Last November, Energy Secretary Ernest Moniz rode an elevator to the top of the 11-story scaffolding surrounding Southern Co.’s new coal-fired power plant here and gazed out over the Mississippi flatlands. Below him lay a new lignite coal mine, new storage facilities and a glimmering maze of steel.
The beauty of it all was this: Sixty-five percent of the plant’s carbon dioxide, a greenhouse gas released by all coal-fired power plants, would be captured, carried through a 62-mile-long pipeline and injected into old oil reservoirs to boost output of precious crude. The carbon dioxide would remain buried in the ground, where it would not contribute to climate change. That would make this the first U.S. power plant designed to include commercial carbon-capture technology.
“The risks of global warming and climate change are very real, and we are experiencing the impacts already,” Moniz said later to a gathering of notables that included Mississippi’s governor and Norway’s petroleum minister. “I consider seeing this plant a look at the future.”
Six months later, the future has been postponed. Southern’s advanced coal plant, already running over budget and behind schedule when Moniz visited, has suffered new setbacks. On April 30, Southern said the Kemper plant would not open until May 31, 2015 — a year behind the original target. And while Moniz says that “we’re going to need not 10, maybe 100 more of these plants across the country,” it might be a triumph to finish just one.
The only thing the Kemper power plant is burning now is money. The plant has suffered almost every kind of cost overrun, beset by bad weather, labor costs, shortages and “inconsistent” quality of equipment and materials, and contractor and supplier delays. Southern said in April that it was raising the projected cost of the plant by $235 million, to a total of $5.5 billion, more than double the original estimate.
Thomas Fanning, Southern’s chief executive, said part of the problem was early miscalculations. Given the amount of carbon capture Southern aimed for, “we did not evaluate correctly the amount of pipe, the thickness of the pipe, the metallurgy of the pipe and the quantity of the pipe,” he said. When all that was fixed, the support structures had to be made stronger, too.
Every month of additional delay will cost about $25 million, Wall Street analysts estimate. So far, the company has eaten about $1.6 billion in losses because of cost overruns. “It’s been a bitter pill to swallow,” Fanning said in an interview during Moniz’s visit.
This is more than a tale of corporate woe. The Kemper plant also is at the heart of the debate over the Environmental Protection Agency’s proposed regulations to limit carbon dioxide emissions from new coal plants. The EPA has held up Kemper as an example of what can be done. Those regulations, in turn, are central to President Obama’s Climate Action Plan and his strategy to use his executive power at a time when Congress has failed to agree on many measures.
Southern says that once the plant is up and running, its carbon footprint will be smaller than that of a natural gas-fired plant. “It’s going to be the cleanest coal plant in the world,” Fanning boasted.
Under the EPA’s proposed guidelines, future coal plants would need to emit no more than 1,100 pounds of carbon dioxide per megawatt-hour of power produced. That’s well below the current U.S. coal plant average of 1,768 pounds but well above Kemper’s projected emission level. It means that new coal plants, depending on their efficiency, would have to capture 20 to 40 percent of their carbon dioxide emissions.
The Kemper plant is one of two cited by the EPA when it unveiled its proposal — and the other is in Canada.
“We know that CCS has been used and is being used at the commercial scale in other industries,” EPA chief Gina McCarthy said at an April 2 congressional hearing, using the acronym for carbon capture and sequestration and referring to techniques used at chemical plants. “The technology is available; each component of that technology has been in use, has been tested and is viable.”
The comment period for the proposals ended May 9, and the EPA said that it expects the comments to number in the millions. The agency won’t say when it will issue final regulations, but it is widely expected to be early next year. The EPA also expects to issue proposed regulations for carbon emissions from existing plants on June 2.
The EPA could still tailor its rules for a new normal for coal plants, but one thing seems clear: The Kemper coal plant may be the only commercial power facility to meet the new standards — and Kemper isn’t normal. That isn’t just because of delays and cost overruns. The plant, for all its financial tribulations, has economic advantages that other coal plants lack.
For one thing, Kemper has had substantial federal funding. The project received a $270 million grant from the Energy Department and $133 million of federal investment tax credits — though by blowing a deadline, Southern will lose some tax benefits.
The most important advantage is the plant’s proximity to a new coal mine and to old Mississippi oil fields. The coal mine has 4 billion tons of minable lignite, enough to supply the new 582-megawatt power plant for a thousand years. Though long-neglected as a feedstock because of its high moisture content, lignite coal, after drying out for three days, is fine for the type of plant Southern is building. Fanning said that tapping the deposit was “like waking up and finding money in your attic.”
The old oil fields offer an opportunity for enhanced oil recovery. Fanning said Kemper’s carbon dioxide will add 2 million barrels a year to U.S. oil output. A speck compared with total U.S. oil consumption, it’s still a useful revenue stream for Southern. Fanning said that the CO2 price will be linked to oil prices. Without divulging exact terms, Fanning and industry analysts estimate that if CO2 is priced at $40 a ton and oil prices stay around $90 a barrel, the economics make sense. Kemper’s carbon dioxide will be sold to Denbury Resources, an oil firm operating the Heidelburg field, which was discovered in 1944.
Moniz said that by selling carbon dioxide and other byproducts, Kemper could earn an extra $80 million a year.
With the EPA advancing to the next stage of rulemaking, coal companies, Republican lawmakers and others are making a huge push to change its course. They are complaining that the EPA standard for carbon dioxide emissions will kill plans for any new coal plants.
“I mean, there is clearly a war on coal,” Rep. Steve Scalise (R-La.) said at the April 3 hearing.
The Florida Public Service Commission wrote in a letter to McCarthy that it is “concerned” that the EPA’s plans to regulate carbon emissions “have the potential to reduce fuel diversity, adversely impact reliability, and increase costs for Florida’s energy consumers.”
The U.S. Chamber of Commerce and others also weighed in as part of an organization formed late last year and called the Partnership for a Better Energy Future.
But many energy experts say the whole fight over the proposed EPA regulations is moot. Even before the EPA proposals, companies shied away from building new coal plants in an age of cheap natural gas, brought on by a boom in shale gas drilling.
Kemper is the only place where ground has been broken for a coal plant since November 2008, according to Bruce Nilles, an attorney with the Sierra Club who has fought to block new coal plants. The Energy Information Administration forecasts that “retirements [will] far outpace new additions” as cheap natural gas and rising construction costs for coal plants make gas the choice of utilities building new facilities.
“I would not point at CCS as being the problem, because that [proposed] requirement is brand new,” Nilles said. “Coal for the past six years, even without considering carbon controls, can’t compete against clean energy and natural gas.”
The quest to capture carbon dioxide from coal plants has gone through several bubbles of optimism. CO2 is much harder to capture than other pollutants, such as sulfur or mercury, which can be taken out of power plant exhaust with big scrubbers. Researchers are experimenting with chemical solvents that might interact more effectively with carbon dioxide.
The electric utility AEP, one of the largest U.S. emitters of greenhouse gases, built a pilot plant (half financed by the Energy Department) for capturing and burying CO2 from its Mountaineer plant in New Haven, W.Va. But the project was abandoned because it was too expensive.
In late 2010, the Atlantic printed an article by James Fallows proclaiming: “For now, the only way to meet the world’s energy needs, and to arrest climate change before it produces irreversible cataclysm, is to use coal — dirty, sooty, toxic coal — in more sustainable ways. The good news is that new technologies are making this possible. China is now the leader in this area, the Google and Intel of the energy world.”
Hailing China’s ability to get coal plants built quickly (without the permitting hassles U.S. companies face), Fallows wrote that China had become a center for innovation. He deplored America’s failure to invest in new coal technology. Indeed, for years a proposed carbon capture and storage consortium called FutureGen, backed in part by federal funds, has failed to get off the ground.
Fallows wrote: “China is where the world’s ‘doing’ now goes on, in this industry and many others. If you want to learn how the power plants of the future will work, you must go to Tianjin — or Shanghai, or Chengdu — to find out.”
Duke Energy, one of the country’s largest utilities, did just that. It sent its chief technology officer, Dave Mohler, to China to join research projects with a Chinese power company, Huaneng, and the government’s Thermal Power Research Institute. Fallows called the institute’s director of technology, Xu Shisen, “a celebrity known for his advocacy of clean-coal projects.” Huaneng is the world’s second-largest power producer and the largest in China, three times bigger than any U.S. power producer.
Four years later, Mohler has lost some of his enthusiasm.
Xu had said he could assemble equipment and technology to capture carbon dioxide from a coal plant for $16 a ton, a figure Mohler marvelled at as “shockingly low.” So Mohler invited Xu to the United States to run the numbers on a Duke power plant in Gibson County, Ind. A detailed engineering study was done in late 2012. The result: Capturing CO2 would cost more than Xu’s estimate by a factor of more than four, Mohler says.
“It turns out that $16 a ton is with Chinese materials, Chinese labor — and Chinese accounting,” Mohler says. Among other things, China’s state-owned enterprises have virtually free access to capital, which is one of the biggest costs for any carbon capture project.
Southern’s plant uses a technology called “transport integrated gasification,” or TRIG, developed with KBR construction company and the Energy Department. It would turn low-quality coal into a gas before combustion. The advantage: The concentration of carbon dioxide is greater than it would be after combustion. Once the CO2 (along with ammonia and hydrogen sulfide) is removed in six towers, the remaining gas would fuel two generating units. Altogether, the above- ground steel pipe runs for 720,000 feet. But the cost of building such plants is steep.
Now, companies wanting to learn how the power plants of the future might work are looking in Mississippi.
Recently Southern agreed to share technology with a Chinese state-owned mining and energy company, Shenhua Group. It has also spoken to firms in Poland, which has large lignite deposits and, Fanning notes, “the geopolitics of [Russian gas monopoly] Gazprom and Vladimir Putin.”
Given the high cost of capturing CO2 from power plants, the only way it could make financial sense on a large scale is by using it to enhance oil recovery in old fields. But not every coal plant, or every planned coal plant, is near both old oil reservoirs and coal supplies.
Does it make sense to build a new pipeline network?
The EPA says that 50 million to 60 million metric tons of CO2 are transported each year through 3,600 miles of pipelines, but virtually all of it comes from natural underground reservoirs of carbon dioxide. A study sponsored by the Energy Department says that with oil selling for about $100 a barrel, the market for enhanced oil recovery will grow if there are attractive prices for man-made CO2.
Moniz, on a flight back to Washington after his visit to Kemper, said that “if you imagined wanting to build a CO2 infrastructure . . . and build a kind of a horseshoe that connects the Midwest down to the gulf region and go to Texas and up to the Rockies, that would kind of link you. Then the question is: Is there going to be enough activity and carbon capture to build a pipeline with lots of feeders and off-take.”
Mohler says Duke and other companies looked at building such a pipeline and concluded that the price of oil, even as high as it was, didn’t justify carbon-
capture and pipeline costs.
Kinder Morgan, one of the nation’s largest pipeline companies, has looked into CO2 pipelines from industrial plants. James Wuerth, president of its CO2 pipeline division, said in an e-mail that the demand for CO2 for oil recovery is probably twice as large as current consumption.
But even that would shave only 1 or 2 percent from U.S. greenhouse emissions. Wuerth said that “to make most capture work,” even at CO2 prices 10 to 30 percent higher than current market levels, “the price of crude would probably need to be closer to $150” a barrel.
He said that Kinder Morgan is working on projects to capture CO2 from natural gas-fired plants, which vent nearly pure streams of carbon dioxide, and using it for oil recovery. “Even with these, we are having a difficult time making them work at today’s price,” Wuerth said.
Still, Moniz and McCarthy say Kemper provides useful lessons.
“EPA got the marker down on new coal plants for now,” Moniz said. The Clean Air Act, he said, “in all of its facets is technology pushing. And there’s every reason to believe costs will come down if the technology is pushed.”
Moniz said that Kemper provided new information about engineering needs. And he said he believed in the potential for a “breakthrough” on capture technology. “I cannot believe with research focused on new technological approaches that we won’t have new technologies for capture,” he said.
Coal companies, utilities, state electricity regulators and GOP lawmakers note, however, that EPA guidelines are supposed to be economically feasible. And a law adopted in 2005 says that the agency cannot rely on facilities that have received federal grants or tax incentives.
Duke Energy’s Mohler says his emphasis has shifted from carbon sequestration to “carbon utilization.” He’s looking at technologies that would use CO2 to grow algae that could then be used in biofuels. That approach would capture a tiny fraction of the output of a coal plant, but it might make financial sense, Mohler says.
As for the larger picture, Mohler is torn.
“As a utility executive, my fiduciary duty is to my company and investors,” he says. “But as a global citizen, if we’re really serious about this issue we need to think about technologies, and not just in the United States.”
He said severe cost overruns have plagued advanced plants, including FutureGen, China’s GreenGen and Duke’s own IGCC plant at Edwardsport, Ind. But, he adds, “if you don’t get started on it, when do you get started on it?”