Running in Circles Over Carbon
By MATTHEW L. WALD
New York Times
June 8, 2008
WASHINGTON— Cutting carbon dioxide emissions is a fine idea, and a lot of companies would be proud to do it. But they would prefer to be second, if not third or fourth.
This is not a good way to get started in fighting global warming.
As efforts to pass a global warming bill collapsed in the Senate last week, companies that burn coal to make electricity were looking for a way to build a plant that would capture its emissions. There is a will and a way — several ways, in fact — to do just that.
Capturing carbon from these plants may become a lot more important soon. Emissions from coal-fired power plants already account for about 27 percent of American greenhouse emissions, but as prices for other fuels rise, along with power demand, utilities will burn more coal. And if cars someday run on batteries, a trend that $4-a-gallon gasoline will accelerate, then the utilities will burn even more fuel to generate the electricity to recharge those batteries.
This could be good news, because controlling emissions from a few hundred power plants is easier than controlling them from tens of millions of house chimneys, or hundreds of millions of tailpipes. And in the laboratory, at least, there are three very promising systems for capturing carbon dioxide before pumping it underground.
But supplying electricity is not like most other businesses. Unlike the companies that make microchips, clothing for teenagers or snack foods, the companies that make electricity can see no advantage in going first. This is true for the traditionally regulated utilities that can charge everything to a captive class of customers (if regulators approve), and it is also true for the “merchant generators,” who build power plants and sell their output on the open market.
“No one wants to go into the new world,” said Armond Cohen, executive director of the Clean Air Task Force, a nonprofit group that favors stringent controls on power plant emissions. “We have very few takers because of the price premium.”
By price premium, Mr. Cohen meant not only the costs of going first, with the high probability of mistakes that others can learn from, but the costs of the new technology itself. The problem is, the premium is of unknown size, which makes everyone in the industry especially wary.
[IF THIS IS THE CASE, HOW CAN U.S. SENATOR BARBARA BOXER HONESTLY SAY THAT THE 'CAP & TRADE' CLIMATE CHANGE BILL SHE SUPPORTS WILL NOT RAISE ENERGY, GOODS & SERVICES PRICES???].
The point was illustrated by a recent decision by the Virginia State Corporation Commission, which regulates utilities, to turn down an application by the Appalachian Power Company to build a plant that would have captured 90 percent of its carbon and deposited it nearly two miles underground, at a well that it dug in 2003. The applicant’s parent was American Electric Power, one of the nation’s largest coal users, and perhaps the most technically able. But the company is a regulated utility and spends money only when it can be reimbursed.
The Virginia commission said that it was “neither reasonable nor prudent” for the company to build the plant, and the risks for ratepayers were too great, because costs were uncertain, perhaps double that of a standard coal plant. And in a Catch-22 that plagues the whole effort, the commission said A.E.P. should not build a commercial-scale plant because no one had demonstrated the technology on a commercial scale.
Thus an approach that makes collective sense — trying out technologies that could be helpful over the long term — is unattractive to individual participants.
That is not the only where-to-get-started problem. Another is that building a plant might make sense to a utility regulator, or to a company that builds power plants on speculation, if it generated pollution credits that the company could then sell to other polluters, for instance, or could help the plant meet emissions quotas. But there are, as yet, no credits to buy or sell and no quota to meet.
When Congress debates the idea, one of the drawbacks is that no one is sure where to set the caps on emissions, because no one is sure what the carbon regulation would cost. So there is no regulation, no plant built to meet the regulation, and thus no plant for lawmakers to look at to determine how strict a regulation to pass.
Carbon capture is not the only field in which nobody wants to go first; another is nuclear power. Builders in that industry also recognize that the first to build a next-generation reactor (the last one ordered that was actually built was in 1973) will pay a lot more than the builders who follow. But Congress has tried, at least, to solve that problem by offering generous loan guarantees and risk insurance for the first few reactors. There was a plan to heavily subsidize a single capture-and-storage coal plant, but when the estimated construction price nearly doubled, to $1.8 billion, the Energy Department dropped the plan.
And without full-scale tests, nobody knows what all this would cost.
“The estimates are accurate to within plus 20 percent to plus 100 percent,” said John Rowe, the chief executive of Exelon, which burns coal and also operates nuclear reactors, and leans toward the latter for new projects. “These are very complicated projects, with a great deal of both science and engineering and of public acceptability tests that have simply not happened yet,” he said. In contrast, he argued, nuclear is easier.
While others differ, or argue that solar or wind would be a better bet, the failure to get started does have a certain circularity to it. Companies will not run to build plants that sequester their carbon because Congress has not set a price for emitting the pollutant. Without the early plants, Congress has little clue how many tons the economy can afford to capture and sequester.
[CONGRESS NEEDS TO INCENTIVIZE THE TECHNOLOGY & INNOVATION CYCLE, NOT PENALIZE IT.]