President Obama's budget request for fiscal year 2015 includes first-time funding for natural gas carbon capture and sequestration (CCS) demonstration projects, a move that the technology's backers say could help EPA justify CCS mandates in future rules for gas power plants amid a declining interest in large-scale CCS projects in the coal sector.
But at only $25 million, the funding request is likely too small given the technology's costs. The funding "indicates more change to come," says an environmentalist who supports CCS, "but it is a very small amount of money for a rather huge priority."
In the budget request for FY15, released March 4, the administration is proposing to include $25 million for natural gas CCS projects as part of the Department of Energy's (DOE) Fossil Energy and Development program, which the request says is dedicated "to further lowering the costs of carbon capture and storage and advanced power systems."
During a March 4 briefing on the request, Energy Secretary Ernest Moniz highlighted the funds, noting the request marks the first time the administration is proposing to "move to a demonstration of natural gas CCS, because certainly if we look decades ahead for natural gas as with coal, to be a major player in a very low-carbon world, will require CCS technology here as well."
The budget request also includes $77 million for carbon capture funding and $80 million in carbon storage, a cut of $15 million and $29 million, respectively, from the administration's estimated funding in FY14.
The shift to fund natural gas CCS projects appears to have originated at least in part in Congress. In the FY14 omnibus spending bill Congress passed in January, the explanatory text directed DOE to use its funding for CCS for both coal and natural gas research and development, "as long as research does not occur at the expense of coal research and development."
DOE funding for CCS projects under its "clean coal" program has been key to the advancement of the technology in the United States, helping to fund, for example, Southern Company's Kemper coal-fired power plant in Mississippi, the FutureGen project in Illinois, and the planned Summit Texas Clean Energy coal-fired project.
Yet amid a major shift in the country toward natural gas electric generation, government research on CCS for gas has lagged behind – even though advocates say the technology will eventually be necessary to attain necessary greenhouse gas (GHG) cuts.
Julio Friedman, DOE's deputy assistant secretary for clean coal, told a Feb. 27 conference of the Global CCS Institute in Washington, D.C. that the department has known for some time that it needed to start funding natural gas CCS research but faced a challenge in doing so because "we didn't actually have [legislative] language which allowed us to do it."
The budget's new CCS funding line item is particularly significant given EPA's pending GHG regulations for new power plants, which sets an emissions limit that will force new coal-fired power plants to install CCS but allows new natural gas-fired power plants to avoid CCS entirely.
EPA declined to require CCS on natural gas power plants because it found the technology had not met a statutory hurdle of being "adequately demonstrated" in the sector.
Even though utilities appear likely to avoid having to install CCS on natural gas plants in this round of the NSPS, EPA will be required to review the adequacy of NSPS eight years after it is finalized, and if natural gas CCS has advanced by the time of that review, EPA could require future natural gas utilities to also install CCS.
At the CCS conference, Friedman noted that the utility NSPS for existing sources -- issued under sections 111(d) of the Clean Air Act -- is a "ratchet that only turns one way" and that at some point CCS would be required for existing gas and coal power plants.
In that context, Friedman said he felt a "particular urgency in my job to figure out how to get the cost down just as quickly as possible and commercialized through our industrial partners."
Friedman said it would be "wildly premature" to take CCS off the table as an option to address climate change. At the conference, he urged attendees to envision a world where CCS wasn't just being deployed on coal-fired power plants.
"We will be doing this for natural gas plants," he said. "We will be doing this at cement plants and steel mills and refineries. We're going to be doing this in a lot of different contexts and a lot of places. It's simply required to get to where we need to get."
The Obama administration has yet to provide specific details on the types of natural gas CCS power plant projects it might fund with the $25 million, and DOE did not respond to a request for comment by press time, but the environmentalist source says that while a positive development, the funding would not likely go very far.
"If I were to put a carbon capture and storage equipment on a 300-megawatt plant, you're looking at hundreds of millions of dollars, so maybe [the $25 million is] a feed study, maybe that's some pilot work that starts to build towards second-generation technologies."
The Obama administration's new funding item for natural gas CCS comes at a time when many utilities in the United States appear to be losing interest in large-scale coal CCS projects, despite years of government-backed research and incentives intended to encourage its commercialization.
Among the factors weighing against coal CCS are its high costs, divergent public views on the technology, market competition from lower-cost natural gas and renewables, and an earlier lack of a mandate to install the technology.
Though a handful of major CCS projects are expected to come online this year in North America, including Southern Company's Kemper coal-fired power plant in Mississippi and Canada's Boundary Dam coal-fired power plant, interest in new major CCS projects is largely drying up, with Peabody Energy last year canceling its plans to build a petcoke gasification CCS project in Kentucky.
Amid an absence of new large-scale CCS projects in the United States, backers of the technology are trying to determine how they can drive investments in second- and third-generation CCS technology that would help curb the technology's costs and expand its deployment. "If we do CCS at the current prices, we will be beat in the market," DOE's Friedman said at the conference. "Since we have to deploy CCS widely and at scale in many places, we have to drop the costs."
Some backers of CCS are pushing for government incentives and tax structures that could encourage the use of CCS, and are touting the benefits of CCS for enhanced oil recovery (EOR), which has played a major role in defraying some of the high capital costs of installing CCS technology. The majority of CCS projects that have been constructed or are in planning stages will use EOR.
"All I can say is thank goodness for EOR," Brad Page, CEO of the Global CCS Institute, said at the conference. He said that in addition to focusing on the climate benefits of CCS, backers of the technology needed to build public support and acceptance of the technology, as he said global understanding of the technology is "extremely low." -- Chris Knight