Power plant operators are more likely to switch fuels if forced to cap carbon dioxide emissions, compared to caps on nitrogen oxide and sulfur dioxide emissions, a government agency said in a congressional report.

The Energy Information Administration found power suppliers are likely to shift to low sulfur coal and install pollution control equipment, if NOx and SO2 emissions are capped at 75% below their 1997 levels by 2008. Most would take the same approach to control mercury emissions.

But to meet a 7% reduction in CO2, the EIA projected a shift to natural gas and more intensive use of cogeneration and nuclear power and renewable energy at the expense of coal. The agency also predicted such a rule could lead to higher electricity prices and lower consumption.

The EIA prepared the analysis at the request of the House Subcommittee on National Economic Growth, Natural Resources, and Regulatory Affairs. The subcommittee asked EIA to examine the potential cost of various multipollutant strategies to cut electric plants’ air emissions.

Presently, EIA noted, neither the future reduction requirement nor the complete timetable is known for airborne emissions, making compliance planning “difficult.”

Still economical
Although pollution control equipment can be expensive, the cost shouldn’t make existing coal-fired plants uneconomical, EIA said. The agency estimated adding both NOx and SO2 control equipment would cost $150-$250/kw of generating capacity, compared to $500-$1,000/kw to build new generating capacity. As a result, adding equipment should have little impact on the price of electricity.

It’s a different story if CO2 is capped at 7% below 1990 levels. Technologies that can capture and store carbon from fossil fuel plants may emerge but not between now and 2010, EIA said. The beneficiaries of a cap on CO2 would be renewable energy, nuclear generation, and gas.

The agency said renewable energy would get a 27% boost by 2010 and 32% in 2020. With fewer nuclear plants taken out of service, the EIA would expect a 3% increase in nuclear generation by 2010 and 14% increase in 2020.

But the biggest beneficiary of capping CO2 emissions would be gas. The agency projected natural gas-fired generation would be 61% higher in 2010 and 43% higher in 2020 than if no cap is imposed.

Combined with stringent caps on NOx and SO2, EIA projected gas consumption would be 10.6 tcf in 2010 and 13.4 tcf in 2020, compared to 6.8 tcf in 2010 and 11.2 tcf, respectively, if the caps are not put in place. It projected gas prices would be $3.66/Mcf in 2010 and $3.74/Mcf in 2020, compared to $2.87/Mcf and $3.22/Mcf, respectively, if carbon emissions were not capped.

The upshot would be higher electricity prices. The agency projected higher power prices would cause consumers to cut their use 8% in 2010 and 12% in 2020, even though it would expect the US electricity bill to be $80 billion higher in 2010 and $63 billion higher in 2020.

The agency also warned it isn’t clear the industry could shift to gas and renewable energy from coal in a short period of time without encountering supply problems. “Undertaking the amount of power plant construction, natural gas drilling, and pipeline construction needed to replace retiring coal plants would be a serious challenge,” EIA said.

Moreover, the agency observed history doesn’t offer much help on how various markets might respond to changes as large as those required by proposed emission targets.