Utilities face conundrum with carbon dioxide emissions

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Imagine you’re running a coal-fired electric utility. The federal government is about to declare the carbon dioxide
spewing from your smokestacks to be a planet killer.

You can:

• Keep using coal and pay a tax. Too pricey.

• Stop generating electricity from coal, the cheapest practical fuel source in Indiana. No, you can’t, at least
not right away, with billions of dollars of infrastructure in place.

 • Use natural gas. Yes, it emits less CO2, but it still costs more than coal.

carbon sequestration graphic

• Go nuclear. It’s carbon-free, after all. Sorry, again, but environmentalists would self-immolate with
kerosene by the millions. And remember Marble Hill’s cost-overruns?

• Generate with wind power and solar? Sounds nice, but it’s too unreliable and power storage technology is not
quite there yet to make it a practical mass-substitute.

Hey, why not just shoot the carbon dioxide underground?

Sounds nutty, but so-called carbon capture and sequestration, or CCS, is seen by some in the utility business as potential
salvation for coal.

But, here again, utilities may face a damned-if-you-do, damned-if-you don’t scenario.

At this point, the technology is costly. It also entails challenging technical, legal, economic and environmental questions.

It’s a process to dissolve carbon out of the flue stream, compress it to thousands of pounds per square inch, and shoot
it thousands of feet below ground.

Carbon’s new home could be an un-mineable coal seam, a depleted oil well or, more likely, a saltwater-filled sandstone

As unnatural as the process seems, deep underground isn’t an alien place for carbon dioxide: Nature has been storing
it there for eons. Mining coal and burning it in power plants has ironically liberated that stored carbon, and in the minds
of many scientists caused global warming, a.k.a. climate change.

European oil companies have sequestered carbon on a commercial scale under the North Sea for years, although sequestration
has been performed only on a mostly trial basis in the United States.

A modest-size, 500-megawatt coal-fired plant—about half the size of Indianapolis Power & Light Co.’s Harding
Street plant south of downtown—might generate 3 million metric tons of carbon per year. That’s three times the
level of the CCS poster child, the Sleipner carbon storage reservoir under the North Sea.

Combined, all U.S. coal-fired electric plants produce more than 2 billion metric tons of carbon per year.

In Indiana, Charlotte, N.C.-based Duke Energy is exploring sequestration for its 630-megawatt generating plant under construction
in Edwardsport, which is in the midst of coal fields about halfway between Evansville and Terre Haute.

But Duke’s interest is illustrative of the controversy surrounding CCS.

“From our standpoint, it’s not affordable and it’s not possible in the scale they’re talking about
… . This is complete Pollyanna-ish. It’s not going to happen,” said Grant Smith, executive director of Citizens
Action Coalition. The Indianapolis-based player in utility regulatory cases prefers renewable generation, substituting natural
gas for coal and energy-efficiency programs.

Lots to learn

Carbon capture and sequestration isn’t so much an exotic technology as much as an evolving one struggling
to become cost-effective. One can’t even say what is cost-effective, at least not until Congress comes up with a trading
scheme for carbon credits or a tax of some sort.

Will it be cheaper to buy credits or pay a tax, to use CCS or a combination of the two?

“Someone is going to have to put a price tag on a ton of carbon dioxide,” said T.R. Massey, a spokesman for Columbus,
Ohio-based Battelle, an independent research institute that operates a handful of federal laboratories and heads the Midwest
Regional Carbon Sequestration Partnership.

Meanwhile, the technology—particularly how to capture carbon—is being worked out. One of the more promising methods
of pulling it from flues of conventional coal-fired generating plants is being tested at American Electric Power’s Mountaineer
Plant in New Haven, W. Va., about 230 miles east of Indianapolis.

AEP is using technology from France’s Alstom Power Inc. that chills flue gas to -35 degrees. An ammonia-based solution
called ammonia carbonate absorbs the carbon dioxide—producing ammonium bicarbonate in a slurry-like form.

The slurry flows into a system that strips out the carbon, turning the slop back into ammonium carbonate, which is reused
to repeat the process. What flows up the smokestack consists mainly of nitrogen, oxygen and a “low concentration”
of carbon dioxide, says AEP.

The Columbus, Ohio-based utility estimates the trial will cost it $73 million and capture more than 100,000 metric tons of
carbon per year. It involves a 20-megawatt portion of the 1,300-megawatt plant. AEP plans to inject at least 1 million tons
of carbon per year deep underground as early as 2012.

“Where there is much to be [learned] is in the capture portion” of CCS, Battelle’s Massey said.

Sequestration is a more mature technology.

Petroleum companies inject carbon dioxide thousands of feet below the surface to chase out oil hiding in nearly depleted
wells, in what’s known as enhanced oil recovery.

Typically, carbon dioxide is compressed to 2,000 pounds per square inch or more, turning it into a “supercritical state”
that is equal parts vapor and fluid.

“The actual sequestration, or storage part of it, we feel very confident about. … We get more confident every time
that we do more” tests, added Massey.

Legal minefield

But injecting carbon below ground on a massive scale at a single site raises new issues of liability and risk management.

The Environmental Protection Agency has been looking at the issue on a broader level. And measures that would address risks
of handling carbon dioxide have reached the Indiana General Assembly.

Senate Bill 211 would have declared carbon dioxide not to be a pollutant nor “a hazardous waste or a deleterious substance.”
Senate Bill 115 would have permitted a firm moving carbon dioxide by pipeline—such as to a sequestration site or to
an oil field—to acquire property by eminent domain.

While neither bill survived the session, the legislation is a sign that utilities feel the need for protections if they’re
to move ahead with sequestration, Smith said.

Existing law generally gives ownership of underground reserves to property owners. But Kenneth Richards, an associate professor
at Indiana University’s School of Public and Environmental Affairs, has noted that because sequestration could place
carbon under thousands of acres of land and underlie 1,000 or more parcels of land, obtaining owner permission could be prohibitively

Convincing a legislature to take a “hard line” on the property issue could be a challenge, Richards has noted.

“I don’t know that the technology is as much of an issue as some of the regulatory framework that needs to be
put in place,” said Darlene Radcliffe, director of environmental policy and fuel technology at Duke Energy.

Lingering doubts

As utilities and other carbon producers move closer to commercial-scale sequestration, new doubts have been raised
about the potential for massive underground storage.

University of Houston and Texas A&M University researchers in a paper presented last fall to a technical conference of
the Society of Petroleum Engineers said the volume of liquid- or supercritical-carbon can’t amount to more than 1 percent
of the pore space of deep saltwater aquifers. In other words, carbon storage would require five to 20 times more underground
reservoir volume than previously believed.

The short of it, according to the authors, is that previous models have failed to consider that reservoir pressure will build
up under injection of carbon at a constant rate.

Practically speaking, if the research is correct, a sequestration site injecting with a small number of wells would require
an underground storage space “the size of a small U.S. state.”

Putting the same amount of carbon into a smaller space, say 340 square miles, would require hundreds of wells to overcome
the pore space restrictions.

“Our very sobering conclusion is that underground carbon dioxide sequestration via bulk [carbon dioxide] injection
is not feasible at any cost,” said authors Michael Economides and C.A. Ehlig-Economides.

Even if sequestration isn’t practical, at least for the moment, there are other potential uses for the carbon. Duke
is considering pumping it through pipelines to oil-producing regions for enhanced oil recovery. •

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