Clean coal suffers another setback as yet more CCS projects fold

Coal is plentiful and cheap, the perfect fuel for the utility boiler, only if it were not for the fact that it is heavily polluting – along its value chain from the mine to the smoke stack – especially after it leaves the smoke stack. NASA’s James Hansen calls coal power plants factories of death, and it is not farfetched. Just ask anyone living near or downstream of the prevailing winds from a major coal-fired power plant. Or ask your own family is they wish to live near one.

What is making life difficult for coal miners and coal burners, however, is not so much that it kills – which it does – but because it is carbon-loaded.

With growing concerns about climate change, there is renewed pressure to restrict use of coal, a major source of power generation in many countries.

Adding to coal’s woes, Pope Francis released an encyclical on the environment and its impact on the poor and vulnerable in mid June 2015. While not necessarily blaming coal, the Pope nevertheless has taken a rather blunt stand on man’s impact on climate, considered highly significant ahead of the United Nation’s Conference of Parties (COP) to be held in Paris this December.

Coal lobby, concerned about longer-term prospects of the fuel, has pinned its hopes and future on the so-called clean-coal – no one can say for sure what it is but the idea is to turn coal into an acceptable fuel by limiting or eliminating its nasty side effects, reducing emissions of SOx, NOx, Mercury, Arsenic, fly ash, and ultimately capturing some or most of the CO2 during the combustion process.

Yet carbon capture and sequestration or CCS has proven technically challenging and financially expensive – certainly on a scale large enough to make a difference. Governments in coal dependent economies around the world have pumped money into CCS to varying degrees but to date, few successful commercial-scale options have emerged.

In the US, Dept. of Energy (DOE) launched a program dubbed FutureGen, among others, to build a demonstration project in partnership with coal-burning utilities. But successive efforts to get the project off the ground have failed to get sufficient traction from investors or support from regulators who must ultimately approve any extra costs going into such a facility as reported in the March 2015 issue of this newsletter.

The problem is cost uncertainty plus escalating costs and who is going to pay for it – assuming the project actually gets underway.

The latest setback came in May 2015 when South Mississippi Electric (SME), an electric cooperative, announced that it was pulling out of one of the few promising CCS projects, citing delays in schedule and increased costs as reasons – and who could blame them. “Updated studies now show that SME’s costs of participation in the project have increased to the point that the rate impacts necessary for ownership would not best serve the needs of  … SME … or (its customers)”.

The project in question, a 582 MW lignite-fired integrated gasification combined cycle (IGCC) plant under construction in Kemper County, Mississippi. Compared to the $2.2 billion originally estimated in 2004, total costs for the nation’s only large-scale integrated carbon capture and sequestration project under construction have now almost tripled. Those familiar with the venture say the project’s total estimated costs now stand at about $6.1 billion. It is more than SME could stomach.

Making matters worse, in Feb. 2015, the Mississippi Supreme Court ruled that the state regulator, Mississippi Public Service Commission (MPSC) had erred in granting rate increases in 2013 and 2014 to cover the extra costs of the CCS project from the hapless customers. That ended any prospects of passing on the extra costs of the experimental facility to utility’s ratepayers.

The court, using unusually harsh words for the MPCS, ordered $271 million thus far collected from customers to be refunded to them, roughly $1,500 for the average customer.

The fate of the Kemper facility, like the fate of FutureGen, and like the future of US coal remains rather bleak, to put it mildly. Anti coal environmentalists, who never believed the clean-coal story, were pleased.

The only credible clean coal technology, they say, is no coal at all. And judging from the recent trends certainly from the US and Europe, their message appears to be getting through.

Perry Sioshansi is president of Menlo Energy Economics, a consultancy based in San Francisco, CA and editor/publisher of EEnergy Informer, a monthly newsletter with international circulation. He can be reached at fpsioshansi@aol.com