Abby L. Harvey
GHG Monitor
9/12/2014
A new study from the Massachusetts Institute of Technology and Penn State University says that less stringent regulations for new fossil fuel power plants would be more effective at stimulating investment into carbon capture technologies than currently proposed regulations from the Environmental Protection Agency. The study, which was published in this month’s issue of Energy Economics, looks at the EPA’s proposed New Source Performance Standards (NSPS) for coal-fired power plants. The regulation as initially proposed would have placed a limit of 1000 pounds per megawatt on carbon dioxide emissions from new coal-fired power plants. In September 2013 the NSPS was revised to set the limit at 1100 pounds per megawatt.
However, even in its revised version, the regulation is too stringent to spur investment into carbon capture technology, the study says, suggesting that allowing a few plants to operate with a higher emissions rate could provide enough financial relief to gain the experience needed to move innovation forward. “Given the economic and political challenges for CCS and its potential value in a low-carbon future, experience with even a small number of commercial-scale power plants with CCS would make a significant contribution to developing the technology and lowering future costs. Granting a limited number of coal-fired power plants a higher CO2 emission standard, for example 1500 lbs/MWh, could be a cost-effective strategy of achieving this. The lower capture percentages needed to comply with these higher emission standards would cost less, and in turn would reduce the need for incentives or climate policy to induce investment,” the study says.
Reduced Regulations Could Also Reduce CCS Costs, Study Says
Among the study’s findings is that a less stringent regulation could lead to the eventual decrease in cost for CCS projects. “A less stringent emission standard, for example 1500 lbs CO2/MWh, would be more likely than current proposals to incentivize investment in CCS technology. Coal with CCS is more competitive at higher emission standards because the cost of capturing carbon can be minimized by designing the facility to capture the CO2 only up to the required emission rate, and these lower capture percentages can be achieved at lower costs. Such projects would result in useful experience with carbon capture at commercial scales, which could lower the costs of future CCS projects,” the study says. Further, the study notes that making the regulations less stringent would have an insignificant impact on climate change, and would prove beneficial in the development of lower cost mature CCS technology, suggesting that the advantages of this approach outweigh the disadvantages.
EPA Proposal Could Increase Use of Natural Gas, Not CCS Investment
The study also says that the EPA proposal is more likely to lead to a faster shift to natural gas than it is to lead to increased investment in CCS. “An emission standard of this level is unlikely to incentivize investment in coal with CCS, regardless of any stated intentions. In the U.S., a significant natural gas price increase from current levels, even with very high EOR prices, would be required before the EPA’s proposed emission standard would incentivize any investment in coal-fired power plants with CCS,” the study says.
