WORKWEEK

This week, the EPA released new proposed guidelines to curb emissions from America’s power sector (which contributes roughly one-quarter of all U.S. greenhouse gas emissions).

If they become law, the guidelines will: 

• Accelerate the closure of most coal power plants in the U.S. 
• Drive remaining coal power plants and most natural gas-based power generating capacity to leverage carbon capture and sequestration technologies to reduce emissions
• Encourage hydrogen co-firing in natural gas power plants as well

Some of these trends are well underway. Absent any formal guidelines or restrictions on emissions in the power sector. According to the Institute for Energy Economics and Financial Analysis, 

“… the U.S. is on track to close half of its coal-fired generation capacity by 2026, just 15 years after it reached its peak in 2011.”

Much of this has to do with the glut of natural gas in the U.S. and carrots the Biden Administration has dangled for the expansion of renewable energy in the U.S.

Still, pairing carrots with sticks is critical to drive even more ambitious emissions reductions. Formalizing the march to close almost all coal power plants by 2040 is a good thing.

Many folks likely would have wanted to see even more ambitious guidelines from the EPA that targeted natural-gas plants more aggressively. Combined cycle natural gas power plants are up to 50% less emissions-intensive than coal power plants. But they still release emissions.

To this end, the new guidelines would push many fossil-fuel power plants still operating in the 2030s and 40s to adopt carbon capture technologies and / or burn hydrogen alongside natural gas to reduce their emissions. 

Theoretically, both approaches to reducing the emissions load of these power plants are already workable today. But successful and rigorously tested carbon capture deployments are few and far in between, partly because there hasn’t been an overwhelming economic incentive or legislative push. 

That’s changing. The IRA includes significant incentives for captured carbon, and power systems contractors I’ve spoken to recently noted there are big projects underway nationwide, especially for ethanol plants in Illinois and Iowa (corn capitals, U.S.A!) 

I’ve often mused that capturing carbon from flue stacks, where the CO2 concentration can be as high as 10-12%, makes a ton of sense. For reference, direct air capture plants that try to remove CO2 from the ambient air are working with 0.04% CO2 concentrations. 

If implemented, the new EPA guidelines represent perhaps the biggest accelerant yet for the carbon capture industry in the U.S. and would become a ‘put up or shut up’ moment for carbon capture companies to prove the efficacy of their technologies. 

The long and winding road to law

You may read a variety of analyses beyond this one in coming days and weeks about these guidelines, what they entail, how they might shape the power sector by 2040 and beyond, and whether they’re enough to make meaningful progress on mitigating climate change.

It bears repeating that these guidelines aren’t yet law and won’t be for some time. It’s unlikely they’ll ever be, in their current form at least. 

The EPA guidelines will definitely get challenged in court. And if a Democrat isn’t elected President in 2024, they may be dead in the water. For context, the Obama admin also proposed power sector emissions guidelines. The Supreme Court shot them down. Whether regulations are ‘legal’ often has little to do with whether they’re a good idea.

If they do become law, they’ll likely look pretty different. They’ll have gone through a slew of edits, additions, and abridgments, likely with substantial ‘hoofprints’ of a cavalcade of industry lobbying. 

The net-net

The EPA’s proposed guidelines are an excellent sign for the clean energy transition. As we discussed ten days ago, reshaping the power sector and the fossil-fuel-fired economy in the U.S. will require both sticks and carrots. 

I imagine that, had these come out a year ago, pre-IRA, people would have been astounded. It bears stepping back once in a while and appreciating how far the clean energy conversation in the U.S. has come in a few short years. 

Still, the proposals’ viability and efficacy hinge on various factors. In summary:

• Can the U.S. power grid ‘stand’ as it looks to shutter more coal plants? This will require a lot more clean power that’s also firm (read as reliable, e.g., nuclear, geothermal, or paired with substantial energy storage).
• How the political landscape shapes up in 2024 and what courts have to say about the legality of power sector regulation.
• Whether carbon capture and sequestration technologies are, or will be, ready for ‘prime time’ in the next 5-15 years.
• Other factors, like the availability of green hydrogen for co-firing in natural gas plants. Currently, 99.3% of hydrogen production globally is black or gray, i.e., fossil fuel-fired in some capacity.