ClimateIntel.com

While new facility emission standards in the Waxman-Markey draft bill would impose a de-facto obligation on newly permitted coal-fired facilities to be capable of installing and ultimately operating carbon capture and sequestration (CCS) equipment, the United Kingdom’s Secretary of State for Energy and Climate Change has proposed legislation that mandates the use of CCS technology on any newly-constructed large-scale coal-fired energy facility.

In a statement to the House of Commons on April 23, 2009, Secretary Ed Miliband explained the proposal:

I propose a requirement to demonstrate CCS on a substantial proportion of any new coal-fired power station. We will propose for consultation a requirement to demonstrate at least 300 MW of net capacity or around 400 MW of gross output as a condition of any consent. The demonstration condition would mean that henceforth unabated coal-fired power stations would not get Government consent. Secondly, alongside that, we must secure not just a commitment to demonstrate, but, when the technology is proven, a commitment that CCS will be fitted on the entire plant.

Miliband’s proposal builds on an existing UK requirement that all new coal-fired units be sited with the capacity to accommodate the addition of retrofitted carbon-capture technology when such technology becomes commercially available (the UK’s Department of Climate Change, as of April 23, 2009, is currently accepting comments through June 22, 2009, on draft guidance for operators seeking to prove their sites will meet the new “carbon-capture-ready” requirement).  The Secretary’s new proposal, however, suggests that some in the UK government now believe the technology is already commercially available-at least for the purpose of a commercial-scale demonstration project at a new facility.

The UK has styled itself as the international leader in developing aggressive policies to promote rapid adoption of clean coal technologies.  It has also established a comprehensive and transparent consultation process to develop new CCS and other climate-related policies.  Therefore, the UK’s progress and experience in implementing its CCS policies, and the ongoing comments and reaction of its many stakeholders, may prove useful references for US stakeholders looking to shape and predict the future of US policy. 

Late last week, the California Air Resources Board (CARB) released its long-awaited Low Carbon Fuel Standard (LCFS). The standard-the first of its kind in the world-will require producers, importers and refiners of fuels to lower the carbon imprint of that fuel by 10% in the eight years from when the standard goes into effect in 2012.

The California standard provides an important template for further LCFS developing in other states and at the federal level. Gov. Schwarzenegger acknowledged this in his statement praising the standard, noting that 16 other states were looking to California for leadership on the issue, also, the report itself indicates that CARB is “working closely with the U.S. EPA to assure that the approaches [towards ILUC analysis] taken in the two analyses are as consistent and transparent as possible.”

The Energy Policy Act of 2005 amended the Clean Air Act, creating the Renewable Fuel Standard (RFS) program.  EPA promulgated regulations under this statute that became effective on September 1, 2007.  The Energy Independence and Security Act of 2007 (EISA), further amended the Clean Air Act provisions governing the RFS program.  Some of the major changes enacted in EISA include:

1. Expansion of the applicable volumes of renewable fuel.
2. Separation of the renewable fuel volume requirements into four categories: cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel.
3. Changes to the definition of renewable fuels and criteria (e.g. life cycle greenhouse gas (GHG) emission performance) for determining which if any of the four renewable fuel categories a given renewable fuel is eligible to meet.
4. Expansion of the fuel pool subject to the standards to include diesel and certain nonroad fuels and expansion of the obligated parties to include refiners, certain blenders, and importers of those fuels.
5. Inclusion of specific types of waivers and EPA-generated credits for cellulosic biofuel.

EPA is developing a Notice of Proposed Rulemaking to implement these changes to the RFS program, which generally are not effective until EPA issues final regulations. 

One of the most controversial provisions of the California standard is its inclusion of Indirect Land-Use Change (ILUC) analysis in its calculation of a fuel’s potential footprint. ClimateIntel has covered the issues of ILUC before, but essentially ILUC involves capturing the emissions that occur because of changing land use due to higher demand for certain crop-based biofuels, such as corn ethanol. In determining how to calculate ILUC, California looked at a series of different parameters, including crop yield elasticity, elasticity of land transformation and trade elasticity; using these parameters, the State developed ILUC calculations for a number of different ethanol fuel streams, including various corn-derived ethanol products and sugarcane ethanol.

The standard acknowledges a number of potential areas of uncertainty in its ILUC analysis—including questions about model inputs, the percentage of the carbon stored above and below ground (in biomass or soils) released into the atmosphere do to land conversion and others. In approving the standard, CARB asked its staff to continue to study these areas of uncertainty and report back by 2011.   

In the coming weeks, ClimateIntel will be looking further into the computer modeling relied upon by CARB and evaluating some of the major uncertainties associated with the modeling.  ClimateIntel will also review a recent study, discussed in the New York Times’ Green, Inc. blog questioning whether an LCFS even makes sense. 

Needless to say this week’s hearing schedule is quiet after the marathon of Markey-Waxman draft bill hearings last week.  One can trust that many lawmakers involved in last week’s hearings will use this quiet time to move their climate-related agendas, some of which are adverse to Markey-Waxman, forward.

On Tuesday the Senate Energy and Natural Resources Committee will hold a hearing to receive testimony regarding legislation to improve the availability of financing for the deployment of clean energy and energy efficiency technologies.  Witnesses include Matt Rogers, Senior Advisor for the American Recovery and Reinvestment Act, Department of Energy; Mr. Dan Reicher, Director of Climate Change & Energy Initiatives, Google.Org; John Denniston, Partner, Kleiner Perkins Caufield & Byers; Jeanine Hull, Counsel, Dykema Gossett PLLC; and Joe Hezir, Vice President, EOP Group.  The hearing will take place in Room 366 of the Dirksen Senate Office Building at 10 a.m.

Also on Tuesday, the House Science and Technology Committee will hold a 10 a.m. hearing titled “Pushing the Efficiency Envelope: R&D for High-Performance Buildings, Industries and Consumers.”  Witnesses include Mr. Steven Chalk, Principal Deputy Assistant Secretary, Energy Efficiency and Renewable Energy, Department of Energy; Mr. William J. Coad, President, Coad Engineering Enterprises and Chairman High-Performance Building Council, National Institute of Building Sciences; Mr. Paul Cicio, President, Industrial Energy Consumers of America; Dr. Karen Ehrhardt-Martinez; Research Staff; Economic and Social Analysis Program.  American Council for an Energy-Efficient Economy (ACEEE); and Dr. J. Michael McQuade, Senior Vice President, Science and Technology, United Technologies Corporation.  The hearing will take place in Room 2318 of the Rayburn House Office Building.

Then on Wednesday the Senate will hold a hearing on climate change, small businesses and farms in the Small Business Committee.  The hearing will take place in Room 2360 of the House Rayburn Office Building at 1 p.m.  Names of witnesses are not available at this time.

The American Clean Energy and Security Act of 2009 (ACES) Carbon Capture and Sequestration (CCS) provisions appear at first blush like a wish list for the coal industry and other CCS proponents.  Between directing the Environmental Protection Agency (EPA) to create an improved regulatory framework for CCS, authorizing billions in new ratepayer-generated funds to support early commercial CCS projects, and authorizing EPA to make direct payments to companies that sequester CO₂, the bill, as developed by Congressmen Henry Waxman and Ed Markey, appears intent on removing regulatory and economic barriers to commercializing CCS technology.  Those incentives come with a lofty condition, however, as the final section in the CCS subtitle lays out the expectation that CCS will reach commercial viability by the middle of the next decade - and become a necessary element of any new coal-fired power plant. Should ACES become law, the expectations for CCS commercialization will high, but the stakes for the coal industry will be even higher.

A Regulatory Framework for CCS

ClimateIntel has reported previously on the legal and regulatory barriers investors and project developers face in moving forward with large-scale CCS projects under the current (or even EPA’s proposed) regulatory framework.  ACES would amend both the Clean Air Act (CAA) and the Safe Drinking Water Act (SDWA) to address some of these key barriers: First, ACES would give EPA’s air program new authority under the CAA to regulate the siting and permitting of these CCS facilities to help prevent atmospheric releases of sequestered CO₂.  Also, EPA’s drinking water regulatory program would gain additional authority necessary to impose financial assurance requirements on owners and operators of CCS facilities, building on EPA’s existing authority to regulate those facilities to protect water resources.

In contrast, on some issues ACES reverts to traditional fact-finding and reporting in lieu of charging forward with rulemaking.  The bill would establish a multidiscliplinary task force to study and report on various legal issues associated with CCS regulation, including options for management of long-term liability at CCS facilities-another issue previously examined on ClimateIntel.  The Bill would also direct the Department of Energy (DOE) and the Federal Energy Regulatory Commission to prepare a Report to Congress on barriers to constructing and operating the extensive web of pipelines that would be needed to transport CO₂ to suitable sequestration or enhanced oil recovery sites.

 A Dedicated Funding Stream for Early Movers

In addition to regulatory certainty, the CCS industry has struggled to generate the capital needed to take CCS from a promising demonstration technology to a proven commercial-scale application.  ACES would establish a quasigovernmental corporation, the Carbon Storage Research Corporation (CSRC), to subsidize early CCS commercial projects using an assessment fee passed through to rate-payers.  The CSRC would operate as a division of the nonprofit Electric Power Research Institute (EPRI), under the direction of a Board of Directors composed of representatives from industry, municipal governments, and nongovernmental organizations.  Absent opposition from 40 percent of state regulators, the CSRC would collect a small assessment fee on each kilowatt-hour of fuel-based electricity delivered directly to retail consumers, tailored to each utility based on their energy mix, providing up to $1 billion per year in funding for CCS projects for the next ten years.

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This week could very well be a seminal week in the history of climate change legislation.  The House Energy and Commerce Committee, which seems to be taking the congressional lead in crafting a bill, will be holding four marathon hearings on the Waxman-Markey draft bill.  Each day will be dedicated to examining a different aspect of the proposal.  Two keys things to watch for will be the warmth of the embrace from democratic members from industrial/coal/oil producing areas (Reps. Dingell, Boucher, Gordon, Gonzalez, Green, Melancon, Barrow, Matheson, Hill, Sutton) and the tone of rejection from moderate Republicans (Upton, Bono, Murphy, and Stearns).  Additionally, eyes will be on members to see how Friday’s EPA “endangerment finding” alters opinions, as many believe the “finding” will be a catalyst for legislation.

Former Vice President Al Gore, U.S. EPA Administrator Lisa Jackson, Energy Secretary Steven Chu and Transportation Secretary Ray LaHood, among dozens of other panelists, will testify in the Waxman-Markey draft bill hearings this week, which will be held in Room 2123 of the House Rayburn Building at 3 p.m. on Tuesday, April 21; 9:30 a.m. on Wednesday, April 22 and Thursday, April 23; and 10 a.m. on Friday, April 24.

While the Markey-Waxman bill hearings will make headlines throughout the week, two other hearings of importance are scheduled to take place.  On Wednesday, April 22, the Senate will hear from Todd Stern, Special Envoy for Climate Change, U.S. State Department at a hearing titled “Global Climate Change: U.S. Leadership for a New Global Agreement.”  Also testifying, in a second panel, are Helena Gayle, President and Chief Executive Officer, CARE; Ned Helme, President, Center for Clean Air Policy; and Paul Camuti, President and Chief Executive Officer, Siemens Corporate Research.  The hearing is scheduled for 9:30 a.m. in Room 419 of the Senate Dirksen Building.

Also on Wednesday, the House Science and Technology Committee will conduct a hearing on the “Monitoring, Measurement and Verification of Greenhouse Gas Emissions II: The Role of Federal and Academic Research and Monitoring Programs.”  Witnesses include Dr. Alexander “Sandy” MacDonald, Director of the Earth Systems Research Laboratory, National Oceanic and Atmospheric Administration; Ms. Dina Kruger, Director of the Climate Change Division, Office of Atmospheric Programs, EPA; Dr. Beverly Law, Professor, Global Change Forest Science, Oregon State University; Dr. Patrick D. Gallagher, Deputy Director, National Institute of Standards and Technology; Dr. Michael Freilich, Director of the Earth Science Division, National Aeronautics and Space Administration; and Dr. Richard Birdsey, Project Leader for Climate, Fire, and Carbon Cycle Science, USDA Forest Service.

The Waxman-Markey American Clean Energy and Security Act of 2009 aims to reduce transportation-generated greenhouse gas emissions, which account for approximately one third of total U.S. greenhouse gas emissions.  In addition to establishing a new low-carbon transportation fuel standard, authorizing financial support for electric vehicle programs and re-tooling auto plants, and requiring the Environmental Protection Agency (EPA) to set emissions standards on non-automobile mobile sources, the bill seeks to battle climate change through the transportation planning process. 

The transportation planning provisions (Title II, Part D) require states to establish and submit to the EPA 10- and 20-year horizon goals for transportation-related greenhouse gas emission reductions.  EPA would promulgate regulations to provide standard methodologies and models for establishing reduction goals, and states would be required to consult with a range of stakeholders in establishing these greenhouse reduction goals, including state resource and transportation agencies, metropolitan planning organization (MPOs) and the public, through comment periods and meetings.  Waxman-Markey would require states and MPOs to establish plans to achieve reduction goals as a part of their transportation plan or transportation improvement plan. 

Waxman-Markey recognizes that transportation-generated emissions cannot be reduced sufficiently by relying on increased fuel efficiency and cleaner fuels alone, but also requires reducing travel demand.  The bill seeks to reduce travel demand by requiring a plan that utilizes a broad-based approach that addresses:

• mobile sources
• increased use of transit
• land use planning
• economic development.

To reduce travel demand, state and MPO plans would seek to increase the use of public transportation by adding new service, employer subsidies, and coordinating transportation and land use planning; update zoning and land use regulations to focus growth close to job centers and public facilities, promote walking, bicycling and transit, and mix land uses; and promote telecommuting, flexible work schedules and satellite work centers.  As with the overall emission reduction goals, Waxman-Markey would require states to coordinate with the public, MPOs, resource agencies, and state and local housing, public health economic development, and land use and public transportation agencies in preparing their plans.

It is noteworthy that the legislation does not set emissions levels or mandated reductions, incorporating instead a “goals and plans approach,” utilizing the transportation and land use planning processes as a first step towards reducing emissions.  There are many considerations in how and where to develop roadways and public transportation systems, and the bill aims to make reducing greenhouse emissions a primary consideration.

Today, the Environmental Protection Agency released its long-awaited “Proposed Endangerment and Cause or Contribute Findings for Greenhouse Gases under the Clean Air Act,” as it was directed to do nearly two years ago by the Supreme Court’s decision in Massachusetts v. EPA. The proposed finding contains two key conclusions: first, that the atmospheric concentrations of several key greenhouses gasses (including carbon dioxide, methane and nitrous oxide) threaten the health and welfare of future generations; and second, that the combined emissions of these gasses by new motor vehicles and motor vehicle engines “contribute to the atmospheric concentrations of these key greenhouse gases and hence to the threat of climate change.”

While this is a necessary first step towards any sort of EPA regulation of GHGs under the Clean Air Act, this finding by itself does not guarantee any EPA regulation. As the announcement itself notes, “An endangerment finding under one provision of the Clean Air Act would not by itself automatically trigger regulation under the entire Act.” ClimateIntel has previously covered the issues underlying EPA regulation of greenhouse gasses under the clean air act in our series “Implications Of Regulating CO2 as an NSR Pollutant;” that series can be read here.

In the past week, the ethanol industry received two pieces of positive news.  First, the Congressional Budget Office (CBO) issued a report, entitled “The Impact of Ethanol Use on Food Prices and Greenhouse-Gas Emissions,” finding that high energy prices had a much more profound effect on the price of food than increased ethanol production in the period April 2007 through April 2008.  Second, EPA published a notice and solicited comments on a waiver application to increase the amount of ethanol that can be blended into a gallon of gasoline to up to 15 volume percent (E15).

CBO Report

The CBO report concluded that, for the period studied, ethanol production accounted for only 10 to 15 percent of the estimated 5.1 percent increase of food prices.  By comparison, the increase in the consumer price index (CPI) for all urban consumers for energy accounted for 22 percent of the 5.1 percent increase in the price of food.

In analyzing ethanol production’s contribution to the increase in the price of food the CBO assessed how increased ethanol production contributed to increases in the price of corn, animal products and soybeans, and how higher prices for these commodities contributed to the prices of foods that are measured in the CPI-U.  Other contributing factors noted by the CBO include a growing demand for meat that increased the demand for animal feed, dollar exchange rate fluctuations that increased demand for U.S. corn exports and concerns about weather for spring planting that caused corn prices to rise during the spring of 2008.

E15 Waiver Request         

The Clean Air Act authorizes EPA to regulate fuels and fuel additives to reduce the risk to public health from exposure to their emissions.  EPA’s regulations require that each manufacturer or importer of gasoline, diesel fuel or a fuel additive, register its product with EPA before “introducing the product into commerce.”  See generally, 40 CFR Part 79.  Since 1978, EPA has established a limit of ten volume percent ethanol (E10) for conventional (non flex-fuel) vehicles.  Growth Energy and fifty-four ethanol manufacturers submitted their E15 application on March 6, 2009.  After EPA’s Notice has been published in the Federal Register, stakeholders have 30 days to submit comments on the waiver application.  The Clean Air Act requires EPA to rule on the waiver application within 270 days of receipt, December 1, 2009.

There will almost certainly be comments submitted to EPA in opposition to the waiver request.  The National Petrochemical and Refiners Association, the American Lung Association, the Sierra Club, the Engine Manufacturers Association and other groups wrote former EPA Administrator Stephen Johnson on December 18, 2008, to oppose any increase in the 10% limit on ethanol in gasoline.  Among the concerns expressed, with respect to a higher blend, were potential machinery impacts, health and safety issues, emissions and compliance with the Clean Air Act.

EPA’s ruling on the waiver request could give an important signal on the direction the Obama Administration will take with respect to the ethanol industry.

As noted in last Friday’s post, one of the technological gaps that must be filled to increase the percentage of energy supplied by renewable sources is the need for grid-level energy storage.  The 2007 Energy Independence and Security Act, combined with the 2009 American Reinvestment and Recovery Act (ARRA), makes billions of dollars available for development of new and improved energy storage systems.  This infusion of funding to promote grid reliability provides an important opportunity for the electric power industry to build energy storage into the national grid design.  As utilities, investors, and policymakers assess the best way to do so, however, they will be choosing among a broad suite of potential technologies looking to exploit that opportunity.  In a constantly changing technological environment, making the right choice will be no simple task.  Some of the major types of grid-level energy storage technologies currently in play include:

• Pumped Hydro Storage (PHS): PHS is the most mature and widely utilized energy storage technology in the world, with over 90GW of PHS in use worldwide. PHS generally consists of two reservoirs—an upper and lower—connected by a reversible turbine. During times of low demand, water is pumped from the lower reservoir to the upper; that flow is reversed during times of high demand. Because of the significant capital costs, long construction times, and highly site-specific nature of PHS, little additional construction of these facilities is expected, though using lagoons or other tidal resources to power PHS is an emerging field of research.
• Compressed Air Energy Storage (CAES): In a CAES system, off peak power is used to pump air into an underground storage formation, such as an abandoned mine or a salt cavern. That compressed air is used to turn gas turbines during peak power periods. CAES is the second most commercially mature technology after PHS; two plants—both with over 100MW of capacity—have been constructed, and a number of other projects are planned, including the Iowa Stored Energy Park (ISEP), which will use wind energy in concert with CAES, creating a 268MW/13,000MWh power plant, which will also provide 50 hours of energy storage.
• Thermal Energy Storage: Thermal storage is generally used in concert with concentrated solar power facilities, and involves the circulation of a heat-transfer fluid-generally molten salt, though other advanced fluids are under development-to produce steam during periods when the sun is unavailable to the plant. Examples include the thermal energy storage system storage systems constructed as part of the Solar Two Facility in Southern California, and the massive Andasol solar power plant in Southern Spain.
• Advanced Material Batteries: Advanced material batteries use materials like molten sodium or lithium to store energy. Currently, sodium-sulfur (NaS) and lithium-ion based batteries are the primary designs for these technologies. Currently, sodium-sulfur (NaS) batteries have more fully penetrated the market, as significant numbers have been installed in Japan (where the batteries are produced), including a 34MW battery-currently the largest in the world. Advances in lithium-ion batteries have mostly been directed towards applications in electric cars, but with recent advances in nanotechnology, these batteries are finding use at the utility scale as well.
• Flow batteries: Also known as redox flow-cell batteries or regenerative fuel cells, flow batteries store electricity through a reaction between two different electrolyte solutions. Because the capacity of these batteries is largely dependant on the volume of electrolytic liquid available, these batteries are highly scalable, giving them the potential to compete with bulk storage in terms of charge and capacity. Current battery designs exist around zinc-bromide, sodium-bromide/sodium polysulfide and vanadium solutions. Fewer flow batteries have been installed than the previously mentioned technologies—currently the largest in the U.S. is a 250kW/2MWh plant in Utah.
• Flywheel Energy Storage (FES): FES is another mechanical storage technology, where energy is stored in a rapidly spinning cylinder. When that outside source of energy is unavailable, the rotor for the flywheel acts as a generator. Flywheels are easily moved and have no environmentally reactive components , but have limited storage capacity and a short discharge period, limiting their applicability. The technology is just entering commercial viability: in September 2008, Beacon Power produced the first flywheel storage system for use on a utility scale.
• Superconducting Magnetic Energy Storage (SMES): SMES uses the magnetic field produced by cryogenically cooled superconductors to store energy. By utilizing superconductors, SMES maximizes efficiency (very little energy is lost in the storage process, and there is no conversion between the form the energy is stored in and its usable form—electricity). Like flywheels, however, an SMES system discharges its energy quite quickly, and therefore is useful mostly for short term applications.

The current diversity of storage technologies under active commercial development creates both an opportunity and a dilemma for policymakers and market participants.  The opportunity is that because each technology offers different technical, financial, and political pros and cons, project developers have a broad selection of alternatives to choose from in pinpointing the ideal storage technology to fit the technical, financial, and political constraints facing a project.  The dilemma, in turn, is that given the relative scarcity of long-term performance information for many of these emerging technologies, and the uncertainty regarding whether and when federal policymakers will provide future incentives similar to those provided in the ARRA, policymakers granting funds and the project developers and investors requesting funds will want to get it right the first time.

EPA released today its annual national greenhouse gas inventory, identifying and quantifying the United States’ primary anthropogenic sources and sinks which finds that overall emissions during 2007 increased by 1.4 percent from 2006.  The report further indicates that overall emissions have grown by 17.2 percent from 1990 to 2007. The Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007 is the most recent report the United States has submitted to the Secretariat of the United Nations Framework Convention on Climate Change.

EPA prepares the annual report in collaboration with other federal agencies and after opportunity for public comment.  The inventory tracks annual greenhouse gas emissions at the national level and presents historical emissions from 1990 to 2007.  The inventory also calculates carbon dioxide emissions that are removed from the atmosphere by “sinks,” (e.g., through the uptake of carbon by forests, vegetation and soils).

The carbon dioxide equivalent of the total emissions of the six main greenhouse gases in 2007 was 7,150 million metric tons CO₂ Eq.  EPA concludes that increases in carbon dioxide emissions associated with fuel and electricity consumption were the primary causes of the emissions increase in 2007.  EPA also concluded that the primary contributors to the increase in 2007 were: (1) increased demand for heating fuels and electricity due to cooler winter and warmer summer conditions in 2007 than in 2006; (2) increased consumption of fossil fuels to generate electricity and (3) a significant decrease (14.2 percent) in hydropower generation used to meet this demand.

Together with EPA’s proposed rule for mandatory greenhouse gas reporting, published in the Federal Register last Friday, EPA’s national inventory will help inform the deliberations in Congress over the shape of comprehensive climate change legislation.