In my last couple of posts I looked at the difficulty of meeting ambitious targets for cutting greenhouse gas emissions (GHG) without help from the lower-emitting portions of our current energy mix. Last week ExxonMobil announced that it is pursuing a new pathway for capturing carbon from power plant exhaust. That could help revive another important strategy for large-scale emissions reduction from our existing energy sources.
Carbon capture and sequestration (CCS) has fallen out of favor, lately, mainly due to the high cost and technical challenges of the early prototypes for large-scale implementation of the technology. Not only are the initial investment costs of today's CCS hardware still very high, but it is also inherently expensive to operate. That's because of the high energy consumption of the process, resulting in a "parasitic" load on the host power plant that reduces its net output by up to 20%, making the remaining output much more expensive. That creates a large deterrent in any market that doesn't provide either direct subsidies for carbon removal, or a high carbon tax or price for traded emissions offsets.
Another reason that CCS has received less attention recently is that the costs of renewable energy technologies like wind and solar power have kept falling. To some they now look cheap enough, especially with further cost improvements extrapolated, to enable us to reach our emissions goals mainly through wider deployment of solar modules and wind turbines.
Even if that were technically feasible, like most other energy industry experts I have met I am convinced that the deep emissions cuts desired for mid-century will require implementing or retro-fitting CCS onto the fleet of coal and gas-fired power plants that will likely still be in service decades from now. CCS underpins several of the emissions stabilization wedges pioneered by Princeton engineering professor Rob Socolow and his colleagues ten years ago.
What makes the approach that ExxonMobil and FuelCell Energy, Inc. have described so attractive is that, instead of being a drain on power generation, capturing CO2 via fuel cells would actually add significantly to a facility's reliable power output. It would increase revenue, rather than curtailing it.
The clever bit, and its potential advantage over current carbon-capture technology, is that CO2 capture in a carbonate fuel cell occurs as a byproduct of the power generation step. That means that it doesn't require a big, expensive, power-hungry process unit, the only function of which is to strip CO2 from flue gas and concentrate it for subsequent shipment and storage.
These fuel cells would still require natural gas for fuel, and they would produce CO2 emissions in the process of generating electricity, though at a lower rate than the coal or gas-fired plant with which they would be partnered. However, both their direct emissions and the CO2 extracted from the power plant exhaust would come out in a highly purified form suitable for geological sequestration and stay out of the atmosphere.
That brings up an important advantage of this approach over various schemes to capture CO2 directly from the atmosphere. Although the article on the Exxon/Fuel Cell Energy development in MIT Technology Review described the CO2 concentration in power plant flue gas (5%-15%) as "low", that is still hundreds of times higher than its concentration in air.
400 parts per million of CO2 in the atmosphere may be worrying from a climate perspective, but it is still just 0.04% of air that remains mostly nitrogen and oxygen. And the lower the concentration, the harder--and normally more expensive--it is to extract. (Green plants can do this trick cheaply thanks to billions of years of evolution combined with cost-free sunlight.)
The press release makes it very clear that this new carbon-capture technology has so far only been demonstrated in the lab. Scaling it up will require additional work, and success is uncertain. Many other promising innovations, including a host of cellulosic biofuel technologies, have failed to scale. However, its potential applications are compelling enough to justify a lot of patience and persistence. I wish them luck.
Showing posts with label clean coal. Show all posts
Showing posts with label clean coal. Show all posts
Tuesday, May 10, 2016
Tuesday, March 27, 2012
The Beginning of the End for Coal?
I saw in Tuesday's Washington Post that the EPA was ready to issue its proposed rules for CO2 emissions from new power plants. When finalized, these rules would apply to facilities larger than 25 MW that begin construction more than a year hence. As the Post notes, the chosen CO2 emissions limit of 1,000 lb. per gross Megawatt-hour (MWh) generated would make it virtually impossible for a new conventional coal-fired generating plant to comply with this requirement. That looks like another positive for natural gas, which is coal's nearest competitor today. It might also help baseload renewables such as geothermal, since wind and solar power don't ordinarily compete directly with coal. However, anyone reading this as the epitaph for coal in the US shouldn't be too hasty, because the EPA has left room for technology and other strategies to keep coal in the future mix.
I'm completely swamped with work and other commitments at the moment, so this posting will be more like an extended Tweet. However, I thought this news was too important not to comment on it, however briefly. Lacking the time to research these data myself, I'll rely on Ms. Eilperin's thoroughness and use her figures of 1,768 lb. CO2/MWh for the average US coal plant and 800-850 lb./MWh for gas. The latter is certainly a long way from state of the art, and I'm sure that a modern ultra supercritical coal plant would come in considerably below the 1,768 lb. mark, as well, yet still above the magic half ton. What intrigues me about the EPA's chosen performance standard is that meeting it would require much less than 100% capture and sequestration of a facility's CO2 emissions. Perhaps as little as 25-30% would be sufficient, particularly, if the plant were also designed to be co-fired with biomass, as some existing coal plants are. That combination, or some other similar strategy, could significantly reduce the cost of compliance and keep coal in the game.
I know that outcome wouldn't please those who see coal as not only the logical place to seek large-scale greenhouse emissions reductions, but also a major contributor to various local environmental impacts. Yet it's also an enormous domestic energy source, the global demand for which continues to grow. Moreover, as coal is increasingly displaced from power generation by cheap natural gas, its price is likely to drop, making it more competitive for export. So perhaps this isn't the beginning of the end for coal in the US, but just the start of a new phase.
I'm completely swamped with work and other commitments at the moment, so this posting will be more like an extended Tweet. However, I thought this news was too important not to comment on it, however briefly. Lacking the time to research these data myself, I'll rely on Ms. Eilperin's thoroughness and use her figures of 1,768 lb. CO2/MWh for the average US coal plant and 800-850 lb./MWh for gas. The latter is certainly a long way from state of the art, and I'm sure that a modern ultra supercritical coal plant would come in considerably below the 1,768 lb. mark, as well, yet still above the magic half ton. What intrigues me about the EPA's chosen performance standard is that meeting it would require much less than 100% capture and sequestration of a facility's CO2 emissions. Perhaps as little as 25-30% would be sufficient, particularly, if the plant were also designed to be co-fired with biomass, as some existing coal plants are. That combination, or some other similar strategy, could significantly reduce the cost of compliance and keep coal in the game.
I know that outcome wouldn't please those who see coal as not only the logical place to seek large-scale greenhouse emissions reductions, but also a major contributor to various local environmental impacts. Yet it's also an enormous domestic energy source, the global demand for which continues to grow. Moreover, as coal is increasingly displaced from power generation by cheap natural gas, its price is likely to drop, making it more competitive for export. So perhaps this isn't the beginning of the end for coal in the US, but just the start of a new phase.
Tuesday, August 24, 2010
FutureGen Switches Tracks
The standard knock on carbon capture and sequestration (CCS) is that it hasn't been tested and proven on an industrial scale. That's really only true in the narrow sense in which you start with coal, produce electricity, and then collect and bury the CO2 that comes out the stack--which I imagine is what CCS evokes for most people who have even heard of the technology. Some years back, the US government set out to close that gap by building a large-scale test facility to demonstrate the coal-to-CCS cycle, with help from a consortium of industry partners. The program was called FutureGen. It died in 2008 after reported cost overruns but was revived in a different format last year. Now the reoriented effort has spawned a new project at a different location--though still in Illinois--to replace the ill-fated Mattoon project. Its basic concept differs significantly from the original FutureGen, and in ways that might improve the odds that coal could continue to contribute a substantial share of the US energy mix for many decades.
The CO2 produced by power plants is much harder to capture and dispose of than the traditional pollutants we associate with them, not least because it is the primary chemical result of the combustion of hydrocarbons, along with water vapor, rather than a byproduct resulting from a fuel impurity or imperfect combustion. That requires dealing with emissions that exceed the mass of fuel being consumed, rather than an order of magnitude or two smaller. And when fossil fuels are burned in air, the CO2 produced must be separated from all that nitrogen, which is the largest constituent of flue gas, before it can be sequestered. All this is expensive, in both energy and financial terms. The original FutureGen was designed to finesse this problem by converting coal into a hydrogen-rich gas that could be burned efficiently in a combined-cycle gas turbine (IGCC), producing emissions consisting mainly of water vapor, plus a sequestration-ready CO2 stream from the hydrogen-production process. Unfortunately, the hardware necessary to do that isn't cheap, either.
FutureGen 2.0, as announced, would take a different tack. It aims to convert an existing power plant owned by Ameren Corporation into an "oxy-coal" plant, in which pure oxygen replaces air in the boiler for combustion, resulting in flue gas consisting mainly of CO2. This approach has pluses and minuses, compared to IGCC. It requires a bigger air separation plant to support full combustion, but it eliminates all the hardware associated with hydrogen. That should entail somewhat lower capital costs, but not necessarily lower operating costs, particularly when you consider that the efficiency of IGCC exceeds that of most existing US coal power plants, though not necessarily supercritical or ultra-supercritical pulverized coal plants. (I couldn't tell how much the basic power block of Unit 4 of Ameren's Meredosia, IL plant, which formerly burned fuel oil, will be modified.) As in FutureGen 1.0, the resulting compressed CO2 would then be pipelined to a disposal site elsewhere in the state.
Although it would take some doing to convince me that oxy-coal with CCS is a better technology than IGCC with CCS, the revised approach to FutureGen looks like a good call on the part of the government. That's because the context in which FutureGen is being pursued has altered significantly since it was first devised. Instead of a scenario of continuing to build many new coal-fired power plants every year to meet steadily-growing electricity demand, the future--at least in the US--looks quite different. An article in yesterday's Washington Post pointed out that a number of new coal plants are still under development, but the rate of new construction has slowed dramatically, due to regulatory pressures, weaker electricity demand, competition from cheaper natural gas, and the growth of renewables. If we want to have an impact on the emissions from the US coal-fired power plant fleet--which accounts for 31% of total US emissions and 91% of the emissions from the electricity sector--then our best strategy probably doesn't involve building hundreds of gleaming new IGCC plants, but rather retrofitting hundreds of existing units built with older technology, for which conversion to IGCC would likely be cost-prohibitive. If FutureGen 2.0 succeeds--technically, if not economically--it would validate that retro-fitting potential.
The world hasn't stood still while the Department of Energy wrestled with all the political and technical challenges that FutureGen faced. The original siting competition between Texas and Illinois looked like a textbook case of logrolling, and FutureGen 1.0 exhibited the hallmarks of a classic government boondoggle. Meanwhile, commercial projects such as Duke Energy's Edwardsport IGCC (without CCS, but in effect CCS-ready) and the Good Spring IGCC project of Future Fuels LLC have emerged and appear to be making progress. The latter is based on technology from the Thermal Power Research Institute of China, which is a good bet to beat all of these projects to the punch with its GreenGen power plant in Tianjin. If FutureGen 2.0 is going to matter, it must be built smartly, quickly and cost-effectively. Yet technical success still won't guarantee that this technology will be taken up and deployed widely. In a market economy, rather than a centrally-planned one, it's hard to see any of this going beyond a demonstration plant or two without a substantial price on CO2 emissions to offset the inherently higher costs of generating power this way.
The CO2 produced by power plants is much harder to capture and dispose of than the traditional pollutants we associate with them, not least because it is the primary chemical result of the combustion of hydrocarbons, along with water vapor, rather than a byproduct resulting from a fuel impurity or imperfect combustion. That requires dealing with emissions that exceed the mass of fuel being consumed, rather than an order of magnitude or two smaller. And when fossil fuels are burned in air, the CO2 produced must be separated from all that nitrogen, which is the largest constituent of flue gas, before it can be sequestered. All this is expensive, in both energy and financial terms. The original FutureGen was designed to finesse this problem by converting coal into a hydrogen-rich gas that could be burned efficiently in a combined-cycle gas turbine (IGCC), producing emissions consisting mainly of water vapor, plus a sequestration-ready CO2 stream from the hydrogen-production process. Unfortunately, the hardware necessary to do that isn't cheap, either.
FutureGen 2.0, as announced, would take a different tack. It aims to convert an existing power plant owned by Ameren Corporation into an "oxy-coal" plant, in which pure oxygen replaces air in the boiler for combustion, resulting in flue gas consisting mainly of CO2. This approach has pluses and minuses, compared to IGCC. It requires a bigger air separation plant to support full combustion, but it eliminates all the hardware associated with hydrogen. That should entail somewhat lower capital costs, but not necessarily lower operating costs, particularly when you consider that the efficiency of IGCC exceeds that of most existing US coal power plants, though not necessarily supercritical or ultra-supercritical pulverized coal plants. (I couldn't tell how much the basic power block of Unit 4 of Ameren's Meredosia, IL plant, which formerly burned fuel oil, will be modified.) As in FutureGen 1.0, the resulting compressed CO2 would then be pipelined to a disposal site elsewhere in the state.
Although it would take some doing to convince me that oxy-coal with CCS is a better technology than IGCC with CCS, the revised approach to FutureGen looks like a good call on the part of the government. That's because the context in which FutureGen is being pursued has altered significantly since it was first devised. Instead of a scenario of continuing to build many new coal-fired power plants every year to meet steadily-growing electricity demand, the future--at least in the US--looks quite different. An article in yesterday's Washington Post pointed out that a number of new coal plants are still under development, but the rate of new construction has slowed dramatically, due to regulatory pressures, weaker electricity demand, competition from cheaper natural gas, and the growth of renewables. If we want to have an impact on the emissions from the US coal-fired power plant fleet--which accounts for 31% of total US emissions and 91% of the emissions from the electricity sector--then our best strategy probably doesn't involve building hundreds of gleaming new IGCC plants, but rather retrofitting hundreds of existing units built with older technology, for which conversion to IGCC would likely be cost-prohibitive. If FutureGen 2.0 succeeds--technically, if not economically--it would validate that retro-fitting potential.
The world hasn't stood still while the Department of Energy wrestled with all the political and technical challenges that FutureGen faced. The original siting competition between Texas and Illinois looked like a textbook case of logrolling, and FutureGen 1.0 exhibited the hallmarks of a classic government boondoggle. Meanwhile, commercial projects such as Duke Energy's Edwardsport IGCC (without CCS, but in effect CCS-ready) and the Good Spring IGCC project of Future Fuels LLC have emerged and appear to be making progress. The latter is based on technology from the Thermal Power Research Institute of China, which is a good bet to beat all of these projects to the punch with its GreenGen power plant in Tianjin. If FutureGen 2.0 is going to matter, it must be built smartly, quickly and cost-effectively. Yet technical success still won't guarantee that this technology will be taken up and deployed widely. In a market economy, rather than a centrally-planned one, it's hard to see any of this going beyond a demonstration plant or two without a substantial price on CO2 emissions to offset the inherently higher costs of generating power this way.
Tuesday, June 22, 2010
Revulsion vs. Hard Choices
I don't know anyone who could gaze at the images of oil-slimed pelicans, gulls, and sea turtles and not feel revulsion and regret. Yet beyond the urgent need to plug the gushing well, protect the coastline and fisheries, and restore the Gulf Coast environment as rapidly as possible, we cannot allow our entirely appropriate emotional response to this tragedy to overwhelm our judgment. As bad as this spill is, our long-term challenges of energy security and climate change remain worse. We would only compound the damage if we allowed our reaction to this spill and its ripples beyond oil to further confuse our energy policies.
In his column in yesterday's Washington Post, Robert Samuelson sharply criticized the President's effort to harness the public's frustration and outrage against the spill into support for his energy and climate change agenda. Mr. Samuelson raised some very salient points concerning the difficulties of attempting to reduce our consumption of fossil fuels at the same time we must meet the expanding energy needs of a growing economy and population. However, I think he missed the deeper contradiction that has been created by the "strange bedfellows" coalitions that have formed since the middle of the last decade, marrying concerns about climate change to the urgent necessity of improving our energy security. As long as the shared enemy was foreign oil--from "countries that don't like us"--these groups could emphasize the overlaps in their positions and mostly ignore the resulting inconsistencies. But with the reaction to the spill turning the political tide against domestic oil as well as the imported kind--and perhaps, by extension, against natural gas derived from the hydraulic fracturing of shale reservoirs--the convenient overlap between climate policy and energy security could vanish.
If that sounds counter-intuitive, perhaps it's because so much of what we've been told by our leaders concerning our energy options has ignored the fundamental mismatch of scale between fossil fuels and our rapidly-growing renewable energy sources. Consider that while US ethanol production has grown by an astonishing 660% since 2000--an average of 23% per year--it still equates to just 2.4% of our annual oil consumption. Non-hydropower renewables, including wind power, which has grown by an even more remarkable 34% per year since 2000, made up just 3.6% of US electricity supply last year. These facts are crucial to the debate, not because these energy sources should be regarded as inconsequential, but because at their current and anticipated near-future output renewables provide a form of energy currency that can only be spent once. If we want to expand wind, solar, geothermal and biomass power to reduce the greenhouse gas emissions from coal-fired power generation, we cannot spend them again on powering electric vehicles to displace petroleum-based transportation fuels. If we want to leverage biofuels to back out imported oil, we can't spend the same biofuels to take the place of oil we won't be getting from offshore wells we aren't drilling. Someday, biofuels and renewable electricity sources may have grown enough to take on all comers, but that day remains over the horizon. And while nuclear power is already contributing on a much larger scale, its expansion will take many years, particularly if we begin retiring older nuclear power plants like Vermont Yankee in the interim.
Natural gas operates in a similar realm of hard choices, though on a larger scale. It currently accounts for nearly one-fourth of our total energy consumption. Last year, with electricity demand down and gas prices at less than half their level of just a few years ago, natural gas-fired power generation made significant inroads into the market share of coal-fired power. That was good for consumers and good for the environment, but it was only possible as a result of the dramatic resurgence of US gas production from the development of shale gas supplies. Together with coal bed methane and gas from tight sands, these unconventional sources now make up half our domestic natural gas output. Yet as with renewables, if we want to use this additional gas to reduce the 40% of US CO2 emissions coming from the power sector, we can't employ the same gas to displace gasoline in cars or diesel in trucks. And without the contribution of shale gas made possible by "fracking", gas would likely be too expensive to substitute for either oil or coal.
We have a wealth of new and old options for addressing both our greenhouse gas emissions and our reliance on imported oil. However, at this point that bounty of choices does not extend to backing out all oil while still reducing emissions. With biofuels and renewable electricity already fully committed to our established energy priorities, our only large-scale option for foregoing the enormous energy resources embodied in the deepwater oil reservoirs of the Gulf Coast--other than simply ramping up oil imports--would require converting coal into liquid fuels. We have off-the-shelf technology to do this, but unfortunately not yet to contain the large increase in CO2 emissions that would accompany such a strategy. Perhaps before we commit ourselves to anything beyond the shortest suspension of deepwater drilling necessary to ensure that it can proceed safely, we should clarify what our national energy priorities really are. A change in the implicit direction in which we've been heading could have far-reaching and enormously expensive consequences, including for the environment.
In his column in yesterday's Washington Post, Robert Samuelson sharply criticized the President's effort to harness the public's frustration and outrage against the spill into support for his energy and climate change agenda. Mr. Samuelson raised some very salient points concerning the difficulties of attempting to reduce our consumption of fossil fuels at the same time we must meet the expanding energy needs of a growing economy and population. However, I think he missed the deeper contradiction that has been created by the "strange bedfellows" coalitions that have formed since the middle of the last decade, marrying concerns about climate change to the urgent necessity of improving our energy security. As long as the shared enemy was foreign oil--from "countries that don't like us"--these groups could emphasize the overlaps in their positions and mostly ignore the resulting inconsistencies. But with the reaction to the spill turning the political tide against domestic oil as well as the imported kind--and perhaps, by extension, against natural gas derived from the hydraulic fracturing of shale reservoirs--the convenient overlap between climate policy and energy security could vanish.
If that sounds counter-intuitive, perhaps it's because so much of what we've been told by our leaders concerning our energy options has ignored the fundamental mismatch of scale between fossil fuels and our rapidly-growing renewable energy sources. Consider that while US ethanol production has grown by an astonishing 660% since 2000--an average of 23% per year--it still equates to just 2.4% of our annual oil consumption. Non-hydropower renewables, including wind power, which has grown by an even more remarkable 34% per year since 2000, made up just 3.6% of US electricity supply last year. These facts are crucial to the debate, not because these energy sources should be regarded as inconsequential, but because at their current and anticipated near-future output renewables provide a form of energy currency that can only be spent once. If we want to expand wind, solar, geothermal and biomass power to reduce the greenhouse gas emissions from coal-fired power generation, we cannot spend them again on powering electric vehicles to displace petroleum-based transportation fuels. If we want to leverage biofuels to back out imported oil, we can't spend the same biofuels to take the place of oil we won't be getting from offshore wells we aren't drilling. Someday, biofuels and renewable electricity sources may have grown enough to take on all comers, but that day remains over the horizon. And while nuclear power is already contributing on a much larger scale, its expansion will take many years, particularly if we begin retiring older nuclear power plants like Vermont Yankee in the interim.
Natural gas operates in a similar realm of hard choices, though on a larger scale. It currently accounts for nearly one-fourth of our total energy consumption. Last year, with electricity demand down and gas prices at less than half their level of just a few years ago, natural gas-fired power generation made significant inroads into the market share of coal-fired power. That was good for consumers and good for the environment, but it was only possible as a result of the dramatic resurgence of US gas production from the development of shale gas supplies. Together with coal bed methane and gas from tight sands, these unconventional sources now make up half our domestic natural gas output. Yet as with renewables, if we want to use this additional gas to reduce the 40% of US CO2 emissions coming from the power sector, we can't employ the same gas to displace gasoline in cars or diesel in trucks. And without the contribution of shale gas made possible by "fracking", gas would likely be too expensive to substitute for either oil or coal.
We have a wealth of new and old options for addressing both our greenhouse gas emissions and our reliance on imported oil. However, at this point that bounty of choices does not extend to backing out all oil while still reducing emissions. With biofuels and renewable electricity already fully committed to our established energy priorities, our only large-scale option for foregoing the enormous energy resources embodied in the deepwater oil reservoirs of the Gulf Coast--other than simply ramping up oil imports--would require converting coal into liquid fuels. We have off-the-shelf technology to do this, but unfortunately not yet to contain the large increase in CO2 emissions that would accompany such a strategy. Perhaps before we commit ourselves to anything beyond the shortest suspension of deepwater drilling necessary to ensure that it can proceed safely, we should clarify what our national energy priorities really are. A change in the implicit direction in which we've been heading could have far-reaching and enormously expensive consequences, including for the environment.
Monday, March 22, 2010
Growth vs. Emissions
An op-ed in today's Washington Post raised some thought-provoking questions about the difficulties faced by developing countries seeking to meet the energy needs of their citizens while minimizing their contribution to increasing global emissions of greenhouse gases. The problem is even trickier for South Africa, which is rich in coal--the literal bête noir of anthropogenic climate change--and relied on by neighboring countries for their electricity supplies. In the op-ed South Africa's Finance Minister, Mr. Pravin Gordhan, pleads for greater understanding of his country's situation by the World Bank and other international lenders that prefer to fund renewable energy projects and regard additional coal power capacity as counterproductive. This dilemma is central to the challenge of reducing global emissions of CO2 and other GHGs without penalizing the growth necessary to lift billions of people from poverty--or pushing others elsewhere back into it.
South Africa needs more generating capacity because its national utility Eskom has struggled to keep up with growing demand for power. There are many reasons for this, including social acceptance of electricity theft by those unable to pay for it, but mainly because until the recession the country's economy was growing at a growth rate of over 5% in real GDP. This has led to chronic blackouts and constraints on some of South Africa's key industrial sectors. The need for more capacity is thus urgent, so timing matters. Although the country currently gets about 5% of its electricity from nuclear power plants, new nukes couldn't be built fast enough to avoid years of tight power supplies. And if your grid is already unstable, adding lots of intermittent or cyclical wind and solar power isn't going to help much, without also adding expensive grid management and power storage technology.
Another aspect of the problem is financial. Even if renewables were economically attractive compared with building more coal-fired capacity--they are not without subsidies on a scale that countries like South Africa can't usually afford--much of their economic benefit comes from the trade-off between high up-front equipment costs and very low operating costs with no direct fuel expense. That's great if you have an indigenous renewable energy manufacturing base or a large, diverse economy that can easily absorb the cost of importing such equipment from other countries. However, if you don't fall into either category and the fuel being saved happens to be one of your most productive resources, this trade-off isn't very compelling. Not only does coal generate most of South Africa's power today, but it is also a major source of transportation fuels from the giant coal-to-liquids plant at Secunda. As a result, South Africa ranks ahead of France and Australia in total CO2 emissions.
According to Mr. Gordhan, South Africa wants to invest in renewables and play a constructive role in managing global emissions, but it also has an obligation to meet the energy needs of its and its inter-connected neighbors' population, for many of whom this translates into basic necessities. Without significant international energy assistance and investment, the priorities for such countries must put current needs ahead of future risks. Yet the provision of such assistance is fraught with other risks, and it cannot be extracted through the assessment of blame for historical emissions that occurred long before the current consensus on human-induced climate change coalesced. I don't see any easy answers to this, short of a cheap way to capture and sequester CO2 from coal-fired power plants, which is the subject of much research and not a little controversy.
South Africa needs more generating capacity because its national utility Eskom has struggled to keep up with growing demand for power. There are many reasons for this, including social acceptance of electricity theft by those unable to pay for it, but mainly because until the recession the country's economy was growing at a growth rate of over 5% in real GDP. This has led to chronic blackouts and constraints on some of South Africa's key industrial sectors. The need for more capacity is thus urgent, so timing matters. Although the country currently gets about 5% of its electricity from nuclear power plants, new nukes couldn't be built fast enough to avoid years of tight power supplies. And if your grid is already unstable, adding lots of intermittent or cyclical wind and solar power isn't going to help much, without also adding expensive grid management and power storage technology.
Another aspect of the problem is financial. Even if renewables were economically attractive compared with building more coal-fired capacity--they are not without subsidies on a scale that countries like South Africa can't usually afford--much of their economic benefit comes from the trade-off between high up-front equipment costs and very low operating costs with no direct fuel expense. That's great if you have an indigenous renewable energy manufacturing base or a large, diverse economy that can easily absorb the cost of importing such equipment from other countries. However, if you don't fall into either category and the fuel being saved happens to be one of your most productive resources, this trade-off isn't very compelling. Not only does coal generate most of South Africa's power today, but it is also a major source of transportation fuels from the giant coal-to-liquids plant at Secunda. As a result, South Africa ranks ahead of France and Australia in total CO2 emissions.
According to Mr. Gordhan, South Africa wants to invest in renewables and play a constructive role in managing global emissions, but it also has an obligation to meet the energy needs of its and its inter-connected neighbors' population, for many of whom this translates into basic necessities. Without significant international energy assistance and investment, the priorities for such countries must put current needs ahead of future risks. Yet the provision of such assistance is fraught with other risks, and it cannot be extracted through the assessment of blame for historical emissions that occurred long before the current consensus on human-induced climate change coalesced. I don't see any easy answers to this, short of a cheap way to capture and sequester CO2 from coal-fired power plants, which is the subject of much research and not a little controversy.
Monday, March 16, 2009
Building the Low-Emissions Future
Last week The Economist published a detailed assessment of the state of play for capturing and storing the carbon dioxide emitted by power plants and factories. Although it skirted the assertion of many environmentalists that "clean coal" is inherently an oxymoron, the article's tone was generally skeptical concerning the cost and ultimate efficacy of the technology. Coincidentally, Greenpeace released a study featuring an ultra-low-carbon scenario created in conjunction with the European Renewable Energy Council. It proposes that by 2050 the US could shed all coal-fired power generation, as well as all nuclear power and most natural gas-fired power, along with nearly 80% of the petroleum used in transportation--all replaced by renewable electricity and biofuels. If the Economist regards carbon capture and sequestration (CCS) as "expensive and unproven", I can only imagine the terms it might use to describe the extraordinary transformation required to achieve the outcome Greenpeace envisions. The necessity of reducing greenhouse gas emissions dramatically by mid-century and the serious obstacles to replacing our entire energy economy with renewable energy sources in that time frame reinforce the importance of continuing to pursue CCS, in spite of its uncertainties.
I've been following CCS for a long time, and I've written about it many times on this blog. Without diminishing the technical challenges involved, I see them as being manageable with existing and foreseeable engineering know-how, without a scientific breakthrough. I attribute the prolonged absence of a large-scale demonstration of fully-integrated CCS on energy sources more carbon-intensive than natural gas to the mismatch between its costs and current monetary benefits. Whether the cost proves to be closer to the low or high end of the range of estimates included in the article, from roughly $40-115 per ton of captured CO2, it's hard to imagine a utility or oil company taking on the investment and operating expenses involved without the incentive of a transparent and fairly predictable price on carbon emissions. Whatever the cost of CCS might be, it can't be considered in a vacuum, and that is the biggest shortcoming of the Economist's otherwise thorough analysis.
As the US Congress prepares to embark on its latest effort to enact a greenhouse gas cap and trade bill, it's important to think about where its enormous pool of emissions savings will be found, and at what cost. CCS is only one option among many. Happily, a fair amount of work has been done in this regard, including a study by McKinsey & Co. for the Conference Board a little more than a year ago. A key chart from their report portrays a potential medium-term supply curve for emissions reductions. It indicates that while there might be a number of ways to cut CO2 at low or even negative cost--changes that would pay for themselves--achieving deeper cuts would require the contribution of costlier solutions, including CCS.
It's also worth noting that the current cost per ton of CO2 reductions from some of our current climate change strategies exceeds most estimates for CCS. In my recent posting on the application of energy storage to solar power, I calculated an effective cost of power for a couple of utility-scale solar projects in Florida at around $0.25/kWh. That's a premium of at least $0.20/kWh compared to a coal-fired power plant (without sequestration.) Based on typical emissions of 2.1 lb. of CO2 per kWh generated from coal, that implies an abatement cost of $190/ton of avoided CO2. In the likelier event that the power backed out by solar was generated from natural gas, the effective abatement cost could be even higher, because of the smaller emissions savings involved, despite the higher cost of gas-fired power compared to coal.
That comparison doesn't imply that solar power will always be a high-cost source of emissions reductions, or that CCS represents some kind of silver bullet for climate change. At the same time, coal now accounts for 23% of US primary energy consumption, 49% of our electricity generation, and nearly two-thirds of our baseload-capable generation. The difficulty of replacing baseload power with cyclical or intermittent sources makes me very skeptical of any low-emissions scenario that ignores CCS or assumes we can jettison coal entirely, not to mention forgoing nuclear power, the second-largest baseload power source in the US and by far our largest source of low-CO2 power. My specific comments on the Greenpeace scenario are posted elsewhere. At a minimum, any claims that it proves we can achieve the administration's 2050 emissions goals with only "green" energy options and efficiency gains are unwarranted. As useful as they are, scenarios can only point the way to possible futures. They can't provide firm proof of anything.
That leaves us with the hard work of cobbling together a broad set of climate solutions, in response to a price signal on emissions. In my assessment, that mix is very likely to include awkward elements such as CCS, along with deeply unglamorous things like improved farming and ranching practices. Contrary to the conclusions of the editorial accompanying the article on CCS, the technology is worth pursuing for reasons that have nothing to do with "placating the coal lobby." Nor does the cost of proving its feasibility look so high as to "deprive potentially cheaper methods of cutting emissions of cash and attention," particularly when the administration expects to carve out $120 billion for energy R&D from the proceeds of cap & trade over the next ten years. And even if it did, it's one of the few options that could be applied to reduce directly the emissions from the fossil fuels that still account for 85% of the energy we consume. That could make the difference between a manageable transition to a low-emissions world and an upheaval as bad as the current financial crisis.
I've been following CCS for a long time, and I've written about it many times on this blog. Without diminishing the technical challenges involved, I see them as being manageable with existing and foreseeable engineering know-how, without a scientific breakthrough. I attribute the prolonged absence of a large-scale demonstration of fully-integrated CCS on energy sources more carbon-intensive than natural gas to the mismatch between its costs and current monetary benefits. Whether the cost proves to be closer to the low or high end of the range of estimates included in the article, from roughly $40-115 per ton of captured CO2, it's hard to imagine a utility or oil company taking on the investment and operating expenses involved without the incentive of a transparent and fairly predictable price on carbon emissions. Whatever the cost of CCS might be, it can't be considered in a vacuum, and that is the biggest shortcoming of the Economist's otherwise thorough analysis.
As the US Congress prepares to embark on its latest effort to enact a greenhouse gas cap and trade bill, it's important to think about where its enormous pool of emissions savings will be found, and at what cost. CCS is only one option among many. Happily, a fair amount of work has been done in this regard, including a study by McKinsey & Co. for the Conference Board a little more than a year ago. A key chart from their report portrays a potential medium-term supply curve for emissions reductions. It indicates that while there might be a number of ways to cut CO2 at low or even negative cost--changes that would pay for themselves--achieving deeper cuts would require the contribution of costlier solutions, including CCS.
It's also worth noting that the current cost per ton of CO2 reductions from some of our current climate change strategies exceeds most estimates for CCS. In my recent posting on the application of energy storage to solar power, I calculated an effective cost of power for a couple of utility-scale solar projects in Florida at around $0.25/kWh. That's a premium of at least $0.20/kWh compared to a coal-fired power plant (without sequestration.) Based on typical emissions of 2.1 lb. of CO2 per kWh generated from coal, that implies an abatement cost of $190/ton of avoided CO2. In the likelier event that the power backed out by solar was generated from natural gas, the effective abatement cost could be even higher, because of the smaller emissions savings involved, despite the higher cost of gas-fired power compared to coal.
That comparison doesn't imply that solar power will always be a high-cost source of emissions reductions, or that CCS represents some kind of silver bullet for climate change. At the same time, coal now accounts for 23% of US primary energy consumption, 49% of our electricity generation, and nearly two-thirds of our baseload-capable generation. The difficulty of replacing baseload power with cyclical or intermittent sources makes me very skeptical of any low-emissions scenario that ignores CCS or assumes we can jettison coal entirely, not to mention forgoing nuclear power, the second-largest baseload power source in the US and by far our largest source of low-CO2 power. My specific comments on the Greenpeace scenario are posted elsewhere. At a minimum, any claims that it proves we can achieve the administration's 2050 emissions goals with only "green" energy options and efficiency gains are unwarranted. As useful as they are, scenarios can only point the way to possible futures. They can't provide firm proof of anything.
That leaves us with the hard work of cobbling together a broad set of climate solutions, in response to a price signal on emissions. In my assessment, that mix is very likely to include awkward elements such as CCS, along with deeply unglamorous things like improved farming and ranching practices. Contrary to the conclusions of the editorial accompanying the article on CCS, the technology is worth pursuing for reasons that have nothing to do with "placating the coal lobby." Nor does the cost of proving its feasibility look so high as to "deprive potentially cheaper methods of cutting emissions of cash and attention," particularly when the administration expects to carve out $120 billion for energy R&D from the proceeds of cap & trade over the next ten years. And even if it did, it's one of the few options that could be applied to reduce directly the emissions from the fossil fuels that still account for 85% of the energy we consume. That could make the difference between a manageable transition to a low-emissions world and an upheaval as bad as the current financial crisis.
Wednesday, November 26, 2008
Artificial Carbon Cycle
Part of the research for my writing and consulting involves watching for trends or common themes, and one that I've been picking up from diverse sources reflects a growing skepticism about "clean coal" and the processes for capturing and sequestering carbon (CCS) that are central to it. To get a flavor for this, Google on "clean coal" and "oxymoron". Some of these concerns are grounded in the science of thermodynamics, while the balance seem to reflect the long-standing attitude of environmentalists toward the coal industry, which would be the primary beneficiary of a practical CCS scheme. It's worth taking a few minutes examining why CCS is unlikely to be easy, but why, if it can be done cost-effectively on an industrial scale, it would be so beneficial.
It helps to think about CCS in the context of the earth's carbon cycle, in which carbon is exchanged through natural processes among the land, ocean, atmosphere, and living things. The principal issue in anthropogenic climate change is that our activities have upset the balance of this natural cycle, overloading it through the rapid release of vast quantities of stored carbon that had accumulated over geological time in fossil fuels. The goal of climate policy is to reduce the magnitude of that overload and eventually eliminate it by using carbon-intensive energy sources much more efficiently, while working to replace them with carbon-neutral or carbon-free energy. That's why biofuels, wind and solar power are regarded as essential elements of climate change mitigation, though it turns out that current biofuels are not remotely carbon-neutral. The idea behind CCS is to complement the main climate change mitigation strategies by creating an artificial version of the carbon cycle, in which the carbon released from the combustion of fossil fuels is collected and returned to long-term storage, before it can enter the natural carbon cycle.
That sounds simple enough, but to understand why it's so hard to do, consider the amount of coal necessary to produce one kilowatt-hour of electricity. In 2007 the US burned a little more than a billion tons of coal to generate just over 2 trillion kWh of electricity, for an average of 1.0 lb./kWh. Because most of the energy from coal derives from its carbon content, the main chemical reaction involved is very simple: C + O2 → CO2. So unlike the sulfate (SOx) or nitrate (NOx) pollution we have managed for decades, CO2 is neither the result of a fuel impurity nor an inadvertent byproduct of combustion, but rather its primary outcome, along with heat. On average, every lb. of coal yielding a kWh of electricity also emits 2 lb. of CO2 to the atmosphere. In other words, the mass of CO2 leaving coal-fired power plants is double the mass of coal that went in. That's a lot of gas to separate, compress, transport, and dispose of in geological or other storage.
Now consider the energy balance of such a system. Before adding CCS at the back end, you had to mine the coal, ship it to the power plant and burn it, producing heat that was used to make steam to turn a turbine that generated power. The typical thermal efficiency of such a facility is 35-45%, depending on coal quality, plant design and operation. But CCS is inherently energy-intensive, reducing the overall efficiency and the energy return on energy invested (EROEI) for the entire coal-to-power process. If separating the CO2 from the flue gas, compressing it, and putting it back into the ground at some remote location consumes up to a third of the energy generated from the coal, as some estimates suggest, then our artificial carbon cycle doesn't look very impressive, as a net energy source. After referring to the First and Second Laws of Thermodynamics, you might even wonder whether we could produce enough net energy from such a loop to be worthwhile, at all.
I had a hard time finding the EROEI of the standard coal-fired power lifecycle. It appears to fall in the range of 5:1 to 9:1, which compares favorably with conventional oil production and refining, and with the best renewable energy sources. If CCS reduced those returns by one-third, then while the energy balance would remain positive in a physics sense, the economics of some applications might become marginal, because CCS would consume a large helping of the energy surplus that coal-fired power normally creates. Another way to look at that is that the portion of the energy surplus thus consumed was attributable to the non-monetized externality of putting a greenhouse gas into the atmosphere, and thus not sustainable, anyway.
As daunting as all this sounds, there may be some clever ways to overcome the toughest impediments to getting started rounding up the carbon from coal power and stashing it back in the earth. In a new study, a team from MIT has proposed "partial capture": removing only enough CO2 from the flue gas to cut the emissions from a coal-fired power plant to the level of one running on natural gas, about a 35% reduction. This would allow CCS to be introduced incrementally, at a much lower investment cost and a less severe efficiency penalty than full CCS. And as I discussed in another posting, using captured CO2 to enhance the output from productive oil fields creates a positive value for it that offsets at least some of the cost of collecting and transporting it. Work at a Canadian oil field that does this suggests that the stored CO2 can be effectively monitored underground. Even more intriguingly, naturally-occurring mineral deposits called peridodites can act as CO2 sponges. These might be used to increase the efficiency of direct CCS, or to establish indirect CCS--a coal-scale emissions offset that would remove CO2 from the atmosphere without requiring a CO2 pipeline from the emissions source.
Easy or difficult, our motivation for pursuing CCS, instead of abandoning coal as incompatible with alleviating climate change, is based on the reality that we still derive roughly half of our electricity from coal and only about 1% from wind, solar and geothermal power. That means that our annual additions of renewable generating capacity are not yet covering the roughly 1.5% per year growth in US electricity demand we've experienced over the last 5 years, let alone taking market share away from coal or any other carbon-based fuel. Could we advance efficiency and renewables rapidly enough to displace a sizable fraction of our coal use within 10-20 years? Perhaps, though I'd feel a lot more confident about meeting the aggressive emissions-reductions targets the US is likely to take on within the next year or two, if we could tackle coal's emissions directly with CCS.
It helps to think about CCS in the context of the earth's carbon cycle, in which carbon is exchanged through natural processes among the land, ocean, atmosphere, and living things. The principal issue in anthropogenic climate change is that our activities have upset the balance of this natural cycle, overloading it through the rapid release of vast quantities of stored carbon that had accumulated over geological time in fossil fuels. The goal of climate policy is to reduce the magnitude of that overload and eventually eliminate it by using carbon-intensive energy sources much more efficiently, while working to replace them with carbon-neutral or carbon-free energy. That's why biofuels, wind and solar power are regarded as essential elements of climate change mitigation, though it turns out that current biofuels are not remotely carbon-neutral. The idea behind CCS is to complement the main climate change mitigation strategies by creating an artificial version of the carbon cycle, in which the carbon released from the combustion of fossil fuels is collected and returned to long-term storage, before it can enter the natural carbon cycle.
That sounds simple enough, but to understand why it's so hard to do, consider the amount of coal necessary to produce one kilowatt-hour of electricity. In 2007 the US burned a little more than a billion tons of coal to generate just over 2 trillion kWh of electricity, for an average of 1.0 lb./kWh. Because most of the energy from coal derives from its carbon content, the main chemical reaction involved is very simple: C + O2 → CO2. So unlike the sulfate (SOx) or nitrate (NOx) pollution we have managed for decades, CO2 is neither the result of a fuel impurity nor an inadvertent byproduct of combustion, but rather its primary outcome, along with heat. On average, every lb. of coal yielding a kWh of electricity also emits 2 lb. of CO2 to the atmosphere. In other words, the mass of CO2 leaving coal-fired power plants is double the mass of coal that went in. That's a lot of gas to separate, compress, transport, and dispose of in geological or other storage.
Now consider the energy balance of such a system. Before adding CCS at the back end, you had to mine the coal, ship it to the power plant and burn it, producing heat that was used to make steam to turn a turbine that generated power. The typical thermal efficiency of such a facility is 35-45%, depending on coal quality, plant design and operation. But CCS is inherently energy-intensive, reducing the overall efficiency and the energy return on energy invested (EROEI) for the entire coal-to-power process. If separating the CO2 from the flue gas, compressing it, and putting it back into the ground at some remote location consumes up to a third of the energy generated from the coal, as some estimates suggest, then our artificial carbon cycle doesn't look very impressive, as a net energy source. After referring to the First and Second Laws of Thermodynamics, you might even wonder whether we could produce enough net energy from such a loop to be worthwhile, at all.
I had a hard time finding the EROEI of the standard coal-fired power lifecycle. It appears to fall in the range of 5:1 to 9:1, which compares favorably with conventional oil production and refining, and with the best renewable energy sources. If CCS reduced those returns by one-third, then while the energy balance would remain positive in a physics sense, the economics of some applications might become marginal, because CCS would consume a large helping of the energy surplus that coal-fired power normally creates. Another way to look at that is that the portion of the energy surplus thus consumed was attributable to the non-monetized externality of putting a greenhouse gas into the atmosphere, and thus not sustainable, anyway.
As daunting as all this sounds, there may be some clever ways to overcome the toughest impediments to getting started rounding up the carbon from coal power and stashing it back in the earth. In a new study, a team from MIT has proposed "partial capture": removing only enough CO2 from the flue gas to cut the emissions from a coal-fired power plant to the level of one running on natural gas, about a 35% reduction. This would allow CCS to be introduced incrementally, at a much lower investment cost and a less severe efficiency penalty than full CCS. And as I discussed in another posting, using captured CO2 to enhance the output from productive oil fields creates a positive value for it that offsets at least some of the cost of collecting and transporting it. Work at a Canadian oil field that does this suggests that the stored CO2 can be effectively monitored underground. Even more intriguingly, naturally-occurring mineral deposits called peridodites can act as CO2 sponges. These might be used to increase the efficiency of direct CCS, or to establish indirect CCS--a coal-scale emissions offset that would remove CO2 from the atmosphere without requiring a CO2 pipeline from the emissions source.
Easy or difficult, our motivation for pursuing CCS, instead of abandoning coal as incompatible with alleviating climate change, is based on the reality that we still derive roughly half of our electricity from coal and only about 1% from wind, solar and geothermal power. That means that our annual additions of renewable generating capacity are not yet covering the roughly 1.5% per year growth in US electricity demand we've experienced over the last 5 years, let alone taking market share away from coal or any other carbon-based fuel. Could we advance efficiency and renewables rapidly enough to displace a sizable fraction of our coal use within 10-20 years? Perhaps, though I'd feel a lot more confident about meeting the aggressive emissions-reductions targets the US is likely to take on within the next year or two, if we could tackle coal's emissions directly with CCS.
I'd like to wish my US readers a Happy Thanksgiving. Postings will resume on December 1.
Wednesday, October 15, 2008
Candidates & Energy: Obama Revisited
The US Presidential election is now under three weeks away, after the longest campaign in living memory. Unsurprisingly, after several years of escalating oil prices, energy features prominently in the programs of both candidates, as does a response to growing concerns about climate change. Senator McCain and Senator Obama have spoken extensively on these issues, and both campaigns' websites feature lengthy discussions on US energy challenges and the possible solutions to them. Unfortunately, their ideas must be weighed in the context of a weakening economy and a federal budget deficit that may ultimately approach a trillion dollars per year. With their attention focused on the financial crisis and the shifting electoral map, it is not clear how much thought either campaign has devoted to reassessing their energy and climate programs in light of the changed circumstances in which the next administration will find itself. After flipping a coin, I will begin with Senator Obama and follow up with a review of Senator McCain's energy proposals within a week.
It seems appropriate at the start to remind my readers of this blog's determined non-partisan stance. My focus is on the candidates' energy policies and anything relevant to those, without making any endorsement. My goal is to provide my readers with insights on the energy aspects of these two candidates' proposals, including their pitfalls, based on my own perspective and experience. However important, energy is only one issue among the many upon which they should base their choice.
Senator Obama has a detailed, coherent energy plan, and his team has clearly spent a lot of time assembling and refining the energy proposals outlined on the campaign's website. Compared to the version I examined in January, during the primaries, the Senator's energy and climate framework has evolved and become more realistic. Although energy independence is still a major theme of Senator Obama's energy platform, his independence goal has become more specific and less ambitious. It is currently stated in terms of reducing our oil imports by an amount comparable to what the US receives today from the Middle East and Venezuela. That equates to around 3.3 million barrels per day, or roughly one-third of net US oil imports in 2007. As I noted recently, such a reduction just might be feasible, but not without a significant effort to ensure that US oil production does not continue to decline. Instead, Senator Obama appears to consider the US tapped out for oil, and apparently expects his energy independence goals to be met without more help from that quarter.
That assessment pervades his approach to the oil & gas industry, though recently he has described natural gas in more favorable terms. It is also consistent with his periodic citations of the "3% of reserves vs. 25% of consumption" soundbite, which drastically understates the remaining resource potential of the US. This may explain his 2006 vote against a modest expansion of the allowed drilling area in the Gulf of Mexico, and his restrained support for expanded access to oil & gas during this summer's Congressional debate on various drilling proposals.
If anything, he seems to regard the domestic oil industry not as a potential source of new supply, but as a source of new tax revenue. His short-term energy program leads off with one-time energy rebates--$1,000 per family or $500 per individual taxpayer--funded by a windfall profits tax on oil companies. He hasn't put a price tag on this, but assuming all taxpayers would be eligible, it would require on the order of $20 billion dollars per year in new taxes over the next five years. Although there are legitimate differences of opinion on the justification for such a tax, its consequences for future US oil output are unambiguous: what you tax more, you get less of. The most positive elements of the Senator's oil strategy feature some interesting ideas for extracting more oil from existing reservoirs through CO2 injection--simultaneously sequestering it. He also supports building a natural gas pipeline from Alaska to the lower-48.
With regard to climate change, Senator Obama shares my preference for an emissions cap with credit trading over a carbon tax. His version would be stricter than the one embodied in the Boxer-Lieberman-Warner Bill defeated earlier this year, with deeper cuts and auctioning of all credits. Although the latter reflects the view that partial auctioning in the EU's limited cap & trade system resulted in a windfall for emitting industries, it also increases the revenues that would be collected to well over $100 billion per year, based on current emissions and the likely cost of credits. The Congressional wrangling over how to spend the smaller windfall from Boxer-Lieberman-Warner was nearly enough to turn me against a policy I have promoted for nearly a decade. We also can't lose sight of the fact that, like a tax, cap-and-trade would raise energy costs for consumers and businesses. That may be a necessary evil, but it is still a fact that has received precious little attention in this campaign. If the price of emissions credits settles at the current European level, we would see gasoline go up by about $0.35/gal, and electricity prices rise by up to 3 cents per kilowatt-hour.
Nor would cap & trade supersede the existing system of selective incentives and tax credits. Initially, at least, it would be additive to these, and apparently also to Senator Obama's $150 billion plan to promote alternative energy technologies over the next 10 years, along with a new low-carbon fuel standard and a greatly-expanded federal biofuels mandate--from 36 billion gallons per year (BGY) by 2022 to 60 BGY by 2030. I still regard the 36 BGY target with its 21 BGY of cellulosic and other advanced biofuel as a stretch, since the first commercial-scale cellulosic biofuel plant has yet to start up. 60 billion gallons is beyond ambitious.
Not every element of Senator Obama's energy plan represents a departure from current policy. His proposal for a 4% per year improvement in Corporate Average Fuel Economy for vehicles is broadly consistent with the 35 mile-per-gallon fleet CAFE target for 2022 adopted in the Energy Independence and Security Act of 2007, and his proposed tax credit of up to $7,000 per car for plug-in hybrids and electric vehicles closely resembles the incentives included in the $700 billion rescue bill recently signed into law. And with regard to "clean coal", his approach seems similar to the Department of Energy's restructuring of its Futuregen program, earlier this year.
There is much to like about Senator Obama's positive vision of cleaner energy, focused on making America more self-sufficient. At the same time, it would impose the biggest and most intrusive changes on US energy markets since at least 1980, entailing the collection and redistribution of many hundreds of billions of dollars--not temporarily, as contemplated for the current federal intervention in financial markets, but on an effectively perpetual basis. The benefits of cutting our energy imports and greenhouse gas emissions to a more sustainable level would be significant, though if we are serious about reducing our reliance on unstable foreign oil suppliers, it is counter-productive to pit solar, wind and biofuels against domestic oil & gas, which today contribute roughly 30 times as much net energy to the US economy, and could do more. We may indeed be entering a new era of big government; however, while parts of the Senator's energy plan would stimulate new industries and new jobs, other portions would act as a drag on existing businesses, and on consumers. This may ultimately be necessary, in order to tackle climate change, but undertaking it during a recession would complicate efforts to revive the whole economy, not just its new green parts.
It seems appropriate at the start to remind my readers of this blog's determined non-partisan stance. My focus is on the candidates' energy policies and anything relevant to those, without making any endorsement. My goal is to provide my readers with insights on the energy aspects of these two candidates' proposals, including their pitfalls, based on my own perspective and experience. However important, energy is only one issue among the many upon which they should base their choice.
Senator Obama has a detailed, coherent energy plan, and his team has clearly spent a lot of time assembling and refining the energy proposals outlined on the campaign's website. Compared to the version I examined in January, during the primaries, the Senator's energy and climate framework has evolved and become more realistic. Although energy independence is still a major theme of Senator Obama's energy platform, his independence goal has become more specific and less ambitious. It is currently stated in terms of reducing our oil imports by an amount comparable to what the US receives today from the Middle East and Venezuela. That equates to around 3.3 million barrels per day, or roughly one-third of net US oil imports in 2007. As I noted recently, such a reduction just might be feasible, but not without a significant effort to ensure that US oil production does not continue to decline. Instead, Senator Obama appears to consider the US tapped out for oil, and apparently expects his energy independence goals to be met without more help from that quarter.
That assessment pervades his approach to the oil & gas industry, though recently he has described natural gas in more favorable terms. It is also consistent with his periodic citations of the "3% of reserves vs. 25% of consumption" soundbite, which drastically understates the remaining resource potential of the US. This may explain his 2006 vote against a modest expansion of the allowed drilling area in the Gulf of Mexico, and his restrained support for expanded access to oil & gas during this summer's Congressional debate on various drilling proposals.
If anything, he seems to regard the domestic oil industry not as a potential source of new supply, but as a source of new tax revenue. His short-term energy program leads off with one-time energy rebates--$1,000 per family or $500 per individual taxpayer--funded by a windfall profits tax on oil companies. He hasn't put a price tag on this, but assuming all taxpayers would be eligible, it would require on the order of $20 billion dollars per year in new taxes over the next five years. Although there are legitimate differences of opinion on the justification for such a tax, its consequences for future US oil output are unambiguous: what you tax more, you get less of. The most positive elements of the Senator's oil strategy feature some interesting ideas for extracting more oil from existing reservoirs through CO2 injection--simultaneously sequestering it. He also supports building a natural gas pipeline from Alaska to the lower-48.
With regard to climate change, Senator Obama shares my preference for an emissions cap with credit trading over a carbon tax. His version would be stricter than the one embodied in the Boxer-Lieberman-Warner Bill defeated earlier this year, with deeper cuts and auctioning of all credits. Although the latter reflects the view that partial auctioning in the EU's limited cap & trade system resulted in a windfall for emitting industries, it also increases the revenues that would be collected to well over $100 billion per year, based on current emissions and the likely cost of credits. The Congressional wrangling over how to spend the smaller windfall from Boxer-Lieberman-Warner was nearly enough to turn me against a policy I have promoted for nearly a decade. We also can't lose sight of the fact that, like a tax, cap-and-trade would raise energy costs for consumers and businesses. That may be a necessary evil, but it is still a fact that has received precious little attention in this campaign. If the price of emissions credits settles at the current European level, we would see gasoline go up by about $0.35/gal, and electricity prices rise by up to 3 cents per kilowatt-hour.
Nor would cap & trade supersede the existing system of selective incentives and tax credits. Initially, at least, it would be additive to these, and apparently also to Senator Obama's $150 billion plan to promote alternative energy technologies over the next 10 years, along with a new low-carbon fuel standard and a greatly-expanded federal biofuels mandate--from 36 billion gallons per year (BGY) by 2022 to 60 BGY by 2030. I still regard the 36 BGY target with its 21 BGY of cellulosic and other advanced biofuel as a stretch, since the first commercial-scale cellulosic biofuel plant has yet to start up. 60 billion gallons is beyond ambitious.
Not every element of Senator Obama's energy plan represents a departure from current policy. His proposal for a 4% per year improvement in Corporate Average Fuel Economy for vehicles is broadly consistent with the 35 mile-per-gallon fleet CAFE target for 2022 adopted in the Energy Independence and Security Act of 2007, and his proposed tax credit of up to $7,000 per car for plug-in hybrids and electric vehicles closely resembles the incentives included in the $700 billion rescue bill recently signed into law. And with regard to "clean coal", his approach seems similar to the Department of Energy's restructuring of its Futuregen program, earlier this year.
There is much to like about Senator Obama's positive vision of cleaner energy, focused on making America more self-sufficient. At the same time, it would impose the biggest and most intrusive changes on US energy markets since at least 1980, entailing the collection and redistribution of many hundreds of billions of dollars--not temporarily, as contemplated for the current federal intervention in financial markets, but on an effectively perpetual basis. The benefits of cutting our energy imports and greenhouse gas emissions to a more sustainable level would be significant, though if we are serious about reducing our reliance on unstable foreign oil suppliers, it is counter-productive to pit solar, wind and biofuels against domestic oil & gas, which today contribute roughly 30 times as much net energy to the US economy, and could do more. We may indeed be entering a new era of big government; however, while parts of the Senator's energy plan would stimulate new industries and new jobs, other portions would act as a drag on existing businesses, and on consumers. This may ultimately be necessary, in order to tackle climate change, but undertaking it during a recession would complicate efforts to revive the whole economy, not just its new green parts.
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