The Subsidy Machine
Do you want to pay more for carbon capture than you pay for electricity generation?
In sweeping new regulations designed to reshape the power industry, the EPA rolled out its new Carbon Capture and Storage (CCS) rules, as it relates to power plants. As the
put it:The “EPA’s finalized rules…impose unrealistic requirements on coal plants to utilize CCS technology to capture 90 percent of their emissions by 2032 if the plants hope to operate beyond 2039. However, coal plant owners who agree to shut down their plants before the beginning of 2032 are exempt from the rules” (emphasis added).
So… what is carbon capture and how does it work?
Let’s look at the EPA’s ‘poster boy’ power plant to get an idea of what your friendly neighborhood bureaucrats might think the grid should look like.
Petra Nova: The Largest US Power Plant Carbon Capture Project To Date
In its 1000+ page ruling, the EPA went to great pains to show that carbon capture was ‘commercially feasible.’ The EPA highlighted projects including two commercial scale carbon capture projects: the 240MWe Petra Nova project located near Houston Texas and a smaller, older ~115MW Boundary Dam project in Canada.
Back in 2010, the US Department of Energy agreed to partially fund Petra Nova. And, the EPA assisted with the project. Construction was completed in late 2016, and Petra Nova was a scaled up version of a process already in use at the Barry Plant in Alabama. When Petra Nova started operations, PowerMag called it the “Plant Of the Year” in 2017. And, as of a Dec 2023 Congressional Budget Office Report, Petra Nova is the largest operational carbon capture project at a US power plant.
Since Petra Nova is the biggest, and the one the EPA assisted with, we’ll focus on it.
How It Works
Petra Nova added carbon capture to an existing sub-bituminous coal plant located near Houston, TX (W.A. Parish).
For it to work, it needs a way to:
Capture the carbon (before or after combustion, etc)
Transport it somewhere to
Dispose of it
***and***
Pay for it.
Let’s Dig In.
Petra Nova captures carbon with amine absorption. It’s nothing new. If you’ve worked around the oil and gas fields, you might be familiar with a natural gas processing plant that sort sulfur and CO2 from the gas coming out of a well. Some natural gas processing plants (or natural gas refineries, so to speak) use amine absorption. Here’s a screenshot from the DOE’s report on Petra Nova:
To start it off, the hot exhaust from the coal plant is cooled (1.) Then, it’s mixed with an absorbing solvent that acts like a million little sponges soaking up the CO2 (2.). Once the sponges (solvent) are saturated, a regenerator ‘rings out’ the sponges(3.). This step requires a lot of heat.
Once the CO2 is separated, it’s compressed with a ~29,000 horse power compressor (4) that is basically equivalent to 4 or 5 diesel-electric locomotives. CO2 is compressed so it can be transported by pipeline.
How To Dispose Of Or Use CO2.
If you capture CO2 and don’t have a way to transport and dispose of it, it’s like a dog chasing a car. Once the dog catches the car, now what?
The carbon business isn’t new. Here’s a chart based on a 2019 IEA report on ‘Putting CO2 To Use.”
Carbon is a building block for Urea (ammonia and CO2), and you might know it as the little white pellets or crystals often used to fertilize soil. Other common uses for CO2 are food and beverages.
For Petra Nova, once the CO2 is captured at the plant, it is transported about 81 miles by pipeline to an old oil field called West Ranch, south of Houston. West Ranch dates back to the 1930s. Its rock formations have lots of tiny holes that are fairly well connected, making it a good place to dispose of CO2. (West Ranch’s porosity: 27%; permeability 400mD). As the CO2 is injected into the rock, it “repressurizes” the West Ranch oil field, boosting oil production (a type of Enhanced Oil Recovery).
Lots of Moving Parts = A Good Chance It’ll Break Down
This carbon capture process is a fairly complex, industrial ballet with lots of moving parts. They all have to work together to make it ‘successful.’ And for Petra Nova, things often got out of sync.
In 2020, oil prices crashed. It no longer made sense to produce oil from West Ranch and the project shut down. Then, there was a fire at the coal plant in May of 2022, knocking it offline, delaying the restart until September of 2023.
Even before the shutdown in 2020, Petra Nova had hundreds of days worth of ‘outages.’ Between 2017-2020, there were:
192 outages caused by the carbon capture system or its generator.
And foreshadowing things to come, West Ranch had trouble receiving the gas, causing 42 outages.
21 weather related outages
52 planned outages and
60 outages from the coal unit (WAP 8)
In total (both full and partial days, including overlapping), there were 367 outages in the 3 year trial period. In the last year of the trial, the system had **ONLY** 74 outages, 49 full days and 25 partial days. Here’s a chart from the DOE’s technical report:
Energy Costs
Petra Nova is a power hungry beast, but owners didn’t want a power parasite on the coal plant. So, to run the carbon capture for 240MW equivalent of exhaust from the coal plant, Petra Nova built a new 78MWe natural gas power station nearby. The size of the natural gas plant was based on the heat needs, not the electricity needs: extra electricity was sold to the grid.
To capture the CO2 for 240MWe of coal power, Petra Nova consumed:
~34-36MWhr of electricity /hr
~500,000lbs of steam/ hr
and ~ 21-66 mmbtus/hr of additional gas to supplement the heat
Adding it all up, when operational, Petra Nova consumed around 880 to 1060 MMbtus of gas per hour (both for the electricity, steam, and additional heat).
How much electricity could be made with that gas?
If Petra Nova was a new combined-cycle gas plant instead of a carbon capture system for 240MWe of coal, it could have generated ~126 to 152MW of electricity (gross). Instead, it ran the carbon capture and generated just 38-51MW (net) for the grid. To run Petra Nova, the grid traded away an opportunity to make ~ 75 to 114MW (net) of useful electricity. (Based on data from the EIA and DOE.)
Energy Return On Energy Invested?
If the energy consumed by carbon capture is invested to ‘make’ more energy (like pumping oil), then we’re getting ‘energy’ in return. But if we spend all that energy to just ‘capture and store’ CO2, we’re taking large amounts of energy from the grid and burying it underground with nothing visibly constructive in exchange.
According to the DOE, during the 3 year project, ~4 million tons of carbon were buried in exchange for ~4.2 million barrels of oil.
Dollar Costs
The DOE estimates it cost $1billion to construct, finance, and launch Petra Nova. That’s a whopping $4million per MWe.
What could $1 billion buy you in terms of power plants? According to the EIA’s 2023 Annual Energy Outlook, a new combined cycle gas plant costs around $1.2 million per MW. If that $1 billion was spent on a combined cycle power plant, you could build 700-900 MW.
The Subsidy Machine
Leave it to Washington to try to get something that doesn’t work, make money… as long as the taxpayers pay for it. Originally passed in 2008, tax credits for carbon capture were $10 per ton. With the 2018 Bipartisan Budget Act, credits started ~ $17/ton for EOR and gradually increased to $35 by 2026. But Congress wasn’t done yet. With the Inflation Reduction Act in 2022, those credits went up to …. $60 per ton of CO2 for Enhanced Oil Recovery.
And, in a government-only plot twist, you get paid more to be less productive. If you just burn energy and bury carbon - without using it for commercial uses like oil recovery - you get paid $85/ton. And we haven’t touched on direct air carbon capture which can get almost 2x the subsidies for power plants!
The government is literally paying people to bury the same thing we are bringing up to the surface. The US sources natural CO2 from underground deposits in Colorado and New Mexico. That CO2 is brought up from deep underground and then shipped to the oil fields to boost production.
Subsidies per unit of electricity
When Petra Nova wasn’t breaking down, it could capture about 5200tons of CO2 a day. Sparing you the math, here’s how much money plants like Petra Nova could make off of the taxpayer from the carbon for each MWhr of power produced:
With the 2018 budget, starting at ~ $15 worth of carbon per a MWh
If installed after the IRA, ~ $ 54 in taxpayer handouts for the carbon captured from a MWhr of coal-powered electricity, if the CO2 is used for enhanced oil recovery.
In the spirit of getting paid more to do less, if we simply bury the CO2, a similar coal plant could earn ~ $77 in subsidies for the carbon captured from generating just 1 MWhr of electricity (for plants qualifying after the IRA).
For reference, the EIA forecasts that Texas’s ERCOT wholesale electricity prices will average ~ $47/MWhr in 2024.
And that should be a sobering thought: Carbon capture for coal could cost the taxpayer more than the price of wholesale electricity. This will depend in part on the type of coal used: some coal contains more carbon. (Note, the subsidies are capped for 12 years).
In the future, more efficient methods of carbon capture could become available. For example, if there’s a breakthrough in graphene filters or pre-combustion separation. Whether or not they turn a profit in the long run depends a lot on how long the subsidies last, future costs, and if plants are able to gain access to the storage and energy necessary to run the subsidy machines. And because of the subsidies, if carbon capture becomes cost effective, it ironically might be the main reason to own and operate a coal plant- and not to generate electricity.
In Closing
Basically, the EPA is trying to force existing, permitted coal plants to go through the permitting process for a brand new, mandated network of infrastructure that will kill the plant if it can’t get approved, financed, or built. This isn’t just changing the rules of the game, it’s changing the rules of survival. Its also, in effect, changing the rules of where a plant can be located, and then retroactively applying those rules to existing plants.
Some coal plants simply might not be able to comply with the EPA’s mandate. How do you capture, store, and transport the stuff? And who’s going to extend a loan or raise the capital necessary? A plant’s ability to survive the mandate may depend on if it won the geological, geographic, and political lotteries. If a plant can find available space for pipeline right-of-ways and nearby rock formations for CO2 storage, none of that matters if the local authorities deny the permits for that infrastructure.
And is it ‘commercially feasible’ to mandate carbon capture when a ‘demonstrated’ system costs more than a power plant? The EPA thinks so since the taxpayer will subsidize coal plants. And because of the 1-2 punch of mandates and subsidies, don’t be surprised if coal plants divert electricity away from the grid to run subsidy machines (AKA carbon capture).
As always, thanks for reading.
Excellent article. I have followed the PetroNova plant, but still learned some new things. Based on first-hand experiences, I predict carbon capture will never be more than a niche. There's not enough money, taxpayer or otherwise in the known universe to make this work. And I predict the same for utility solar & wind electricity, and EVs. Which is proving out as I write.
Well written and insightful. Thank you.
Close examination of your figure showing the use of CO2 raises significant questions. As noted in the figure, 81 percent of the material is used for fertilizer production and oil recovery. The administration's current policy is to electrify everything and shut down oil production. What is the impact of carbon needs if fertilizer production is shifted to heated coils instead of fire? Would processes designed to reduce the energy input also reduce the CO2 demands? The administration is hell bent to destroy the oil industry, shutting it down forever. Thirty four percent of the carbon captured goes to enhanced oil recovery, which would no longer be needed. So where is that waste to be disposed, and how much energy would be needed?
Has the EPA's analysis factored in the massive resistance to CO2 pipelines in the midwest? Has it factored in the added transportation and disposal costs of that 34 percent that would be shifted from EOR?
Finally, has the EPA done a life-cycle cost analysis of this boon-doggle?