Steve Caldwell's blog

The first two weeks of August saw two big news items from the U.S. Department of Energy (DOE) related to carbon capture and storage (or CCS, for an overview of CCS see the our Climate TechBook CCS brief). First, on August 5, DOE announced its plans for FutureGen 2.0. One week later, President Obama’s Interagency Task Force on CCS delivered its final report and recommendations regarding overcoming “the barriers to the widespread, cost-effective deployment of CCS within 10 years, with a goal of bringing five to ten commercial demonstration projects online by 2016” (see the separate post regarding the task force’s report).

Why is this FutureGen announcement from DOE important? CCS is anticipated to be a key technology for achieving large reductions in U.S. and global greenhouse gas (GHG) emissions (for example, see the recent projection from the International Energy Agency that CCS could provide nearly one fifth of all global GHG emission reductions by mid-century). Initial commercial-scale CCS demonstration projects are a critical step in advancing CCS technology; these projects provide valuable experience and confidence in “scaling-up” CCS technologies and technology improvements and cost reductions from “learning by doing.” The aforementioned report from the Interagency Task Force on CCS notes that FutureGen is one of ten planned CCS demonstration projects supported by DOE (see Table V-2 of the task force’s report for the list of seven power-sector and three industrial CCS projects).

The FutureGen project has had a somewhat tumultuous history. In 2003, DOE announced its plan to work with an industry consortium on the FutureGen plant to demonstrate commercial-scale integrated gasification combined cycle (IGCC) technology coupled with (pre-combustion) CCS at a single new coal-fueled power plant (with DOE covering most of the project’s costs). In 2007, the industrial consortium selected a site in Mattoon, IL, for the FutureGen power plant. In 2008, though, DOE abandoned the idea citing the escalating cost estimates for the FutureGen project and decided instead to pursue cost-sharing agreements with project developers to support multiple CCS demonstration projects (this time with DOE covering a smaller fraction of project costs). DOE received only a small number of applications for this restructured FutureGen approach, and this change of plans came in for some criticism from the Government Accountability Office (the GAO report also provides a helpful overview and history of what might now be referred to as “FutureGen 1.0”).

In 2009, the Obama Administration revived plans for a single FutureGen plant and restarted work with the industrial consortium on preliminary design and other activities, promising a decision in 2010 on whether to move forward with the project. That decision came on August 5 and included another shift in DOE’s plans for the FutureGen project (now dubbed “FutureGen 2.0”). Energy Secretary Chu announced the awarding of $1 billion in Recovery Act funding for the repowering of an existing power plant in Meredosia, IL, as a coal-fueled power plant using oxy-combustion and CCS. With “FutureGen 2.0,” DOE decided to change from building a new plant to repowering an existing one and chose a different technology (oxy-combustion with CCS rather than IGCC with CCS).

When subsidizing initial CCS demonstration projects, policymakers should support a variety of relevant technologies and configurations. With respect to applying CCS technology to coal-fueled electricity generation, there are factors that are expected to make certain variants of CCS technology more appropriate for certain circumstances. These factors include the application of CCS with: new plants vs. retrofitting/repowering existing plants; different coal types; and various geologic formations for CO2 storage. Importantly, there are three types of CO2 capture technology—pre-combustion, post-combustion, and oxy-combustion—with the latter two appropriate for use at existing coal-fueled power plants (see our Climate TechBook CCS brief for details). 

With its new approach for “FutureGen 2.0” DOE has focused on large-scale demonstration of oxy-combustion. Of the ten CCS demonstration projects supported by DOE, FutureGen will be the only one to use the oxy-combustion technology. Of the 34 large-scale power plant CCS projects worldwide tracked by MIT, only four (counting FutureGen) use or plan to use oxy-combustion, and FutureGen will be the only such oxy-combustion project in the United States. Given the greater focus so far given to the two other alternative CCS approaches, oxy-combustion is likely the CCS technology that can most benefit from the FutureGen large-scale demonstration project.

With its new approach for “FutureGen 2.0,” DOE is taking an important step in demonstrating a portfolio of different CCS technologies. Such demonstrations, along with other supportive government RD&D policies, provide a critical “push” for low-carbon technologies. Long-term policy certainty (such as from a GHG cap-and-trade program) for the private sector regarding future GHG emission reduction requirements can provide the necessary technology “pull” to guide private investments in widespread deployment of CCS and other low-carbon technologies.

Steve Caldwell is a Technology and Policy Fellow

Last week, the Obama Administration’s Interagency Task Force on Carbon Capture and Storage (CCS) released its final report and recommendations. President Obama created the task force, co-chaired by the Department of Energy (DOE) and the Environmental Protection Agency (EPA) and involving 14 executive departments and federal agencies, in February. The President’s directive charged the task force with delivering “a proposed plan to overcome the barriers to the widespread, cost-effective deployment of CCS within 10 years, with a goal of bringing 5 to 10 commercial demonstration projects online by 2016.”

We recently released a report that describes the petroleum sector from production to consumption and examines options for including greenhouse gas (GHG) emissions from petroleum use under climate policy (e.g., GHG cap and trade). Currently, policymakers are considering multiple approaches for coverage of petroleum under comprehensive climate and energy legislation. In deciding how to address a sector of the economy or a particular fuel, policymakers must balance the goals of ensuring maximum coverage of emissions, minimizing administrative complexity and burden, avoiding creating perverse incentives or market distortions, and promoting emission reductions.

While the details of the Kerry-Graham-Lieberman climate and energy proposal in the Senate are yet to be released, press reports indicate that the trio is likely to adopt a new approach to covering transportation fuels—the so-called “linked fee.” Unlike other proposals in the House or Senate, the Kerry-Graham-Lieberman approach would reportedly levy a “carbon fee” on transportation fuels with the fee amount linked to the carbon price from a GHG cap-and-trade program covering at least electric utilities. The forthcoming details of how the “carbon fee” is linked to the cap-and-trade market will determine whether such an approach can lead to significant emissions reductions from transportation and whether such an approach can yield the economy-wide emissions reductions needed to protect the climate.

Our new report includes information relevant to the linked-fee approach. For example, the report calculates that about 80 percent of combustion emissions from petroleum use are attributable to transportation fuels that are already subject to federal fuel excise taxes. Untaxed transportation fuels and large and small stationary combustion sources account for the remainder of emissions from petroleum use. This means that a linked fee could be implemented at least in part by covering the same entities that currently pay the fuel tax. 

Another Senate proposal, the Cantwell-Collins Carbon Limits and Energy for America's Renewal (CLEAR) Act, creates an economy-wide cap-and-trade program—in this case just covering CO₂ emissions from fossil fuel use. The CLEAR Act adopts an entirely “upstream” point of regulation that would make “first sellers” (i.e., coal mine and natural gas and oil well owners) responsible for surrendering cap-and-trade allowances for end-use emissions from the fossil fuels they sell. As the new Pew Center report explains, there are about a half million oil wells in the United States. Of the nearly 14,000 domestic well operators tracked by the U.S. Energy Information Administration (EIA), the 10 largest (e.g., BP, Chevron) account for about half of total production, and the 670 largest account for about 90 percent of production.

The House-passed comprehensive climate and energy bill (H.R. 2454, the Waxman-Markey American Clean Energy and Security Act of 2009) also included an economy-wide GHG cap-and-trade program. Waxman-Markey, however, would require petroleum refiners and importers to surrender cap-and-trade allowances equal to the GHG emissions from the final end use of their products (e.g., tailpipe emissions from vehicles). This point of regulation for petroleum would achieve complete coverage of combustion emissions and regulate a small number of entities and facilities (about 150 refiners with 67 different owners and a larger number of importers and points of entry). Of note, Waxman-Markey adopted different points of regulation for different emission sources--including large sources (e.g., coal and natural gas power plants and industrial sources) and local natural gas distribution companies (residential, commercial, and small industrial natural gas users).

With different proposals in play, our new report can inform policymakers and others considering options for reducing GHG emissions from petroleum use and help advance approaches that balance the goals of emissions coverage, administrative ease, and cost-effective and significant emission reductions.

Steve Caldwell is a Technology and Policy Fellow

The Obama Administration made some important announcements about offshore drilling last week. And in the near and medium term, we believe increasing U.S. oil production is compatible with successful efforts to significantly reduce U.S. greenhouse gas (GHG) emissions.

Offshore drilling has been much talked about lately. Expanding offshore drilling in the federal outer continental shelf (OCS) areas and increasing oil and gas revenue sharing for nearby coastal states is part of the package of climate and energy policies being negotiated by Senators Kerry, Graham, and Lieberman.

Recent news has cast a spotlight on nuclear power. We’ve blogged before about nuclear power and its potential to play a large role in decarbonizing the electricity sector.

First among the big news items related to nuclear power is the official naming by the Obama Administration of a much-anticipated Blue Ribbon Commission on America’s Nuclear Future to recommend a safe, long-term solution for used nuclear fuel and nuclear waste. The commission, announced on January 29, will issue its final report within 24 months. Energy Secretary Chu noted that the commission is not tasked with recommending a site for a long-term waste repository.

We just added a brief on natural gas to its Climate TechBook that helps to explain why natural gas is unique among fossil fuels. Natural gas is both a contributor to climate change (natural gas combustion accounts for about 16 percent of total U.S. greenhouse gas emissions) and an option for reducing emissions since natural gas is less carbon-intensive than coal and petroleum. The United States could actually reduce total greenhouse gas emissions by burning more natural gas if it’s displacing other fossil fuel use (this is particularly the case for fuel switching from coal to gas in power generation).

Like coal, but unlike petroleum, natural gas is primarily a domestic energy resource, with net imports of natural gas constituting only about 13 percent of U.S. consumption and about 90 percent of imports coming from North America. Unlike coal (93 percent consumed for electricity generation) and petroleum (more than two thirds used for transportation), natural gas consumption is more evenly split across the electric power, industrial, residential, and commercial sectors.

The past few years have seen a “revolution” in the outlook for natural gas supply. Until recently, experts thought that the United States would become increasingly dependent on expensive imports of liquefied natural gas (LNG) from overseas, but the recent boom in domestic “unconventional” gas production (driven by shale gas) and the dramatically increased estimate of U.S. gas reserves have led to projections of increasing domestic natural gas production and declining imports.

Natural gas is receiving a lot of attention in the discussion about U.S. climate and energy policy. The gas industry is pressing for favorable treatment in possible climate and energy legislation, with a specific set of policy priorities recently put forth by a major industry lobby group.

While some tout natural gas as a “bridge fuel” to a low-carbon future others fear that a “dash for gas” (i.e., fuel switching by electric power generators) could increase demand for and the price of natural gas, thus negatively impacting manufacturers that rely on natural gas for energy and as a feedstock.

Recent analysis by the U.S. Energy Information Administration (EIA) of the climate and energy bill passed by the House in June 2009, illustrates how the projected role of natural gas in reducing U.S. greenhouse gas emissions depends in large part on the use of offsets under cap and trade and the relative cost and commercial availability of low-carbon technologies (e.g., wind, solar, carbon capture and storage, and nuclear power). When low-carbon technology deployment and offsets are constrained, EIA finds a much heavier reliance on natural gas for electricity generation under cap and trade, but the new outlook on U.S. natural gas supply means that even this pessimistic scenario does not lead to major increases in projected natural gas prices.

A new modeling analysis from Resources for the Future (RFF) sought to quantify the implications of the dramatically expanded U.S. natural gas supply. RFF researchers found that without new energy and climate policy, more abundant and less expensive natural gas could actually mean slightly higher U.S. greenhouse gas emissions in 2030 than would otherwise be the case (as cheaper natural gas competes with non-emitting energy sources and increases total energy consumption).

This last point brings us back to the overarching importance of implementing a policy that puts a price on carbon, as a greenhouse gas cap-and-trade program would do. Putting a price on carbon would harness market forces to drive the deployment of a portfolio of low- and lower-carbon technologies and fuels, including increased natural gas use to the extent it can cost-effectively reduce emissions.

Steve Caldwell is a Technology and Policy Fellow

The Pew Center just published a summary of many of the major clean energy policy developments of the past five years (2005 through 2009). This look back gauges progress on clean energy policy since the “10-50” Solution Workshop, sponsored by the Center and the National Commission on Energy Policy (NCEP) in 2004, which convened leading experts to discuss key technologies likely to enable a low-carbon future by mid-century (50 years henceforth) and to identify the critical policies necessary in the next 10 years to enable this long-term vision.

Shortly before the new year, Vice President Biden issued a memo summarizing the federal government’s progress in promoting “clean energy,” primarily via the 2009 stimulus bill (the American Recovery and Reinvestment Act, or ARRA). The Dec. 15 memo highlights significant incentives provided for efficiency, renewable electricity, biofuels, plug-in hybrid-electric vehicles, carbon capture and storage, and other low-carbon technologies. It summarizes where things stood one year ago (e.g., in terms of generating capacity, number of homes with smart meters) and where things are expected to be in the next few years.

The memo notes that ARRA provides $80 billion for clean energy investments. In terms of impacts, Vice President Biden claims, for example, that ARRA and other policies put the United States on track to double by 2012 non-hydro renewable electricity generation capacity compared to the level at the beginning of 2009. The memo says the rate of home energy efficiency retrofits will increase by an order of magnitude from 2009 to 2012 (to one million per year). While there are currently no commercial-scale carbon capture and storage projects in operation, the memo projects that there will be five by 2015. There are also evaluations of vehicle fuel economy, biofuels, nuclear power, electric vehicles, smart grid, and clean energy manufacturing.

While the clean energy advances touted by the Vice President are undoubtedly positive developments, the key policy for significantly reducing U.S. greenhouse gas emissions—i.e., putting a price on carbon—is still being debated in Congress. The House passed a climate and energy bill that included a greenhouse gas cap-and-trade program in June, and the Senate continues deliberations on a similar bill.

In considering efforts to transition to a low-carbon future, it’s helpful to remember that climate change is a “tale of two market failures.” First, and most importantly, businesses and households do not face any price associated with emitting greenhouse gases despite the social costs (e.g., costs of damage to coastal communities from sea level rise, increase in costs due to reduction in water resources) associated with their contribution to dangerous climate change. Thus businesses and households lack a key financial incentive to invest in efficiency or lower-carbon energy sources. Second, while intellectual property protections help firms profit from their investments in new technology, the nature of innovation is such that the gains to society (i.e., to other businesses and consumers) from a single company’s investments in innovation generally exceed the returns to that company.  Thus businesses tend to under-invest in innovation.

With respect to fostering innovation, a summary from Harvard’s Belfer Center of U.S. Department of Energy research, development, and demonstration (RD&D) funding over time illustrates that the $7.5 billion in energy-related RD&D funding in ARRA is more than half as much as DOE received, cumulatively, in the five years from FY2005 through FY2009. 

We know that a combination of a market-based climate policy that puts a price on carbon (e.g., via a greenhouse gas cap-and-trade program) to “pull” a portfolio of low-carbon technologies into the market coupled with incentives for low-carbon technology research, development, demonstration, and deployment (RDD&D)—i.e., policies to “push” low-carbon technologies into the market—make reducing greenhouse gas emissions less costly overall than a reliance on only “push” or “pull” policies alone.

The efforts outlined in the Vice President’s progress report are providing a much needed “push” for clean energy—such as government funding and loan guarantees to leverage private-sector investment in commercial-scale demonstrations of carbon capture and storage.  But, ultimately, the United States will not make the required significant, absolute reductions in emissions without the market “pull” created by an economy-wide carbon price.

Steve Caldwell is a Technology and Policy Fellow

The smart grid is a hot topic these days. President Obama touted the smart grid during his campaign and continues to be a booster. The 2009 stimulus bill (the American Recovery and Reinvestment Act, ARRA) provided nearly $4.5 billion to the Department of Energy (DOE) for smart grid investments. In October, DOE made $3.4 billion in awards under the Smart Grid Investment Grant Program, and, in November, DOE announced awards totaling $620 million as part of the Smart Grid Regional and Energy Storage Demonstration Project.

Last month, we added a smart grid factsheet to its Climate Techbook. While it’s not easy to give a short definition of the smart grid, one can think of it as the application of digital technology to the electric power sector to improve reliability, reduce cost, and increase efficiency. Smart grid technologies—including communication networks, advanced sensors, and monitoring devices—provide new ways for utilities to generate and deliver power and for consumers to understand and control their electricity consumption.

The smart grid has several anticipated benefits unrelated to climate change, such as improving electricity reliability (e.g., fewer power outages) and reducing utilities’ operating costs (e.g., by eliminating meter reading). Much of the buzz around the smart grid, however, has to do with the ways that smart grid technology can facilitate greenhouse gas emission reductions.

Efficiency, renewables, and  plug-in hybrid electric vehicles (PHEV) are three of the primary climate solutions the smart grid can enable. Initial evidence suggests that giving consumers direct feedback on their electricity use via smart meters and associated display devices can by itself lead to energy savings of 5-15 percent. One of the challenges that will become increasingly important as the United States relies more on renewable electricity from wind and solar power is that these resources are variable (i.e., they only generate electricity when the wind blows or the sun shines) rather than schedulable like traditional fossil fuel power plants. Smart grid technology makes it easier to add energy storage to the grid and to exploit demand response (e.g., cycling air conditioners on and off) to more easily balance electricity supply and demand as output from variable renewables fluctuates. Finally, smart grid technology would facilitate charging PHEVs during periods of low electricity demand (when generating costs are lowest and existing capacity is underutilized) so that PHEV charging can be done most cost-effectively.

Achieving greenhouse gas emission reductions at the lowest cost will require deploying a portfolio of energy efficiency measures and low-carbon energy technologies, several of which can build upon smart grid technology.

Steve Caldwell is a Technology and Policy Fellow

The role of coal in the future U.S. energy mix is a key issue in the Senate debate over climate legislation. Another senator has recently drawn attention to the importance of carbon capture and storage (CCS) technology to coal. On December 3, Senator Robert Byrd (D-WV) issued an opinion piece entitled “Coal Must Embrace the Future.”

West Virginia produces more coal than any state other than Wyoming and accounts for about 13.5 percent of total U.S. coal production. Coal-fueled power plants provide nearly 98 percent of West Virginia’s electricity. Coal mining accounts for about 6 percent of West Virginia’s state GDP and 3 percent of total state employment.

Senator Byrd’s opinion piece addresses issues related to mountaintop removal mining and climate change. Notably, on the question of climate change, Senator Byrd writes that:

To be part of any solution, one must first acknowledge a problem. To deny the mounting science of climate change is to stick our heads in the sand and say “deal me out.” West Virginia would be much smarter to stay at the table. The 20 coal-producing states together hold some powerful political cards.

Disinterested analyses (e.g, from MIT and EPRI) project coal with CCS to be a significant component of a least-cost portfolio of low-carbon energy technologies.  Coal currently provides nearly half of all U.S. electricity. Senator Byrd’s opinion piece reinforces the distinct importance of preserving a significant role for coal in a future U.S. energy supply in order to secure broad political support (i.e., at least 60 votes in the Senate) for action on climate change.

Senator Byrd earlier stated that he did not support the climate and energy bill passed by the House in June (H.R. 2454, the American Clean Energy and Security Act of 2009) “in its present form.” Our recent brief describes the significant investments the House energy and climate bill includes for demonstration and deployment of CCS with coal-fueled power plants. The senator does, however, highlight in his opinion piece that he has been working for the past six months with a group of coal state senators on provisions that could be included in a Senate climate and energy bill that would facilitate a transition to a low-carbon energy future for the coal industry.

In short, Senator Byrd’s opinion piece is a candid assessment of the situation as he sees it: the science supporting man-made climate change is clear; U.S. climate and energy legislation will pass eventually; cooperative, constructive engagement by coal state Senators in crafting such legislation is the best strategy for protecting the interests of their constituents.

Fittingly, one of the most advanced CCS projects in the world recently began operation in Senator Byrd’s home state—American Electric Power’s Mountaineer Plant Carbon Dioxide Capture & Storage Project.

Steve Caldwell is a Technology and Policy Fellow