Electric co-ops shift from coal but call carbon capture unrealistic

Editor’s note: The is the first of two articles on the impact of carbon capture and storage on rural utilities. 

Rural electric cooperatives apprehensively await federal court decisions that could allow the EPA to impose costly carbon capture technology on existing coal-fired generating plants.

Adjudication of EPA’s new source emissions rule, published in April, is pending at the U.S. Court of Appeals for the D.C. Circuit in Washington. 

Trade groups representing utilities, mining and coal groups and Republican state attorneys general sought a stay of the rule, which the U.S. Supreme Court denied earlier this month. 

The EPA rule calls for existing coal plants, if they hope to remain operational after 2039, to adopt the use of carbon capture and storage (CCS) by 2032 or to be shut down. The requirements also apply to new natural gas-fired power generation.

CCS is considered the best available technology, and EPA expects that it can capture 90% of emissions. "Lower costs and continued improvements in CCS technology, alongside tax incentives" in the Inflation Reduction Act allow utilities to largely offset its cost, EPA argues. 

EPA is still working on a proposal to address emissions from existing natural gas-fired generation.

The new power plant rule repeals a Trump administration rule that environmental groups saw as restricting the reach of the Clean Air Act in reducing emissions from stationary sources.

Some rural electric cooperatives rely on coal-generated power since because they get their electricity from generation and transmission companies that own the plants. A shift toward low carbon resources is under way, slowly reducing the contribution of coal. Coal accounted for 30% of rural electric co-ops' retail power sales in 2022, down from 41% in 2016, according to the National Rural Electric Cooperative Association (NRECA). The share of power from renewable and nuclear sources grew from 32% in 2016 to 37% in 2022.

CCS has slim track record 

“Options are few to capture 90% of CO₂ by 2032,” NRECA spokesman Dan Riedinger said, “and the challenge of sequestration follows. Onsite geologic storage is not feasible in many areas.” If a facility is not near an appropriate geologic formation, pipeline networks are needed, he said. 

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The recent history of CCS is checkered. 

American Electric Power ran a successful pilot in West Virginia in 2009-10 to capture flue gas particular to natural gas combined cycle plants and store the CO₂. The Department of Energy planned to give the utility $334 million to sequester CO₂ from a generating unit at its Mountaineer coal plant. AEP was not confident that state regulators would allow it to recover the additional cost of CCS through rate increases, and dropped the project.

The only operating U.S. power plant with CCS is Petra Nova in Fort Bend County, Texas, owned by JX Nippon Oil and Gas Exploration. The plant is designed to capture 90% of its CO₂ from a 240 megawatt slipstream of flue gas from the adjacent Parish Unit 8 coal plant.

The CO₂ is piped to Jackson County, Texas, where it is injected and sequestered. The plant was taken offline in May 2020 because of economic conditions and restarted in 2023.

A small coal-fired plant in Saskatchewan has been operating with CCS since 2014. During the second quarter of 2024, the CCS facility at Boundary Dam was available 88.7% of the time, according to SaskPower, resulting in two of the best-ever months for carbon capture. The facility has had outages in recent years to replace motors that compress CO₂.

Fiscal tools to advance CCS

The Biden administration has used fiscal policy to encourage the use of the technology to meet President Joe Biden’s goal of a net-zero U.S. economy by 2050. 

The federal tax code, which provides credits of up to $85 per ton of CO₂ captured and permanently stored, was updated in the Inflation Reduction Act (IRA). But power plants are expensive and uncertain, with most tax credits going to ethanol, natural gas and ammonia. 

DOE’s CarbonSAFE Initiative provides up to $750 million for commercial-scale CCS and CO₂ transport demonstration projects. The awards may cover one coal-fired power plant and up to two industrial facilities. 

Some 22 rural electric cooperatives and generation and transmission associations have been selected to receive funding from USDA through the Empowering Rural America program, known as New ERA. Most plan to add renewable sources; two plan a CCS project. New ERA funding announced to date would provide $13 billion to rural utilities. 

NRECA contends that the rule forces its members to realign generation sources too quickly.

“Because of the near certainty that NRECA’s generation and transmission members will not be able to comply, many existing coal-fired power plants will be forced to retire before the end of their useful life,” the group said in comments to EPA. “Of necessity, this will force generation to shift to other sources — those preferred by EPA.” 

A private think tank confirmed the trend. Most generating capacity additions by electric utilities, based on regulatory filings from the first half of the year, come from wind and solar sources, according to the Rocky Mountain Institute. 

Andy Berke of USDA's Rural Utilities Service

The group said that many utilities have updated their plans to include more gas capacity. 

“Our modeling then shows that higher load, and higher use of gas plants, have increased projected emissions to levels higher than we projected before the passage of the IRA,” RMI analysts said in a July report.

There is significant demand among rural electric co-ops for renewable energy capacity, according to USDA officials. Last week, USDA announced a new round of New ERA awards that would finance projects at six electric co-ops and the Tri-State Generation and Transmission Association, Westminster, Colo. 

The grants and loans will finance the purchase of 1,040 megawatts of renewable energy and more than 200 megawatts of energy storage for Tri-State as well as the retirement of 1,100 megawatts of coal-fired generation. 

“We got about four and a half dollars of requests for every dollar that we had to give out,” said Andy Berke, administrator of USDA’s Rural Utilities Service.

"This is entirely voluntary on the part of cooperatives, and what they see here is an opportunity to make this transition at a cost their members can afford, and that's why we think that we've seen so much energy and enthusiasm," Berke said. "New Era allows them to choose the way that they get to this future and put that decision in their own hands. So you see nuclear, you see wind, you see solar, you see battery storage.”

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