Paper presented at the Appalachian Research Initiative for Environmental Science Environmental Considerations in Energy Production Conference.This paper identifies the main barriers confronting deployment of Carbon Capture Utilization and Storage (CCUS) and describes incentives that would expedite the use of CCUS, with emphasis on utilization of carbon dioxide (CO2) for enhanced oil recovery (EOR) and enhanced gas recovery (EGR). This is explored mainly within the context of the business/regulatory structure of electric utilities and other factors that bear on deployment of Carbon Capture and Storage (CCS) and especially on CCUS, including federal and state government policies. It also proposes possible steps that should be considered to facilitate deployment of CCS/CCUS.

1. BARRIERS AND INCENTIVES FOR
DEPLOYMENT OF CARBON CAPTURE
UTILIZATION AND STORAGE
Herbert Wheary
Michael Karmis
Gerald Hill
Nino Ripepi
Environmental Considerations in Energy
Production
September 21, 2015

2. Benefits of CCUS
Controls emission of carbon dioxide
• Utilization of CO2 helps offset cost of carbon
capture
• Extends life of existing fossil plants, esp. coal
• Helps maintain a diverse and balanced power
generation portfolio
• Can enhance recovery of domestic oil and
natural gas
• May provide a safer medium for fracking, etc.

3. Why target the Investor Owned Utilities?
• Utility sector produces about 30% of CO2
• IOUs are largest component of that sector
• Already highly regulated
• Historically highly dependent on coal
• Generally inventive and responsive in
achieving compliance
• Agenda to convert them to renewables

4. Electric Utility Business Model
• Investor-owned, publicly traded
• Mostly monopolies with franchised areas
• Generally vertically integrated
• Highly regulated by: FERC, EPA, PUC, etc.
• Very capital intensive
• Long term planning and investments
• Taxed similarly to other industries
• Subject to transparency

6. Public Utility Commission
• State regulation of Public Service Companies
• Protects the “Public Interest”
• Seeks balance between consumers and utility
• Usually composed of three or five “judges”
• Uses a “quasi-judicial” process with public
participation
• Utility investments subject to prior review
• Determines cost recovery & earnings allowed
for utilities (sets rates)

8. Major factors to consider
• Uncertainty
• National Policy
• Financial
• Legal
• State Regulatory
• Technology & Timing
• Competing Technologies & Fuels
• Infrastructure
• Environmental Regulations
• Public Participation

9. Dealing with Barriers

10. Factor: Uncertainty
Barrier/Impediment
• Difficult for utilities and businesses to commit to
CCUS due to multiple open issues
Incentive/Remedy
• Resolve outstanding issues to create confidence and
enable decision making on CCUS

11. Dealing with Uncertainty

12. Factor: National Policy
Barrier:
• Lack of settled national policy on CO2
emission limits and controls
Incentive:
• Work for reasonable CPP and SIP that
embodies banking and trading of emission
credits and allows time for CCUS to mature

13. The Carrot and Stick Approach to Incentives

14. Factor: Financial
Barrier/Impediment:
• High capital and unknown O&M costs
• Gap between capture & transport cost, and its value to user
• Possibly complex business structures
Incentive/Remedy:
• Grants and cost sharing
• Cost recovery from CO2 sales
• State or local government bonds
• Tax credits and exemptions
• Assurance of recovery through electric rates
• Sale of carbon credits or allowances

15. More Barriers

16. Factor: Legal
Barrier:
• Unresolved questions of ownership, liability
and risks
Incentive:
• States should enact legislation
clarifying/assigning ownership & liability until
national policy in place
• Support uniform national policy

18. Factor: State Regulatory Policy
Barrier:
• Risk of PUC disapproval of CCUS project or denial of
cost recovery via rates
Incentive:
• Make case for importance of coal in a balanced
energy portfolio
• State legislation could guarantee cost recovery for
IOUs and other incentives for CCUS to reduce risk

19. Compliance Timing is Critical

20. Factor: Technology & Timing
Barrier:
• Immaturity of emerging CCUS technologies
and likely early CPP compliance dates
Incentive:
• Work to extend compliance dates in CPP/SIP
• Accelerate and proliferate scaled-up demos by
providing federal grants and state support for
cost sharing

21. Competing Energy Sources

22. Factor: Competing technologies and Fuels
Barrier:
• Replacement of existing coal capacity by gas, etc.
• Alternatives to CCUS, especially renewables
Incentive:
• Work to target and reserve the coal units most
suitable for CCUS
• Provide RPS-type incentives via legislation giving
CCUS parity with other low carbon options

23. Factor: Infrastructure
Barrier:
• Need for suitable user for CO2 for EOR/EGR
and pipelines or other means for delivery
Incentive:
• Support business model that includes
incentives that facilitate third party as CO2
user and facilitates CO2 pipeline routing and
permitting

24. Factor: Other Environmental Regulations
Barrier:
• Concern for impact of CO2 injection and
possible contaminants from CCUS used for
EOR/EGR
Incentive:
• EPA already has rules in place under UIC
• Develop/support long-term monitoring

25. Factor: Public Participation
Barrier:
• Activists and others may intervene in opposition to CCUS
and the continued use of fossil fuels
• Utilities are subject to public scrutiny
Incentive:
• Accelerate large-scale demos to develop track record
• Use outreach and education to convey
understanding and benefits of project
• Rally stakeholders and communities in support of
CCUS

26. Conclusion
The NRDC calls CCUS a “win-win-win”
BUT…
• CPP compliance may be needed before CCUS is ready
• Decommissioning of coal units reduces opportunities
• Abundant natural gas and cheap oil blunt incentives
• Large scale CCUS demos are needed now
• Other barriers must be addressed
• States need to play a larger role
• Objective: reduce risk and UNCERTAINTY
• The barriers can be overcome

27. Barriers can be broken!

28. BARRIERS AND INCENTIVES FOR
DEPLOYMENT OF CARBON CAPTURE
UTILIZATION AND STORAGE
Herbert Wheary
haggiscat@live.com
Michael Karmis
mkarmis@vt.edu
Gerald Hill
Gerald.hill.Phd@gmail.com
Nino Ripepi
nripepi@vt.edu