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Commit to the Use of Clean Coal

Currently, coal provides approximately 50% of our electricity supply, making it the largest source of domestic, reliable, and affordable energy. Coal will necessarily be a critical and expanding source for our future electricity and fuels needs. To use coal cleanly and to address CO2 emissions, we need to greatly increase our research, development, and demonstration of clean coal and carbon capture and sequestration technologies. We also must establish a fair and predictable regulatory environment.

Coal is the largest source of energy produced domestically. Demonstrated reserves of U.S. coal stand at about 491 billion tons, about 264 billion tons of which are recoverable. At the current production rate of about 1.1 billion tons a year, this is enough coal to last for well over 200 years.

The United States has nearly 1,500 coal plants in operation. These plants make up about one-third of the nation’s generating capacity, but they generate a much larger portion—more than half—of the nation’s electricity. This is because coal plants, like nuclear power plants, are run constantly to meet baseload power needs while other types of plants, like natural gas plants, are generally run more intermittently to meet peak-load demand.

Not only must coal remain a viable source of energy in the United States, it is likely to play an increasingly important role globally in the generation of electricity and over time in the production of transportation fuels through coal-to-liquids (CTL) technology. The Department of Energy’s Energy Information Administration (EIA) projects significantly greater global coal use, accounting for more than one-third of the total increase in energy consumption in 2030 compared to 2005, the highest amount for any single energy source. Coal is expected to supply about 29% of energy demand in 2030, up from 26% in 2005. Much of this growth is expected to come in the developing world, especially from large developing countries—such as China, India, Indonesia, and South Africa—that possess large reserves of coal.

Coal, however, poses significant environmental challenges, not least of which is that it emits the most CO2 per unit of energy of any fuel source. Because coal will remain an important resource in the global energy portfolio, we must develop technologies such as carbon capture and storage (CCS) that allow us to use coal while minimizing the resulting air pollution and CO2 emissions. For countries to adopt this technology, especially developing countries, the cost of a CCS-equipped coal plant will have to come down considerably. This will require a substantially expanded and expedited research, development, and demonstration program focused on both pre- and postcombustion CO2 capture technologies as well as a scientifically-intensive program that includes largescale tests to study and understand the impacts and methods of large-scale and permanent geologic storage or sequestration of CO2.

However, for all of the promise of CCS, the technologies are very complex, expensive to build and operate, result in large “parasitic” energy losses, and require significant supporting infrastructure. Parasitic energy losses—that is, the energy lost to the grid because it is required to operate the CCS equipment of the plant— can run as high as 30%, which means that more or larger plants will be needed to supply the equivalent amount of energy to the grid compared to plants without CCS. These high costs could result in fuel switching from coal to natural gas, which could exacerbate, not improve, our energy security challenge.

Bringing down the cost of CCS is therefore an important goal, and one that can be achieved only with some fundamental breakthroughs in technology. A recent report by the Massachusetts Institute of Technology on coal’s future similarly concluded that to take advantage of the most widely available energy resource—coal—both the deployment time and cost of CCS need to be reduced.

Given the prominence of coal as a fuel for power production, an accelerated program of CCS technology development and demonstration should be undertaken to determine the technical and economic practicability of the technology. If CCS technology proves too costly or research reveals adverse environmental impacts from storage, it is better to discover this earlier rather than later so that alternative technology paths can be pursued.

A number of CCS technologies are being pursued for different types of coal plants. CCS technologies for Integrated Gasification Combined Cycle (IGCC) plants rely on precombustion technologies that capture carbon before the fuel is combusted. However, there are only a couple of IGCC plants in operation today in the power sector (gasifiers are common in the petrochemical industry), and IGCC is more expensive, with a capital cost premium and parasitic energy loss of about 20% over a state-of-the-art pulverized coal (PC) plant. In addition to lowering the cost of capture technologies, improvements in IGCC plant efficiency, turbines, and other technologies will play an important role in making CCS more affordable.

Maintaining a strong federal clean coal program overall is therefore extremely important.

PC plants of different types and vintages make up nearly all of the coal-fired power plants now operating in the United States. CO2 from traditional coal plants can be captured from the flue gas using postcombustion technologies. Because CO2 accounts for only 10–15% of the flue gas, a large amount of it must be processed per unit of CO2 captured. Carbon capture technology using oxyfuel combustion is another technology being considered.

Concerning sequestration, estimates suggest that there are hundreds of years of geologic storage capacity in North America and thousands of years worldwide. Field tests sequestering at least a million tons of CO2 per year are needed to test the environmental and technical feasibility of large-scale sequestration. The three largest sequestration projects in the world today—Sleipner in the North Sea, Weyburn in Canada, and In Salah in Algeria—together store approximately 3 million metric tons annually, which is the amount of CO2 produced in one year by a single 500 megawatt coal-fired power plant. DOE is planning, through its Carbon Sequestration Regional Partnerships, at least seven such tests in different geologic formations. It is important that the partnerships receive the necessary funding to move ahead. The significant experience of the oil and gas industry with injecting CO2 through enhanced oil recovery programs should be harnessed to supplement geologic storage R&D.

The widespread use of CCS also would entail a considerable amount of infrastructure to move the captured and compressed CO2 from the plant at which it was generated to the sequestration site. If the CO2 from all existing coal-fired electricity generation in the United States were captured and compressed, its volume would be about 2.5 times the volume of oil handled each day. There is a great deal of uncertainty about how extensive this infrastructure would have to be—e.g., how much pipeline capacity would be needed—but it is safe to say that under almost any circumstances the infrastructure requirements would be quite large.

Advances in measurement and monitoring technologies for geologic storage also are needed to assess the integrity of subsurface reservoirs and transportation systems and the potential leakage from geologic storage. CCS technology development and demonstration should be among our highest R&D priorities, and they will require more funding from both government and private sector sources. DOE and the private sector should continue to work together to support large-scale CCS on commercial plants to demonstrate and assess the performance of a range of capture, transport, storage, and monitoring technologies.

However, alternative methods to assemble the necessary level of funding should be considered for such an expanded program and new management regimes should be explored to allow private sector entities with the greatest stake in the outcome to participate in the management of such an expanded R&D effort. One way to accomplish this would be to administer a small fee on fossil-based utilities and match it with federal funds for a technology fund devoted to developing and demonstrating CCS on commercial plants.

We believe that an average of $2 billion each year over 10 years should be devoted to develop and demonstrate the full range of clean coal technologies (including CCS). One-half of the funds should come from the DOE (as part of the increase in R&D funding recommended in Section V of this Blueprint) and half should be provided by the private sector through the fee indicated above.

EPAct2005 provided $1.65 billion in investment tax credits to stimulate clean coal technology, $800 million of which was devoted to IGCC for electricity production. However, this amount would support about two new IGCC plants for each coal type. A more robust tax incentive could accelerate IGCC even further by significantly decreasing the capital costs and increasing the knowledge base of the power sector with IGCC technology. These tax credits should support three to five additional plants to be built for each coal type at an accelerated pace.

As the technology proceeds, we must also develop policies, laws, regulations, and liability regimes that will govern geologic sequestration. How will long-term responsibility be managed? How will space in underground storage facilities be apportioned? Will the federal government provide guarantees? How will compliance be monitored? How will siting and permitting of CCS infrastructure be handled? These and other questions create substantial uncertainty about the risks of CCS and illustrate the need for a sound legal and regulatory infrastructure for this technology. Without this, investors and developers lack the certainty that can prevent capital from forming and developers from moving forward with coal plants that include CCS. The EPA is at work on an underground storage injection rule to address some of these issues. It is important that this and other carbon sequestration rulemaking processes proceed in tandem with technology development, and field tests should be timed to provide input into the regulatory process. Finally, for CCS technology to be successful in attracting financing and achieving a foothold in the market, the use of DOE’s existing loan guarantee authority likely will be needed.

Despite best efforts, it must be recognized that CCS technologies will not be ready for widespread commercial uptake until 2020 at the very earliest, and maybe closer to 2030. Climate change policies must take this timeframe into account. Until the technology is ready for deployment, policies should focus on improving the efficiency of the existing fleet of fossil fuel–fired power plants and the commercial use of highly efficient state-of-the-art coal plants.