Mandated carbon capture sequesters resources better used elsewhere

Like a bad penny, the law mandating carbon capture and storage at Wyoming coal-fired power plants keeps turning up for revision. This year House Bill 200, which originally passed in 2020, reappears as Senate File 42. Why the repeated efforts to fix a statute that has proven unworkable and costly?  

The Public Service Commission granted both Rocky Mountain Power and Black Hills Energy rate increases to cover the burden of compliance. As the Wyoming Office of Consumer Advocate warned, electricity consumers are “being asked to pay for unproven research and development.” 

Four years, millions of dollars, and untold hours of deliberation have brought us no closer to the intent of HB 200. Natural gas power plants are far superior to coal plants with carbon capture modifications in meeting its stated goals: 

• Cost Effective – Black Hills Energy reports 20 times higher capital cost for carbon capture vs. coal-to-gas conversion. A high-ranking U.S. Department of Energy official and leading expert on carbon capture acknowledged, “It’s fairly clear that carbon capture may not make economic sense on the remaining coal-fired power plants in the U.S.“
• Reliable – Natural gas power plants across the U.S. consistently achieve higher availability than the more complex and generally older coal plants.
• Dispatchable – Natural gas combined cycle plants respond more quickly to changes in electric loads and supply, making them a better backup to wind and solar.
• Low-Carbon – A modern natural gas combined cycle plant without carbon capture generates fewer CO2 emissions per kilowatt-hour than a Wyoming coal plant equipped with 75% carbon capture. In the latter, emission reductions are offset by a 30% energy penalty, lower thermal efficiency and higher carbon intensity.

Senate File 42 changes the net-power emission standard to a carbon removal standard, signaling the true motive behind carbon capture and storage. It’s not to generate low-carbon power, but to manufacture high-value CO2 tax credits. Paradoxically, this revised standard incentivizes inefficiency by turning the carbon capture energy penalty into a bonus. The more coal burned just to supply steam and power to the capture plant, the more CO2 available to remove and monetize.

One must wonder whether the backers of HB 200 believe their own story. Wyoming officials recently opposed the EPA’s version of a carbon capture and storage mandate for power plants. Gov. Mark Gordon claimed it would increase utility costs and threaten grid reliability. U.S. Sen. Cynthia Lummis complained that for Wyoming coal-fired power plants, the proposed rule sets “an egregiously unrealistic target that is not feasible based on current carbon capture technology.” How true. But these are precisely the arguments raised against HB 200 four years ago. 

Conversely, the dubious reasons cited by proponents of HB 200 are echoed in the EPA’s justification for carbon emission performance standards. “EPA has determined that [carbon capture] … is adequately demonstrated, achieves significant reductions in greenhouse gas emissions, and is highly cost-effective.” 

Senate File 42 prolongs the obligation and the expense of evaluating carbon capture by extending the compliance period to 2038. The burden of proof is a moving target. Every coal-fired carbon capture plant built or planned represents a first-of-a-kind facility. The challenges of energy inefficiency and solvent degradation have spurred continual process adjustments and solvent reformulations. Financial markets penalize first-of-a-kind facilities by charging a steep risk premium. Until the prevailing technology stabilizes or a replacement emerges, we should view coal plant carbon capture as pre-commercial and ill-suited for regulatory mandates. 

Obsolescence poses another risk. Black Hills Energy and Babcock & Wilcox recently announced an award of $16 million from the Wyoming Energy Authority to fund research into a novel carbon capture and hydrogen production technology. The chemical looping process exposes a circulating oxygen carrier to coal, which burns to produce easily separated CO2 and water. The depleted carrier is replenished with oxygen from steam, leaving pure hydrogen as a valuable byproduct. Innovations like this could supersede conventional carbon capture technology and leave enormous stranded investments. 

Senate File 42 perpetuates the unlimited risk borne by ratepayers. Ostensibly, the law limits ratepayer exposure to 2% of their monthly bill. But the clause that follows makes this cap meaningless. If the 2% rate recovery surcharge doesn’t fully compensate the utility for its compliance costs, the Public Service Commission must “take such actions as necessary” to cover those costs, “notwithstanding any other provision” of the statute. In other words, the 2% cap is mere window dressing.

House Bill 200, and now SF 42 provide the means for their own repeal should the PSC so advise. Chairperson Mary Throne is concerned that the law is pushing the PSC beyond traditional rate-making principles of “just and reasonable” costs. Well, the statute empowers the Commission to push back. Credit the PSC for expressing hope that utilities can find financial support for carbon capture analysis from sources other than their ratepayers. But hope cannot substitute for regulatory policy.