OBSERVERS: DESPITE GAS BOOM, CCS, NUCLEAR R&D INVESTMENTS NEEDED

Tamar Hallerman
GHG Monitor
10/11/13

The U.S. should not let the recent natural gas boom detract from investments in clean energy technologies with higher capital costs like carbon capture and storage and new nuclear, observers warned during a Bipartisan Policy Center panel event on natural gas this week. “It would be a tragedy if we settled into a state of complacency because of what appears today to be reasonably-priced gas, and as a consequence shortchange the innovation and investment that we need to do on new nuclear, carbon capture and other technologies that we need for the long-term,” former Under Secretary of Energy David Garman said. “Frankly, we don’t know what the price of natural gas is going to be in the future.”

Bloomberg New Energy Finance’s Head of Policy Analysis Ethan Zindler said the U.S. is “very rapidly putting a lot of eggs in the natural gas basket.” He warned that if natural gas prices increase beyond $4 or $5 per million British thermal units, recent investments could be put in jeopardy. “The conventional wisdom is definitely focusing on $4 or $5 natural gas prices, and if that’s not the world we end up in we’ll be in a very interesting situation in the next few years,” Zindler said. He added that cheap gas and flattening electricity demand have made it difficult in recent years to raise money for expensive utility-scale demonstration projects. “The U.S. certainly could and should think more about R&D, but there is a challenge for trying to raise the private capital to go into a new CCS or a new nuclear project,” he said. Garman, who is now a principal at the consulting firm Decker Garman Sullivan and Associates, also emphasized the value of R&D and said it would be “arrogant” if policymakers expect that “we can do what needs to be done with today’s energy technologies.”

Strong Policy Signal Needed, Experts Say

Instead, speakers at the panel event said a strong policy signal or regulatory framework is ultimately what would benefit CCS and new nuclear development and deployment the most, as they indicated that the Environmental Protection Agency’s carbon regulations for new and existing power plants may not be enough to drive significant RD&D investment over what is expected to be a “dash to gas.” Former energy and environment aide to President Barack Obama and current Harvard University Professor Joseph Aldy said that for expensive clean energy technologies like CCS to move forward, the government will have to provide more than the limited public sector R&D money that’s fueled much of the work to date. “I recognize the political constraints, but at the end of the day, if we’re going to be successful in tackling climate change and developing a new suite of low-carbon technologies, we need to create the kind of incentives for the private sector to participate in that innovation and really start to deploy and test those technologies at commercial scale,” Aldy said. “Absent some sort of certainty in what the regulatory framework or price on carbon might look like, I don’t think we’ll see enough private-sector activity that’s really necessary.”

Panelists also said that a strong policy signal is not likely to pass in the current Congress. “Barring a dramatic change of heart about how we’re going to spent our scarce fiscal resources, it difficult to see this ramp up without some sort of policy signal,” Aldy said, acknowledging what he said is declining interest in funding large-scale CCS projects following the $3.4 billion injection of cash included under the 2009 American Recovery and Reinvestment Act. Garman said that advocates may instead have to work under another kind of incentive framework. “I don’t think putting a price on carbon is within the realm of possibility right now, but promoting innovation [is doable],” he said. 

EOR Could Incentivize CCS

Panelists did, however, appear optimistic about enhanced oil recovery providing an interim incentivize for CCS. “Enhanced oil recovery is an excellent place to start. There’s the possibility that we could even structure a revenue-positive federal incentive for carbon capture and EOR that would give us more liquids on the market, sequester a lot of carbon dioxide in the ground and advance the technology on carbon capture,” Garman said, alluding to recommendations made by the National Enhanced Oil Recovery Initiative to Congress last year. “If we’re willing to do that, then I would say that in five, 10 years we could start to implement carbon capture,” he added, clarifying that a policy must be structured to promote innovation and not just oil production. However, Zindler said that it will ultimately be “very hard” to make CCS viable without EOR if there is no policy signal in place.