NEWS RELEASE                                                                                           APRIL 2012

“Create and Trade” is a Better Way to Deal with Coal-fired Power Plant CO₂ Emissions

EPA is proposing limits on CO₂ emissions from new coal plants but not existing ones. This approach will actually increase CO₂ emissions and the cost of energy. The McIlvaine Company in its Utility CO₂ Mitigation Markets proposes an alternative which would much better reach the objective.   This concept is called “Create and Trade.” It empowers the utility industry to reduce CO₂ and other emissions in innovative and cost effective ways.

A new ultrasupercritical plant would emit 30 percent less CO₂ than an existing plant. However, the just proposed limits on CO₂ emissions from new plants will effectively eliminate their construction. On the other hand, we need coal for somewhere between 30 to 50 percent of our generation capacity over the next 30 years.  If we do not build new plants to operate over this timeframe, we will be emitting 30 percent more CO₂ than would be emitted with new plants.

Natural gas can be economically converted into LNG and liquids. There is no expectation that the world price will be low enough to allow gas to compete with coal for power generation.  It is an illusion to believe that gas producers will not seek lucrative offshore markets rather than supply cheap gas to domestic users. Some LNG facilities built to regasify LNG are already in the process of conversion to allow them to liquefy and export gas.  Therefore, a plan to completely eliminate coal over the next few decades would be very unwise.

The air pollution control industry has made big strides in developing technology to very effectively reduce mercury, SO_2, NO_x, fine particulate, hydrogen chloride and toxic metals.  The limits for new power plants are just a fraction of what is being allowed for old power plants. Replacing the old power plants with new ones would make a very big difference in the emissions of the whole range of air pollutants.

McIlvaine proposes a whole new approach called “Create and Trade” as opposed to “Cap and Trade.” Utilities which reduce CO₂ and other pollutants to a much greater degree than the average would receive payments from those utilities with higher than average emissions.  A base line for CO₂ would be established based on good practice for an old power plant.  The base line for other pollutants would be the limits which already apply to old power plants.

The payments to the clean power plants would start with reductions beyond the baseline and   accelerate as they go beyond a midpoint between limits for existing power plants and NSPS. So an exceptionally clean power plant would generate much more revenue per ton of pollutant reduced than would a moderately clean power plant.

There will be some new power plants that will opt for carbon capture and sequestration. Those that can sell the CO₂ for enhanced oil recovery will choose this route. The problem is that this opportunity will only be available to a small number of power plants. The net CO₂ reduction is reduced by the large energy consumption in CO₂ capture and transport.

The system will give credit to technologies which more broadly reduce emissions.  Coal plants can make hydrochloric acid and reduce the net pollutants by eliminating chlor–alkali plants. New coal plants can be integrated with cellulosic ethanol plants where they supply the low pressure steam rather than lose the energy in cooling towers. These plants will also burn the cellulosic waste and displace some of the coal.

One of the biggest opportunities is to co-locate sewage treatment and garbage burning facilities with coal plants. The complex will have far fewer emissions and much less water consumption than non-integrated operations. Europe is already doing this.

The premium on highly efficient removal technologies would cause a flow of investment into cutting edge technology. All payments would be among utilities and would not involve government regulation. The only need would be for government to eliminate some of the legal barriers to new plant construction.

If the environmental community can be assured that “Create and Trade” will really result in the greatest pollution reduction and that the lifespan of the new coal plants is limited to the anticipated retirement dates for the existing old fleet, then there should be hearty endorsement by this faction.

For more information on Utility CO₂ Mitigation Markets, click on: http://home.mcilvainecompany.com/index.php?option=com_content&;view=article&id=57