If we are to solve the climate problem, our current generation of conventional, CO2 intensive coal plants must be our last. Note: this response was originally posted on the National Journal’s Energy & Environment Blog. You can read the entire post here, including the contributions of other experts. With its high CO2 emissions and central place in the US (and global) energy infrastructure, ‘fixing’ coal is arguably at the center of a successful resolution to the climate challenge in the United States and the world. At present, coal is responsible not only for significant CO2 emissions, but also for environmental damages ranging from mountain top removal to mercury emissions. However, it offers a plentiful and low cost fuel that today provides more than 50 percent of U.S. electricity production, and we do not, at present, have either the financial capital or technological alternatives within reasonable costs to call for an immediate phase-out. If we are to solve the climate problem, our current generation of conventional, CO2 intensive coal plants must be our last. A price on carbon as part of a larger strategy to move into non-emitting sources is clearly critical. However, the urgency of the climate change challenge means we cannot wait for the coal problem to be solved through such pricing mechanisms alone. For the next 20-30 years, we must pursue a set of complementary strategies that will transition the electricity grid away from coal over the long-term while reducing its destructive environmental impacts as much as possible in the short term. Carbon capture and storage (CCS) is a critical part of such a strategy. In practice, this means that new coal plants should only go forward under a narrow set of conditions. First, on a generator-by-generator basis, new coal plants should be the option of last resort. Even under optimistic assumptions, CCS is projected to capture well below 100% of CO2 emissions; many believe it will capture less than 80% even under optimistic scenarios. Thus, even with CCS, coal will always be a liability from the perspective of climate change. Cleaner renewable energy sources and demand reduction through energy efficiency should be the first alternatives whenever possible. Second—and as soon as possible—all new coal plants should be designed and engineered to capture the majority of their CO2 emissions for either long-term storage or industrial use. This requirement would facilitate a rapid transition to broad-scale underground CO2 storage if and when the technology and infrastructure make it possible. Currently, “carbon capture ready” is poorly defined; often it means only that a utility has set aside acreage for capture facilities. Carbon capture needs to be built into the plant design, and implemented on day one. Third, we should not build new coal plants in locations where the surrounding geology is not conducive to long-term underground CO2 sequestration, or where a lack of CO2 pipeline infrastructure would mean massive and costly delays for adequate CO2 storage. Nationally, the U.S. has huge sequestration potential—some have called it the “Saudi Arabia of sequestration.” But just as wind is not universally feasible, neither is sequestration. New large-scale CO2 pipelines are not currently being developed, and are likely to be prohibitively expensive in many cases. Finally and most important, we must immediately embark on a “crash program” to develop and deploy carbon storage capability on a massive, global scale. Underground storage is the only option on the table for dealing with CO2 emissions from fossil fuel power plants. We now know enough about CCS siting, regulatory and liability challenges to quickly move towards industry-scale demonstrations. But CCS will require billions—not millions—in research funding. The G8 goal of 20 CCS demonstration projects requires funding on the order of $1-1.5 billion per project. Investments on that scale will not happen fast enough without public subsidies, which should be a priority for the next Administration.

WRI and a group of corporate green power purchasers explore whether long-term green power contracts can be a win-win for providers and consumers. A key advantage of renewable power is that it is generally free of fuel costs. That makes it attractive to buyers looking for a “hedge” against energy price volatility pegged to fossil fuels. But while this “hedge” can clearly be provided at the wholesale level, there is little experience in using it for retail customers, especially in competitive power markets. A group of businesses—working with WRI’s Green Power Market Development Group, the Green Power group California Affiliates, and the U.S. Climate Business Group—is looking into ways to change that. The group recently distributed a first-of-its-kind Request for Information (RFI) to a select group of green power suppliers. The RFI is intended to solicit information to assess the feasibility of long-term (say, 10-year) renewable power transactions as a hedge against energy prices in competitive U.S. power markets around the country. The results of the RFI could lead to either formal solicitations or long-term contract negotiations. The background summary document (PDF, 36 Kb, 4 pages) envisions two long-term contract options. The first option is a fixed-price contract, where the buyer agrees to buy a portion of their total load from a green power provider for a fixed price (say, 6 cents/KWh) or series of annual fixed prices. The second option is a “contract for differences,” in which the provider and consumer agree to a “strike price” (say, $60/MWh) for the duration of the contract. If the market clearing price is less than the strike price at the time of production, the consumer pays the power generator the difference between the two. If the market price is greater, the power generator pays the difference to the customer. Either way, both parties enjoy the benefit of a predictable price. A long-term “hedge contract” could provide big benefits for both consumers and producers. Consumers get the aforementioned hedge against volatile fossil fuel energy prices. For green power producers, a long-term contract is an attractive value proposition and could help the developer lock-in debt financing. As the crisis in the financial markets has reduced the amount of capital for project financing, these long-term contracts could provide an additional source of support to project developers. The RFI was originally submitted to a group of pre-screened suppliers; additional suppliers, merchants and generators should contact Alex Perera or Robert Heilmayr if interested. For more details, read the background summary document (PDF, 36 Kb, 4 pages).

Imported Coal Power Could Undermine Northeast Global Warming Cap-and-Trade System

The California Air Resources Board is expected to vote today on two new rules that would dramatically reduce toxic emissions from big-rig trucks.

Missouri’s new clean energy statute would save consumers money, as well as reducing harmful carbon emissions.

If passed later this week, a Massachusetts compromise energy bill will make the state a leader in cutting global warming pollution.