Confronting the Bleak Economics of CCS in the United States

Abstract

This chapter will argue that carbon capture and sequestration (CCS) policies must be reevaluated in light of the dramatic changes in electricity markets. Coal-fired power has progressed from being the cheapest to one of the most expensive sources of electricity in the United States, and while it will remain an important source of electricity for decades, it is projected to be in “terminal decline” by 2020. The Donald J. Trump Administration may prolong the transition away from coal, but the underlying economics will prevent its reversal. Three factors are driving this transformation: (1) dramatic declines in the cost of renewables; (2) the projected long-term low price of natural gas; and (3) strong signs that electricity storage will be widely cost-competitive by the mid-2020s. I have omitted environmental and climate change regulations because, though important, their status is highly uncertain in the near term given the current political climate in the United States. The changes in the electricity sector necessitate a reevaluation of the strategy for deploying CCS that is built around coal-fired generation. If, as many energy experts believe, rising market competition is inexorably undercutting the viability of coal-fired generation, plans and policies for CCS must adapt to the new economic realities. The greatest barrier to deployment of CCS is the low price of natural gas, which is displacing coal-fired generation and foreclosing the construction of new plants — a factor also independent of the expected demise of President Obama’s Clean Power Plan. At the same time, the cost of renewables and electricity storage are projected to continue their decline and to reach grid parity long before widespread commercialization of CCS. As a consequence, even under optimistic scenarios coal plants with CCS will have to compete in a market increasingly dominated by technologies with more rapid innovation cycles, modularity, and low barriers to deployment at both the utility-scale and as distributed generation.