By Bill Loveless
New efforts to promote technology to capture carbon-dioxide emissions from coal-fired power plants and bury them underground or use them to enhance oil production are getting more attention in Washington these days thanks to the Trump administration and its commitment to save the U.S. coal industry.
Now, the credit-rating agency Moody’s is cautiously predicting that the technology may be the answer for the declining industry in the long run, though daunting obstacles remain.
One thing that could jump start interest in carbon capture and sequestration (CCS) would be a spike in the cost of natural gas, whose abundance in the U.S. and low price in recent years have persuaded electric utilities to rely more on gas to fuel their power plants and less on coal, according to a new report from Moody’s.
On that score, the agency said it would keep an eye on the impact of liquefied natural gas exports, which began from the lower-48 states in 2016, on domestic gas prices. The International Energy Agency predicts that the U.S. will be the world’s number-two exporter of LNG by 2022.
“If coal were to become more cost-competitive vis-à-vis other fuels such as natural gas, environmental concerns would likely still keep the industry in decline, unless CCS technology were widely adopted,” Moody’s said.
“Although we do not expect economics to change in coal’s favor in the near-term, its competitive position may be helped in the long run by, for example, growth in liquefied natural gas exports.”
U.S. coal has a long way to go to recover. Coal consumption by U.S. power plants has fallen steeply, going from 45% of the electricity sector’s fuel mix in 2010 to 30% in 2017, the report said, citing figures from U.S. Energy Information Administration.
In addition to low-cost gas, advances in renewable-energy technology, consumer demand for green energy and regulatory uncertainty have all contributed to coal’s troubles.
“Absent disruptive changes in available technology, policy and prices, we expect this trend to continue, with coal’s share of U.S. energy generation likely dropping to 20-25% within a decade,” Moody’s said.
And foreign markets may not offer much hope for bigger U.S. coal exports, either, considering the cost of shipping the mineral to growing coal-consuming markets in Asia, compared to that of other coal-supplying countries.
So why even the glimmer of hope for coal and CCS technology?
Moody’s notes a commonly held view that capturing carbon from power plants, including eventually gas-fired facilities, will ultimately be essential to meeting aggressive goals for reducing carbon emissions, such as those included in the 2015 Paris climate agreement.
Among the proponents of that view are the International Energy Agency and even the Obama administration, whose Clean Power Plan for reducing emissions at power plants assumed the use of CCS technology in new coal facilities.
“That said, the major barrier to deployment (of CCS) is no longer technological, but political and commercial, as there are currently 21 large-scale CCS projects operating or under construction throughout the world and across industries,” Moody’s said.
Most of those projects are in Canada and the U.S., where the option of using captured CO2 for enhanced oil recovery provides incentives for financing.
Even there, the results are mixed. The Petra Nova project in Texas, completed in 2016 at an existing coal power plant by NRG Energy and JX Nippon Oil & Gas Exploration, sells CO2 to coax more production from a nearby oil field. On the other hand, Southern Company last year suspended work on the carbon-capture portion of a $7.5 billion power plant in Mississippi.
In India and Southeast Asia, where coal demand is expected to grow the most in coming years, the outlook for CCS technology is uncertain because of little or no opportunity to use the carbon emissions for oil production and legal and technological challenges to burying CO2.
Still, CCS could become an option in some parts of the world as projects like Petra Nova signal improvements in the technology and lower costs of building such plants declines, Moody’s said. The report cites IEA data indicating that those costs could fall by nearly 30% in the future.
And even in the U.S., interest in the technology could perk up thanks to Trump administration’s outspoken concerns over the reliability and resilience of the U.S. power grid as old coal and nuclear power plants are closed.
“Such reliability considerations, along with deep decarbonization requirements, could support CCS development over time,” Moody’s said.
