By Valerie Volcovici
WASHINGTON (Reuters) - The U.S. government may soon require natural gas-fired power plants to install technology to capture carbon emissions, sources said, as President Joe Biden's administration enacts new rules to help decarbonize the power sector in 12 years.
The Environmental Protection Agency as soon as this week is expected to unveil standards for new and existing power plants, which belch roughly a quarter of U.S. greenhouse gas emissions, two sources said. The rules will replace former President Donald Trump's American Clean Energy rule and former President Barack Obama's Clean Power Plan, both of which were invalidated by courts.
More than a year in the making, the standards should be based on a plant's potential to reduce emissions through carbon capture and storage (CCS) technology, according to clean air law experts and industry representatives in talks with the EPA.
Utility companies may need to decide whether they want to build new baseload gas plants with CCS technology or zero-emission renewable energy. States would develop plans for bringing their plants into compliance.
"These standards could level the playing field between new gas plants and new renewable energy," said Thomas Schuster, head of the Sierra Club's Pennsylvania chapter. Most new gas plants currently do not pay for emitting carbon, so the rules could make it harder for them to compete with solar and wind power.
Biden has pledged that the power business will decarbonize by 2035. According to the Clean Air Act, the standards must be based on “best system of emission reduction,” technologies deemed affordable and technically feasible.
The proposal will reflect two major developments to ensure the rules are legally defensible. One, a Supreme Court decision last July, barred EPA from forcing a system-wide shift in electric generation but allowed it to issue plant-specific rules.
Second, the Inflation Reduction Act created tax credits making carbon capture and hydrogen more affordable and affirmed EPA's authority to regulate power plants. The law offers more than $100 billion in clean electricity tax incentives, including a 70% increase in credits for each ton of carbon captured and sequestered.
"If you're building a new fossil (plant), it needs to control its emissions, said Lissa Lynch, director of the federal legal group at the Natural Resources Defense Council. Existing technology can capture and store approximately 90% of carbon emissions, Lynch said.
EPA could set varying standards for plants, applying stringent measures for ones that run constantly and easier ones for "peaker" plants which run during high power demand, Lynch said.
CLEANER POWER
U.S. Energy Information Administration figures show fossil fuels accounted for more than 60% of U.S. electricity generation in 2022, with 60% of that coming from gas and 40% from coal. Renewables accounted for 21.5%, with nuclear energy making up the rest.
The EIA projected that this year, 54% of new generation (21GW) will be solar and 14% will be natural gas (7.5GW).
Federal utility TVA has the most planned gas capacity at 5GW followed by investor-owned Duke Energy (NYSE:DUK) with 3 GW planned.
TVA's portfolio in the coming decades will include carbon-free sources "and sources like natural gas that complement that diversity without sacrificing rates or reliability", a spokesperson said.
Duke plans for natural gas to be part of its mix but "operated less as baseload generation and as more of a peaking/ramping resource over time to balance out the variability in renewable resources", a spokesperson said.
Some industry representatives signaled in comments to the EPA last year that they do not think power plant standards should be based on carbon capture and storage, with the National Mining Association saying it is not an "adequately tested technology." The group cited failure of a Texas project called Petra Nova that was mothballed in 2020.
Utility Southern Company (NYSE:SO) , which is phasing out its large fleet of coal generation, said new gas turbines should be favored "to safeguard electric needs of the U.S.".
Southern, which also runs the National Carbon Capture Center with the Department of Energy, said commercial deployment of carbon capture technology "is many years away" despite the cost-reduction potential of the Inflation Reduction Act.