEO of the American Coalition for Clean Coal Electricity (ACCCE) described his organization’s efforts to educate public awareness on the role that coal-fired electricity plays in driving a robust economy and how it is essential to our quality of life. Depicting what he referred to as “sustainable energy policy,” he referred to a triangle with the economy on one side, the environment on the other, and energy as the foundation. Steve pointed out how increases in retail electricity prices from 2001 – 2008 have disproportionately affected low-income families, and forecasted dramatic future increases resulting from the failure to find ways to continue utilizing domestic coal supplies. This being said, Steve stated that the Coalition firmly supports a mandatory federal cap & trade program for CO2, so long as its design “balances the interests of our people, our nation, and our planet.”
Several observers have noted the quick reversal that has transpired in the wake of the Circuit Court's overturning of CAIR: CO2 was once the fledgling upstart that many considered tacking on to laws regulating the emissions of NOx and SO2. Now – in the scramble to find a path forward for CAIR – these traditional criteria pollutants may end up being "tacked on" to one or more of the many CO2 cap & trade bills currently before the US Congress.
And the fact that carbon risk is being made a formal part of standard shareholder due diligence only ups the ante in terms of the financial implications of climate change.
Right now RGGI and the Chicago Climate Exchange are the only functioning liquid CO2 allowance markets in North America. The rapid implementation timeframe for the Western Climate Initiative (WCI) and the Midwest Accord, however, combined with the inevitability of near-term cap & trade legislation, is causing customers performing financial justifications for investments in optimization to assign CO2 allowance values of $25/ton or higher, which is nearly the current trading value in the European Economic Union!
My follow-up blog on developments related to the over-turning of CAIR since the first – including the panel at Coal-Gen – should be forthcoming shortly.