Honey, I Shrunk the Power Plant! – Watts Up With That?

Kevin Kilty

 In May 2024, Mark Christie, Chairman of the Federal Energy Regulatory Commission (FERC), had this to say during U.S.Senate testimony.

“The United States is heading for a reliability crisis. I do not use the term “crisis” for melodrama, but because it is an accurate description of what we are facing. I think anyone would regard an increasing threat of system-wide, extensive power outages as a crisis.

In summary, the core problem is this: Dispatchable generating resources are retiring far too quickly and in quantities that threaten our ability to keep the lights on. The problem generally is not the addition of intermittent resources, primarily wind and solar, but the far too rapid subtraction of dispatchable resources, especially coal and gas.”

The executives of large systems operators like PJM and MISO have said the same, as has the North American Electric Reliability Council (NERC). Mark Christie is only wrong about one thing – the adoption of renewable energy is a contributor to the crisis.

Slowly, too slowly I’d say, it is dawning on people that a reliable network supplying adequate supplies of affordable energy is one of the few things that separates, Massachusetts say, from becoming the equivalent of Albania; or more to the point of this essay preventing Wyoming from becoming like Afghanistan. This is not a made-up crisis.

Chapter 18

Back in the 2020 legislative session, the Wyoming legislature passed a bill adding Chapter 18 to Title 37, the enabling legislation for the Wyoming Public Service Commission. The purpose of Chapter 18 was to head-off in the only way that people could imagine, the impacts of EPAs endangerment finding and the fallout from Massachusetts vs. EPA – shuttering coal mines and also coal and gas fired power plants within the state. Its intent is pretty clear from this statement:

“Consistent with the objective of ensuring Wyoming electric utilities maintain access to reliable and cost effective electric generation resources, the public service commission shall establish by rule energy portfolio standards that will maximize the use of dispatchable and reliable low carbon electricity.”

Although it isn’t spelled out explicitly, and wiggle room is available for other technologies such as burning hydrogen, the term “low carbon electricity” means Carbon Capture, Use and Storage (CCUS). In fact, we can probably dump the “U” from this because while CO2 is a valuable commodity, it isn’t clear that a market for CO2 exists within reach of the coal and gas plants affected. There are 2-4 billion barrels of oil recoverable by CO2 flooding of fields in the Rocky Mountain region out of the 22 billion barrels of recoverable oil remaining in those fields. What this means for “Use” of CO2 isn’t clear to me and a recent order from the Wyoming PSC reveals that it isn’t clear to the PSC or affected utilities either.[1] There’s no point discussing the technical details of CCUS or its use in stimulating oil production further at this time.

Senate File 92

A bill before the Wyoming Legislature this session is intended to remove the provisions of Chapter 18 almost completely. It is currently stalled in committee and very likely may die there.  A standard way of killing a bill that is in danger of passing if it reaches the floor, is to bottle it up in committee. As I told several people, “I know how politics works. I often hate to see it work.”

On Monday February 3 was scheduled a committee hearing intended to decide on advancing this bill. It was quite clear as the hearing progressed that the committee had no interest in advancing the bill. I was called upon to make a case for the bill only on January 31 along with a staff member of the CO2 Coalition, Byron Soepyan. Byron has done research on the costs of adding CCUS to existing thermal plants and also its costs in building new plants with CCUS incorporated from the beginning. I felt I could use his numbers to make an argument for the unnecessary waste that CCUS represents. However, after the usual protocol of having public officials weigh in on the bill, and then allowing lobbyists for the affected industries to make their positions clear, all further public commenters were reduced to a two-minutes limitation. Period. Byron and I had no time to make our cases clear.

However, the testimony of officials and lobbyists was informative in several ways. First, it revealed that there is a wedge issue involved that Byron and I knew nothing about. This is the issue of primacy. Primacy means that a state has the authority to enforce state laws and regulations instead of EPA regulations. Right now only three states, Wyoming, North Dakota, and Louisiana are allowed primacy over regulation of class IV wells for CCS. Everyone had concerns that Senate File 92 would upset this primacy status, and make a number of industries subject to getting permits from multiple agencies – something they dread which then puts their interests in maintaining cheap power against other costs. It would have been helpful to have known about this in advance.

The head of Wyoming’s Department of Environmental Quality (DEQ) suggested a rephrasing of the bill that he felt would resolve this issue. It was a constructive suggestion. His suggestion, though, would have made supporters of the bill feel it was watered down. Probably it would have not mollified the primacy warriors. Suggestions that leave everyone dissatisfied are sometimes the basis for progress. However, that was not proved true here.

Second, The chairperson of our PSC testified, not clearly as to position on the bill in question, but appeared to assure the committee that the Commission would still have power to examine the prudence of proposed CCUS facilities in any event.

Stating that the PSC would remain undeterred in its mission to ensure that investments in electric service are prudently made should comfort those of us worried about the course of grid reliability and service affordability.[2] Yet, there are reasons to believe that the chairperson’s definition of prudence and that of people who frequent this website are not aligned.

At an energy conference held in September 2022 in Laramie, this person made these statements.  First, “This isn’t your Grandmother’s PSC.” That, in her words, the old mission of reliability and affordability is outdated. She also said quite clearly that, paraphrasing here, “Coal is not the enemy; CO2 is.” and then “We will never allow a coal-fired facility that emits CO2.” Possibly, prudent means weighing economic value against CO2 orthodoxy. 

Finally, speaking of CO2 orthodoxy, I expected but still found it surprising the extent that the typical concerns  dominated the statements of people opposing the bill. Concerns about public perception of Wyoming industry, the desires of voters in other states with utility ties to Wyoming, concerns about climate change, fears that we continue to put CO2 into the atmosphere. The orthodoxy about CO2 is now well cemented in the minds of a huge segment of the public. My guess is that Senate File 92  dies in committee.

Attacking CCUS

Byron has produced figures for the costs of CCUS based on the numbers provided by the U.S. Energy Information Administration and the National Energy Technology Laboratory, to comply with Biden’s 2024 EPA rule. Summarized for existing coal power plants they are: 1) capital costs of $4.1 billion to retrofit six long-term Wyoming coal power plants, 2) 24% net power output reduction and 3) a 44% increase in operation and maintenance (O&M) costs.

Costs for incorporating CCS into a natural gas plant from inception are different per category, but the end effect on utility rates is roughly the same. Figure 1, below, shows a highly simplified

Figure 1.

rate setting algorithm. With CCS the O&M costs rise by 44%. Taxes, depreciation and base rate  costs will rise in some way proportional to the $4.1 billion in capital costs, but in the case of a utility like Rocky Mountain Power with ratepayers in three states, the costs would have to be made proportional in some way. In the best case, Wyoming’s share would rise by one-sixth, or $700 million, which is an increase of about 33% over current values. Thus, costs rise by an average of, say, a factor of around 1.4.

What people fail to realize is that the calculation of rate structure has sales volume in the denominator which Figure 1 shows. Because of the parasitic CCS load, capacity of the plant is reduced by a factor of  0.76. The result is that commodity costs from this source of service rise over 1.8 times what it had been originally. This estimate compares favorably with LCOE in a design study done by the Electric Power Research Institute (EPRI) of a 300MW advanced supercritical AUSC which showed an increase of 1.8.

Obviously there are other generating sources, and overall rates won’t rise necessarily by 1.8. There are subsidies that will pay for some of this in a hidden manner. However, there are times even now when thermal plants produce nearly all the power being consumed and CCUS will just reduce that available power. Figure 2 shows the situation in the last week of January in the PacifiCorp balancing authority (PACE). During the bitter cold, wind was generally absent.

Figure 2.

Note the constant ramping of the thermal plants needed to balance wind/solar, which obviously have priority. Note in particular that coal never seems to reach above 4,800MW. That is the coal capacity we have left in PACE. Note, finally, at midnight on the 29th that wind is significantly gone, having slowed to under 10% capacity factor. Figure 3 shows PACE working to deliver increasing amounts of energy to Idaho Power throughout the period shown, and gradually increasing rates to Los Angeles Department of Water and Power throughout the night and morning of January 29-January 30. At this same time PACE was drawing energy from the Western Area Power Authority (WACM) at a rate of 1,200MW. Imagine the same situation with the coal assets in PACE reduced because of CCS to a maximum of 3,600MW. In that case we would be drawing perhaps 2,400MW from WACM. Could WACM deliver?

Figure 3.

Figure 4 shows that generation of energy in WACM at this time includes almost nothing from wind. WACM is in the wind drought also. What is contributing mightily at WACM is coal, under the same pressures to convert or die as coal elsewhere.

Figure 4.

In Wyoming we have gotten used to feeling that we have an abundance of energy. Yet, with increasing demand and closing or conversion of plants, we are terribly close to having inadequate energy supply during common winter conditions. Even with balancing area interchange, the remaining coal-fired plants are becoming the most valuable resources on the grid, critically needed for balancing wind/solar. Yet, adding CCS to existing plants is equivalent to closing one out of every four. It is a stealth plant closure through shrinkage and it is presently the policy of Wyoming to require CCUS for combustion/thermal plants.

Benefits of CCS?

Are there compensating benefits to CCS that make up for the expense and risk of unreliable and inadequate energy supplies? No. The benefits come from complying with an imposed orthodoxy and placating a class of customers many of whom live in other states. One of the great ironies here is that while Rocky Mountain Power believes its CO2 emissions will decline by 50 million tonnes per year once they close plants or convert all plants to CCS, by 2030 China will emit this much every 22 hours. We dig holes at great effort, they fill them in effortlessly. It does nothing toward advancing the dubious goal of reducing CO2, or improving the climate, to say nothing about generating lots of new high-paying jobs.

Why all the noise?

Given the cost, risks, and lack of benefits, why is there lots of support for CCUS? Cheyenne perhaps suggests one answer. Cheyenne lies at the intersection of two major rail networks with associated long haul internet backbone fiber, two major interstate highways, and a satellite uplink/downlink and satellite flying operation. For these reasons, and its cheap local electrical energy, a number of social media, data centers and AI facilities want to locate there. However, the wokeness of these companies dictates that they use clean energy. Powerful business interests and state politicians see all this as economic opportunities.[3] In addition there are plans for building a green hydrogen hub and even trying direct air capture of CO2. Then, there are subsidies to harvest.

Unfortunately Wyoming ratepayers are at risk of being dragooned into providing support for this effort through undoubtedly higher electrical rates. There is no other possibility.  

References:

1- Wyoming Public Service Commission (http://psc.wyo.gov) 20000-660-EA-24           Record No.: 17536  Order No.:30681, 1/23/2025, Rocky Mountain Power, IN THE MATTER OF THE APPLICATION OF ROCKY MOUNTAIN POWER FOR AUTHORITY TO ESTABLISH FINAL LOW-CARBON ENERGY PORTFOLIO STANDARDS, Memorandum Opinion, Findings and Order

2- One mention of prudence in investment occurs in Chapter 18 (bolding here is mine) – “Beginning in 2023, and occurring every second year thereafter, the commission shall report to the joint minerals, business and economic development interim committee and the joint corporations, elections and political subdivisions interim committee regarding implementation of the electricity portfolio standards and recommend whether it should be continued, modified or repealed. To the extent the electricity portfolio standards are modified or discontinued, nothing shall impair the ability of a public utility that has incurred costs to comply with the electricity portfolio standards to recover its prudently incurred costs as authorized by the commission.”

But what takes precedence, prudence or recovery of incurred costs in an effort to aid the climate?

3-People will argue that CCUS has financial benefits if it is used for enhanced oil recovery. This idea is so complex that a separate essay is needed to explain it. Yet, the financial difficulties experienced by the few full-scale attempts at CCUS provide a powerful counterargument. If there is any real industrial future to CCUS, it has only now reached the innovation stage. As Rogers’s classic work on the “Diffusion of Innovation” revealed, innovators often get wiped out.

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