Analysis by Energy Workforce President Tim Tarpley
Last week, the Biden Administration released a sweeping new emissions rule for power generation in the United States similar in many respects to the “Clean Power Plan” that was released during the Obama Administration but never fully implemented. The plan sets stringent new emissions requirements for coal and natural gas power plants and if ultimately implemented, could have significant implications for natural gas demand and carbon capture technology within the United States.
Of particular interest to our sector, the plan sets new requirements for natural gas fired power plants. While exempting some of the plants, any plants over 300 megawatts in size that run more than half the time — the sort of plants often used to generate so-called baseload power that provides a continual stream of electricity — have two options. The first option is that they can install carbon capture technology that would capture 90% of their carbon pollution by 2035. The second option would be to choose to mix more clean-burning hydrogen into their fuel, reaching a 96% hydrogen mix by 2038. The latter approach would equate to an 88.4% reduction in the plant’s carbon emissions according to estimates.
While deploying the hydrogen option could bring significant investment to the technology, there are still many uncertainties as to whether this goal is feasible with current or expected technology in the coming years. Many observers believe that should the rule actually go into effect as proposed, the carbon capture option may be more likely to be chosen by the majority of power generating facilities. Should this be the case, one thing can be certain, the United States will have to dramatically speed up its permitting process for carbon capture and related infrastructure, otherwise this goal will be unattainable.
Since the passage of the Inflation Reduction Act, Congress has injected more than $12 billion in subsidies into carbon capture and beefed up its tax credits, setting the stage for massive private investment if the projects can actually get permitted. However, the EPA, the agency that currently has oversight over permitting for the technology, has only been able to process two of the at least 75 carbon-capture permit applications it has received. At this rate, it is just a matter of time until investment dries up and the promise of the technology begins to falter.
Even our European allies appear poised to beat us on the permitting side. Two options could help the gridlock. Many states, including Texas and Louisiana, have applied for primacy to take the role of permitting from the EPA. However these applications have not yet been accepted by the EPA and some critics have concerns as to whether states have the resources to do much better than the federal government. Permitting reform passing on the federal level could also help speed up the process if it were to be done right with adequate resources.
Given the tremendous uncertainty that still remains, we can expect this new Biden Administration proposal to face an uphill battle for implementation and that it will become a target in the upcoming 2024 presidential election and from the Republican-led House.
DOE Again Says It Intends to Refill the SPR
The Department of Energy released a request for proposals on Monday which indicates it intends to purchase up to 3 million barrels of oil this summer to begin to replenish the Strategic Petroleum Reserve (SPR). The Biden Administration tapped 211 million barrels from the SPR in 2022 after the Russian invasion of Ukraine. That release has caused the reserve to reach its lowest level since 1984 and despite numerous statements by the Administration regarding a plan to refill, action has not yet been taken. DOE said it plans to refill the reserve at a lower price than the $95 a barrel average it sold for last year, and it intends to make additional SPR purchases later this year. Given the considerable geopolitical risks that exist around the world, it is vital for U.S. energy and national security to keep the reserve full as is required by federal law.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.