Ken Silverstein | Aug 29, 2011

 

Carbon capture and sequestration may have gotten a second wind now that the Obama administration is helping to finance new projects. But the move appears to contradict the current political and regulatory climate -- one that favors austerity over more subsidies. 

 

The White House has been clear about its intentions: Coal has a place at the national energy table as long as those who use it will implement the best available technologies. Doing so not only reduces harmful emissions and greenhouse gases, but will also help slow its loss of momentum.  

 

Indeed, U.S. Energy Secretary Steven Chu says that with government assistance, coal will remain relevant in this country. As such, his department has chosen 16 projects aimed at making carbon capture real. The goal: To bring 5-10 commercial demonstration plants to market within 5 years and to do so without causing the price of electricity to rise by more than 35 percent. 

 

“Charting a path toward clean coal is essential to achieving our goals of providing clean energy, creating American jobs, and reducing greenhouse gas emissions. It will also help position the United States as a leader in the global clean energy race,” says Secretary Chu.

The latest move will channel $41 million to facilities that would improve post-combustion processes. Right now, the trials show that it takes too much energy to actually capture the carbon. That’s energy that is not going to power homes and businesses, resulting in a net energy loss. Such “parasitic” losses total 20-30 percent, the agency says. 

The Energy Department hopes to reduce that energy penalty. Simply, the new tools would add a “filter” to isolate the carbon dioxide from other gases before the carbon leaves the plant. 

While the administration has always been committed to advancing new coal technologies, the timing of this announcement is ironic. Not only does clamor abound to cut subsidies but also the nation has found itself awash in inexpensive and cleaner shale-gas. The surrounding haze has caused American Electric Power to withdraw from its carbon burial project. 

“Carbon capture and sequestration is an unproven, expensive and potentially dangerous technology that, even if it works, does nothing to alleviate the environmental, health and social consequences resulting from the mining and burning of coal,” says the 2011 Green Scissors report written by conservative and liberal activists alike.

Best Bet

Utilities are deciding which fuel sources will make the best bets. They are trying balance the needs of the various constituencies that range from regulators who are demanding reliable and cost effective electricity to the environmentalists who want everything to be green. For now, natural gas seems smart. But prudence would suggest a diversified fuel strategy.

Roughly, 540 coal plants exist in the United States and are responsible for almost half of electricity generated here. That’s coming from an asset base in which 15 percent of the facilities are older than 50 years, says Ken Humphreys, chief executive of the FutureGen Alliance. And, another 20 percent of that is older than 40 years.

While those plants have been upgraded over the years, they are candidates to be retired, particularly in this current regulatory atmosphere. All-in-all, Humphreys goes on to say that anywhere between 5-20 percent of the existing generation fleet will be lost over two decades. To replace that will require money -- $50 billion to $100 billion, which won’t just materialize. 

“It really is a daunting amount of complexity that the average coal-fired executive in the U.S. faces,” says Humphreys. FutureGen is expected to be 200-megawatts that retrofits an existing oil-fueled unit. The U.S. government is putting up 80 percent of the $1.1 billion cost. 

The planned subsidies are actually pitting the deficit hawks and free marketers against those in the coal sector. The essence of the discussion is this: At a time of mounting red ink, shared sacrifice will be required. Market forces should therefore determine what types of electric generation utilities decide to build.

The counter argument is that coal is here for the foreseeable future. The diversity, meanwhile, acts as a hedge to what have been volatile natural gas prices. At the same time, the government is mandating coal users clean their act and as such, the industry will require assistance. Otherwise, the endeavors are too expensive and too risky for any individual company to assume. 

While coal and some utility executives view the pending regulations as unfriendly and a potential death knell, the Obama administration is arguing that clean coal technologies are the industry’s best hope for long-term survival. It has thus chosen to help finance the projects to make it all possible, which is to the dismay of most budget hawks and environmentalists. 

EnergyBiz Insider has been named Honorable Mention for Best Online Column by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists. 

Follow Ken on www.twitter.com/ken_silverstein

 

energybizinsider@energycentral.com.

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