Transitioning to a carbon-constrained world: Reductions in coal-fired power plant emissions through unit-specific, least-cost mitigation frontiers

Abstract

There is growing concern that progress toward reaching the carbon dioxide (CO2) targets set forth in the Paris Agreement is falling short of the mark, and efforts to decarbonize the global economy must be hastened and the reductions deepened. Doing so quickly through a buildup of natural gas generating capacity as a replacement for coal-fired capacity can greatly aid in lowering near-term emissions towards the Agreement target to limit future climate impact to well below 2 °C but would incur stranded costs as natural gas assets are retired before their end-of-life age. The stranding of such capital investment may inhibit efforts to further decarbonize the world economy because of technology lock-in. One possible solution to reduce such stranded costs is to mitigate CO2 emissions from the existing coal-fleet. For the evaluation of the costs and emissions, we develop a novel method that uses unique coal-fired electric generating unit (EGU) characteristics to evaluate multiple mitigation-technology options under local fuel prices; the result of which is a least-cost mitigation frontier for nine EGU-specific mitigation solutions created within a common assessment framework. With this EGU-specific method, we find the mitigation options that achieve the lowest capital cost and levelized cost of electricity to meet CO2 emission-intensity reduction-targets for a representative EGU in the U.S. coal-fired fleet and use this method to analyze the uncertainty for these deterministic solutions. For this EGU, we find that the portfolio of mitigations defining the frontier is sensitive to fuel price variation, as well as other EGU-specific factors such as efficiency and retirement age. A probabilistic analysis of projected fuel prices indicates that mitigation decision-related regret can be high but may be limited to specific intensity targets. A further insight is that for deep CO2 mitigation, high capital costs and predominantly low natural gas prices may limit the viability of coal-fired EGUs retrofitted with carbon capture and storage with an auxiliary power system, even with a tax credit (e.g., Section 45Q of the Bipartisan Budget Act of 2018).