Blog Post

Saving Coal: Reprieve Through Carbon Capture and Sequestration?

Jan 4, 2017 | Joel Darmstadter, Jan Mares

Even before Donald Trump elevated resurgence of the US coal industry to a conspicuous plank in his presidential campaign, an alleged “war on coal” had for years stalled serious discourse on the industry’s fundamental problems. Major long-term, market-driven changes had already shifted production away from Appalachian underground mines to the more productive surface deposits in the West (with Wyoming alone replacing the output of several key eastern producers combined)—and growth in aggregate coal production had diminished as well, thanks to environmental policy constraints and competition from other energy sources, including nuclear and, in recent years, low-priced natural gas.  Notwithstanding this shrinkage, coal will retain a significant role on the US energy scene for some years—which is why limits on carbon emissions from new coal-fueled electric plants are a key provision of the US Environmental Protection Agency’s (EPA’s) proposed Clean Power Plan and the country’s commitment under the 2015 Paris Agreement on climate.

In the face of potential new limits on emissions and with the prospect of coal’s fading market viability over the long term, one technological lifeline offers a cautiously promising respite to the industry—carbon capture and sequestration (CCS), i.e., the capture of gaseous carbon dioxide (CO2­) released at coal-fueled power plants, followed by its injection into subsurface reservoirs deep enough to ensure enduring containment. Aside from energy-efficiency considerations, it is immaterial whether the emitted CO2 is captured at a conventional coal-burning facility or from, say, a coal-gasification combined-cycle complex (as is the case with the Kemper County, Mississippi, project described below).

Source: USGS National Assessment of Geologic Carbon Dioxide Storage Resources—Results

A CCS approach to managing greenhouse gas emissions is plausible due to two significant developments. First, and most important (even if, from a global warming standpoint, serendipitous), CCS as a scientific principle is not in dispute, regardless of its uncertain commercial prospects. Whether in gaseous or liquid form, CO2 has for years existed, and is capable of being monitored, in reservoirs deep underground—its presence there intact over the geologic time scale. In modern times, CO2 has been injected into petroleum reservoirs that no longer had sufficient pressure to sustain economic production. In these cases, the use of CO2 made it possible to extend production into a phase termed “enhanced oil recovery” or EOR. In effect, EOR—even if only symbolically—constitutes a kind of conceptual bridge to the prospect of a vastly expanded storage regime for CO2.

Second, the last several decades have seen a major surge of research—in the United States and internationally—examining the achievability of such a CCS regime as a nontrivial contributor to other elements in society’s decarbonization portfolio. A mix of private-public partnerships and financing has facilitated some clear advances—partly through research and development, partly through demonstration projects—toward a fully functioning role for CCS in limiting future CO2 releases to the atmosphere. In the part of its Clean Power Plan applicable to new plants, EPA sees those advances as a demonstrated component of CO2 abatement options available to meet emissions reduction goals deemed necessary by the year 2030. Here we take a look at both developments, as well as policy considerations for a successful CCS regime.

CCS Forerunner: Enhanced Oil Recovery

So what is the technological experience that makes EOR an attractive, if early, signpost for a successful CCS operation? For example, what about the risk of CO2 leaks from underground reservoirs back into the atmosphere? A fair question, but one with a well-grounded response. The record of EOR operations over the years suggests that injected CO2 is almost always reliably contained so as to guarantee permanent storage at depths ranging from 5,000 to around 8,000 feet. In limited circumstances, where some CO2 venting has occurred as oil is extracted, recapture and reinjection of that escaped CO2 appears to have been responsibly accomplished. In short, the history of EOR operations serves as an important and credible stepping stone for this important component of a full-fledged CCS future.

But challenges remain. CO2-dependent EOR practices in the United States are credibly judged to account for some 350,000 barrels per day (or 128 million barrels per year), representing 6 percent of onshore crude oil production. The amount of CO2 injected for EOR is approximately 120,000 metric tons yearly—roughly 0.02 percent* of the nation’s aggregate release of 6 billion tons. As things stand, even that small amount is acutely sensitive to prevailing oil prices. An EOR operation is reckoned to add around $15–20 to per-barrel oil-lifting costs. Recent oil prices in the $45–55 per barrel range make not only EOR less attractive—even conventional extraction (such as in the North Dakota shale deposits) has had to be curtailed. Injection of CO2 for EOR will no doubt endure in this country and elsewhere but whether EOR is or isn’t employed depends crucially on the economics of the oil industry, and therefore will likely continue contributing very little to the remediation of total carbon emissions. No matter—EOR may well turn out to have played a pivotal role en route to CO2 containment in the context of global warming.

Two additional factors affecting both EOR economics as well as permanent CCS (discussed below) should be noted: the distance from the CO2-emitting power plant to the CO2-injection complex and the characteristics of the subsurface reservoir. The US Department of Energy’s (DOE’s) National Energy Technology Laboratory (NETL) has estimated the cost of transportation to and storage in four different US basins with reservoirs 62 miles from the point of CO2 combustion and capture—finding the cost of transportation for 11,000 tons of CO2 to be about $2 per ton, with costs rising approximately linearly with distance. Clearly, having to move CO2 significant distances—say, in excess of 200 miles—might start to seriously undermine the cost side of the whole operation.  A very tentative, quantity-weighted, average of storage capacity and cost for the four regional basins—each with certain unique, but identifiable features—points to a storage-cost figure of around $15 per ton of CO2. We return to both transport and storage costs in the last section of this post.

More broadly, what about the nation’s overall capacity to accommodate large quantities of captured CO2 in the decades ahead? A reassuring finding for meeting that cumulative challenge is provided by the US Geological Survey (USGS), citing evidence of widespread availability of CO2-storage capacity throughout the country. In its comprehensive 2014 assessment of 36 US regions, USGS points to a mind-numbing nationwide total containment capacity of 3,000 billion tons of CO2.

Status of CCS around the World

Even with the global future of CCS remaining beset with considerable uncertainty, as one surveys both the diversity of accomplishments to date and continuing investigative activities around the world, optimism seems in order. Let’s look at a few underpinnings that could help establish CCS as a significant factor in global climate change policy.

The Australia-centered Global CCS Institute has identified “38 large-scale projects around the world,” with an additional 20 expected to be “operational” (in the institute’s—not entirely clear—wording) by the end of 2017. A sense of the geographic diversity and stage of those projects can be found in the institute’s latest review. (That this research is based in Australia is unsurprising given the country’s vital stake in preserving both its domestic and Asian export markets for coal.)

In the United States, there are several CCS facilities in operation, construction, or planning stages, for both power plants and industrial production sites. Although troubled by significant cost overruns and operational delays, the Kemper County CO2 Capture and Storage Project in Mississippi—based at an integrated gasification combined cycle (IGCC) plant—is farthest along among the larger of these facilities. Federal subsidies (in the form of tax credits and a DOE grant) account for around $400 million of the Kemper overall price tag, now estimated at close to $7 billion. The plant’s owner and operator is Mississippi Power, a subsidiary of Southern Company. The 600 megawatt facility features a CCS configuration designed to capture, and ship to a containment site 60 miles away, 65 percent of some 3.5 million tons of CO2 released annually. A 2016 Massachusetts Institute of Technology (MIT) review of the installation reads: “The Kemper County CCS project is being used…by the EPA to demonstrate the feasibility of CCS on coal-fired power plants to reduce their CO2 emissions. Under the US EPA’s proposed guidelines, future coal plants would need to emit no more than 1100 pounds [of CO2] per megawatt-hour of power produced. The Kemper County CCS project will emit well below that amount.”

The most internationally advanced CO2 storage complex is the Weyburn-Midale CO2 Monitoring and Storage Project in southeastern Saskatchewan—a site that makes a convenient end-point for transmission of large volumes of CO2 produced at the Great Plains lignite-burning/gasification power plant 180 miles to the south in North Dakota. As a pilot project—with the prospect of widely applicable findings—the Saskatchewan project represents a collaborative undertaking among Canada, the United States, Japan, the European community, and several other government and private industry sponsors. Starting in 2000 as a conventional EOR operation, the facility has grown to hold 25 million tons of CO2, with some 3 million tons being added annually. Most importantly, the project has gone far in studying, monitoring, and ensuring the integrity of a deep subsurface geologic reservoir.

CCS Economics

Development of a successful CCS regime will ultimately, and decisively, need to reflect a strategic calculation: How does the incremental cost of a ton of CO2—for capture, transport, and containment—compare with the incremental cost of equally effective CO2 abatement through one or another feasible alternate policy? A comprehensive 2015 study (albeit reflecting data for several years earlier) by scholars from Carnegie Mellon, MIT, and the International Energy Agency (IEA) yielded a midpoint estimate of capture costs (expressed here in the 2015 price level) of around $48 per ton of CO2. The addition of transport ($5 per ton) and storage ($15 per ton), based on the NETL report cited earlier, brings the total CCS system cost to nearly $70 per ton. (Such a number, the study notes, could translate to an increase in the cost of electricity of roughly 50 percent.) Needless to say, a point estimate of a technology still very much in its development phase demands caution. Even the authors’ lower- and upper-cost bounds for carbon capture ($38 and $55 per ton, respectively) are quite speculative.

Suppose an alternative policy approach is a carbon tax reflecting the estimated “social cost of carbon” in, say, the $45–50 per ton range. Beating that comparative cost becomes the target of the many CCS exploratory efforts under way. Although one hesitates voicing anything conclusive about these calculations, for now, betting that CCS costs can undercut those of alternative abatement options—such as the Clean Power Plan, which looks ahead to 2030—would seem a risky proposition. Still, there may be some historically minded persons not so easily swayed by CCS contrarians. An exhaustive 2005 IPCC special report estimated (within a wide range) the midpoint cost at $75 per ton of CO2 for capture (expressed here in the 2015 price level). The 2015 estimate of $48 by the Carnegie Mellon/MIT/IEA group, which included two authors of the 2005 IPCC report, serves as a reminder that technology does progress and real costs do come down.

In all likelihood, a mix of abatement strategies, varying in their cost and other attributes will be considered for adoption in coming years. To be sure, some factors in that mix may be mutually exclusive. If, as some people have proposed (and RFF experts have studied), it were decided to “keep coal in the ground,” CCS would no longer represent a candidate solution rationally worth pursuing. That dilemma might also be the case if, for political or other reasons, governmental financial support for renewables or other alternatives undermined sound market choices because of seriously distorted subsidy policies. For now, a continued use of investment and production tax credits give solar- and wind- power systems a marked advantage among carbon abatement sweepstakes, even as these two energy sources are steadily edging toward market competitiveness. If the Obama administration’s DOE budget request of $261 million for CCS research and development in fiscal year 2017 seems a tad modest, it is worth noting at the same time that the Secretary of Energy’s Advisory Board (SEAB), in a November 2016 report, has strongly urged the government’s continuing commitment to CCS development. And although the $50 per ton tax credit for carbon containment—proposed jointly by Senators Heitkamp (D-ND) and Whitehouse (D-RI) earlier in 2016—seems like a long shot in the new Congress, pursuit of the SEAB position may be the more promising route to a CCS scenario that multiple constituencies may be able to embrace. If efforts to support CCS were to endure under the Trump administration, CCS could allow some continued use of coal to generate electricity, even while meeting constraints on carbon emissions.

Much of this blog post has focused on the CCS scene in the United States. But, in the end, it is worth underscoring the global scope of the challenge presented by greenhouse gas emissions. An enormous quantity of coal resources exists around the world. Reducing the cost of CCS would facilitate continued use of the fuel among countries embracing a commitment to reduce carbon emissions.

* A previous version of this blog misstated the percentage of the nation's aggregate release of CO2 that is injected for EOR.

The views expressed in RFF blog posts are those of the authors and should not be attributed to Resources for the Future.