UK releases further detail on CCS plans

: Biomass, Electricity, Emissions, Hydrogen
23/03/30

The UK government today set out further information on its plans for carbon capture and storage (CCS), including seeking applications to establish two new CCS clusters.

As as part of a co-ordinated net zero strategy day, the government called for applications under its so-called Track 2 scheme, which aims to establish two further CCS clusters in the UK by 2030. The HyNet and East Coast clusters were selected in October 2021 under the Track 1 process, for deployment by the mid 2020s.

Track 2 applicants must either have a CO2 storage licence or have applied for one, and they must have "relevant agreements and commitments in place" with capture projects, the government said. Criteria for eligible Track 2 capture projects have not yet been set out.

The Acorn and Viking projects are "best placed to deliver on the government's objectives", the government said, though its call for applicants will remain open until 28 April. Acorn, in Scotland, missed out in the Track 1 scheme, but the government's Scottish Affairs Committee recently called for its approval. Viking, off the east coast of England, is targeting a start date of 2027 and a capture rate of 10mn t/yr of emissions by 2030. It is led by UK independent Harbour Energy and partners include Associated British Ports, power producer West Burton Energy, refiner Phillips 66 and trading firm Vitol's power plant subsidiary VPI.

The government also today said eight carbon capture projects have progressed to a "negotiations project list" of the Track 1 programme. These include three industrial carbon capture, two energy from waste, one power with carbon capture, usage and storage (CCUS) and two hydrogen projects. London also promised a forthcoming "updated investment roadmap on CCUS, summarising government policy and funding", and "a vision for the UK CCUS sector to raise confidence and improve visibility for investors".

The UK aims to capture 20mn-30mn t/yr of CO2 by 2030 and estimates that up to 100 stores may be needed to hit these targets.

Beccs model progresses

The UK also today clarified its preferred approach to support bioenergy with carbon capture and storage (Beccs), and utility Drax said it will start formal discussions with London to move forward its Beccs project in the country.

Drax — which last week paused its Beccs plans, calling for clarity on government support — now "stands ready to progress [its] £2bn investment programme and deliver this critical project for the UK by 2030," chief executive Will Gardiner said today.

The UK government plans to use a dual contracts for difference (CfD) business model to support Beccs. The model combines a CfD for low-carbon electricity generation and one for carbon captured. The policy has not been finalised, and the government said today it will continue development and to engage with interested parties. The biomass strategy, expected by the end of June, will set out sustainability considerations for Beccs, it said.

By Georgia Gratton

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24/12/31

California H2 fueling deployment falls behind target

Houston, 31 December (Argus) — California this year fell even further behind ambitious goals set for fuel-cell electric vehicle (FCEV) deployment, beset by, among other factors, permitting delays, the loss of planned refueling locations and unreliable hydrogen supplies. Executive Order B-48-18 established in 2018 a goal of 200 hydrogen fueling stations by 2025. The network is now projected to reach 129 stations by 2030, a longer timeline than forecast last year, the California Air Resources Board (CARB) said in its 2024 annual hydrogen evaluation. As of July, hydrogen fueling stations fell by four from 2023 to 62. Four new stations opened, including two in Oakland, one in Orange County, and one in Riverside, but those gains were offset by the permanent closure of seven stations owned by Shell. Of the 62 stations, some were listed as temporarily out-of-order or available by reservation only. "Progress has proven slow and not kept pace with prior near-term projections," the report said. California has earmarked billions of dollars to spur the development of a zero-emissions vehicle network, mandating that 100pc of all new car and light truck sales by 2035 are electric. Most of the funding for building hydrogen infrastructure is administered through the Clean Transportation Program (CTP) and the Low Carbon Fuel Standard (LCFS) program. Assembly Bill 126 directs the state's energy commission to allocate at least 15pc of CTP base funds per year for hydrogen infrastructure, resulting in $15mn set aside for the year 2024-2025. While the development of stations has always faced challenges, the last year was more difficult than most, CARB said in its report. Stations, especially in Southern California, have experienced supply interruptions as the cost of producing hydrogen has risen. As station reliability has fallen, so too has demand for FCEV, with auto manufacturers reporting historically low sales in a CARB survey and a slower pace of growth going forward than previously expected. Updated on-road vehicle projections for 2030 is 20,500 FCEVs compared with a previously reported estimate of 62,600 on-road FCEVs for 2029. By Jasmina Kelemen Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US coal supply may tighten

24/12/31

Viewpoint: US coal supply may tighten

Houston, 31 December (Argus) — More US coal production cuts may be on the horizon, setting up thermal coal supply to potentially be lower than demand starting in late 2025. US coal producers have been scaling back mining operations since at least mid-2023 in response to lackluster demand. Market participants are continuing to contend with elevated power plant inventories following relatively mild winters and more competitive natural gas prices. Some producers are signaling more production cuts are coming in the next few months. As a result, the US Energy Information Administration (EIA) recently forecast the country's coal output in 2025 would fall by 7.2pc from this year to 472.3mn short tons (428.5mn metric tonnes), the lowest level in agency data going back to 1949. But US coal-fired generation and coal consumption is expected to grow modestly next year, to 643.7bn kWh and 409.4mn st, respectively, from 641.6bn kWh and 406mn st in 2024, because of greater electricity and industrial demand. Coal consumption for the electric power sector alone is expected to rise to 371.5mn st from an estimated 369.4mn st in 2024, EIA data show. Generators are expected to draw from their existing coal inventories for the majority of the year to meet the slightly higher electricity demand, potentially bringing power plant stockpiles down to more normal levels. Coal producers also are expected to have less inventory at mines and loadout facilities as volumes that had been deferred to 2025 are delivered. If the inventory withdrawals and expected slight increase in domestic consumption are coupled with higher export market prices and demand, "there could be an impetus for a slight ramp-up in domestic production, but currently, that prospect does not appear to be visibly on the horizon", EIA chief economist Jonathan Church said. For example, Argus assessments for calendar year 2025 API 2 coal swaps averaged $112.85/t from 1-24 December, compared with $104.19/t for all of December last year. The response from coal producers to any improvement in demand could be uneven, which could constrict competition and boost prices. While larger producers with longwall mining equipment, primarily in northern Appalachia and the Illinois basin, can somewhat efficiently resume or increase production, other companies may struggle to ramp up operations. Producers also may not have the financial support to increase coal output. A number of market participants expect smaller producers with higher-cost operations to be forced out of business as major banks continue to pull back on lending money to coal mining companies. In the nearer term, recent or planned coal mine closures could further limit supply. Alliance Resource Partners said in November that it intends to retire its central Appalachian coal-producing MC Mining complex in Kentucky, and the company has already cut operations to two of its four production units. Earlier in 2024, American Consolidated Natural Resources closed its Pride Mine in western Kentucky and Hallador Energy idled two small Indiana mines in February. Other producers have scaled back operations but kept mines open. Coal miners worked an average 45.5 hours/wk in October when not adjusted for seasonal factors, preliminary figures from the US Labor Department show. A year earlier, coal miners averaged 48.3 hours/wk. Producers also have to contend with an uncertain outlook beyond 2025, including an expected shift in environmental policies under president-elect Donald Trump, how new data centers will affect electricity demand, and timelines for installing new generation and transmission upgrades. Alliant Energy, Vistra Energy, Duke Energy and Louisville Gas & Electric and Kentucky Utilities are among utilities that recently announced plans to potentially delay retiring coal-fired generating units or plans to remodel coal units to co-fired natural gas and coal to try to meet load growth projections for the next few years. This could keep coal-fired generation and demand at least somewhat stable, but it may not provid long-term support. "To have increased coal demand, you would have to have load growth outpacing new supply," said Robert Godby, associate professor in the economics department at the University of Wyoming. He and others expect new renewable generation and transmission projects to eventually accommodate projected electricity demand growth. Increased load growth will be "at best just a reprieve from the ongoing downward trend in coal production and coal demand", Godby said. As such, producers may continue to try to limit output in 2025, which could partially raise domestic prices from current levels that straddle the line of profitability for many coal mining companies. But the increases will likely be modest as alternative energy sources are expected to continue to suppress demand for coal generation. By Anna Harmon Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Power demand could bolster RGGI allowances

24/12/31

Viewpoint: Power demand could bolster RGGI allowances

Houston, 31 December (Argus) — Regional Greenhouse Gas Initiative (RGGI) CO2 allowances in 2025 could get a boost from a projected increase in electricity demand, despite uncertainty over the RGGI states' ongoing program review. Allowance prices hit record highs this past year, particularly during the summer as high temperatures raised expectations for emissions, increasing compliance demand. The first three auctions of 2024 cleared at record levels, draining the cost containment reserve (CCR) — a mechanism where additional allowances are released to temper rising prices — during the March auction . Prices followed suit in the secondary market, reaching multiple all-time highs before peaking on 20 August, with Argus assessing December 2024 and prompt-month allowances at $27.82/short ton (st) and $27.31/st, respectively. The increases have been fueled by anticipated growth in electricity demand as states work to implement policies promoting electrification in the transportation, industrial and heating sectors. In New England alone, peak power demand is forecast to double from 27,000MW to 55,000MW by 2050, according to an Acadia Center report . But the biggest source of this demand — and the steady climb in RGGI allowance prices since late-2023 — is the rapid expansion of data centers, according to University of Virginia professor William Shobe, who studies emissions market and auction design. New CO2-emitting sources such as natural gas-fired plants must factor rising allowance prices into the future cost of electricity in the long-run, Shobe said. As prices rise, other cleaner sources of energy, such as offshore wind and small modular reactors, will become more competitive, he said. Review the review The member states of RGGI launched a review of the program in February 2021. As power demand creates a potential for a bullish RGGI market, the review remains a source of uncertainty for participants and volatility in the secondary market. The program review includes considerations for a more ambitious emissions cap plan beyond 2030. But it has faced a number of delays and was originally scheduled to wrap up last year . Member states have provided few updates on the status and timeline of the review, leaving participants and environmental groups alike on tenterhooks over how a finalized program review — and with it, an updated emissions cap plan — will affect the future supply of allowances. Participants "are always thinking about future scarcity", said Shobe. "The more information we can give them about the future path of scarcity (of allowances) now, the more efficient their own behavior can be." The latest updates were released in September. They included an emissions cap plan that combined two previously floated proposals where the allowance budget starts at about 70mn st, declining at a rate consistent with a zero-by-2035 goal from 2027-2033 and a lower rate consistent with a zero-by-2040 goal from 2033-2037. Member states are also considering adding a second CCR and eliminating the emissions containment reserve (ECR), a market mechanism designed to respond to falling prices by withholding allowances. The review is planned to end in early 2025. A draft rule with additional modeling was to be released in the fall, but there have been no updates regarding another change in timeline. RGGI has not responded to requests for comment. States in limbo The status of Virginia — which left RGGI in 2023 — and Pennsylvania as potential members is another point of uncertainty as those states' participation are under legal scrutiny in their respective courts. Virginia's Floyd County Circuit Court in November ruled that regulation enabling the state's exit from RGGI was unlawful since it was enacted without legislative approval. Governor Glen Youngkin's (R) administration intends to appeal to the Supreme Court of Virginia sometime in 2025, but has declined to specify when. While it is unlikely Virginia will rejoin RGGI in the interim, its participation would increase demand for allowances and put an "upward pressure on price", Shobe said. Much of this demand would be fueled by data center expansion, as northern Virginia is the largest market for data centers in the world, with 25pc of all reported data center operational capacity in the Americas and 13pc globally, according to a report by a state legislative commission. The Supreme Court of Pennsylvania is also reviewing a lower-court decision striking down CO2 trading regulation allowing the state to participate in RGGI. Governor Josh Shapiro (D) has reluctantly defended Pennsylvania's membership in the program as an issue of preserving executive authority, and Republican state lawmakers have been attempting to revive legislation that would cement the state's exit from RGGI. The state's high court could issue a decision sometime in 2025. But Governor Shapiro also proposed a state-specific power plant CO2 cap-and-trade program earlier this year — another development participants should keep an eye on. By Ida Balakrishna Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US Supreme Court tees up more energy cases

24/12/31

Viewpoint: US Supreme Court tees up more energy cases

Washington, 31 December (Argus) — The US Supreme Court is on track for another term that could significantly affect the energy sector, with rulings anticipated in the new year that could narrow environmental reviews and challenge California's authority to set its own tailpipe standards. The Supreme Court earlier this month held arguments in Seven County Infrastructure Coalition v Eagle County, Colorado , a case in which the justices are being asked to decide whether federal rail regulators adequately studied the environmental effects of a proposed 88-mile railway that would transport 80,000 b/d of crude. A lower court last year found the review, prepared under the National Environmental Policy Act (NEPA), should have analyzed how building the project would affect drilling and refining. Business groups want the Supreme Court to issue an expansive ruling that would limit NEPA reviews only to "proximate" effects, such as how rail traffic could affect nearby wildlife, rather than reviewing distance effects. The court recently agreed to hear a separate case that could restrict California's unique authority under the Clean Air Act to issue its own greenhouse gas regulations for newly sold cars and pickup trucks that are more stringent than federal standards. Oil refiners and biofuel producers in that case, Diamond Alternative Energy v EPA , say they should have "standing" to advance a lawsuit challenging those standards — even though they could now show prevailing in the case would change fuel demand — based on the alleged "coercive and predictable effects of regulation on third parties". These two cases, likely to be decided by the end of June, follow on the heels of the court's blockbuster decision in June overturning the decades-old "Chevron deference", a foundation for administration law that had given federal agencies greater flexibility when writing regulations. Last term, the court also limited agency enforcement powers and halted a rule targeting cross-state air pollution sources. This term's cases are unlikely to have as far-reaching consequences for the energy sector as overturning Chevron. But industry officials hope the two pending cases will provide clarity on issues that have been problematic for developers, including the scope of federal environmental reviews and the ability of industry to win legal "standing" to bring lawsuits. Two other cases could have significant effects for the oil sector, if the court agrees to consider them at a conference set for 10 January. Utah has a pending complaint before the court designed to force the US to dispose of 18.5mn acres of "unappropriated" federal land in the state, including oil-producing acreage. Utah argues that indefinitely retaining the land — which covers about a third of Utah — is unconstitutional. In another pending case, Sunoco and other oil companies have asked for a ruling that could halt a series of lawsuits filed against them in state courts for alleged damages from greenhouse gas emissions. President-elect Donald Trump's re-election could create complications for cases pending before the Supreme Court, if the incoming administration adopts new legal positions. Trump plans to nominate John Sauer, who successfully represented Trump in his presidential immunity case, as his solicitor general before the Supreme Court. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Bearish year ahead for NOx markets

24/12/30

Viewpoint: Bearish year ahead for NOx markets

Houston, 30 December (Argus) — The Cross-State Air Pollution Rule (CSAPR) NOx allowance markets will likely face a bearish year in 2025, as the incoming administration of president-elect Donald Trump creates uncertainty over the fate of the latest federal regulation to curb emissions. The US Supreme Court halted implementation of the US Environmental Protection Agency's (EPA) "good neighbor" plan in June with a nationwide stay. This left an already stunted regulation to cut NOx emissions, a precursor to harmful ground-level ozone, obsolete for the foreseeable future. EPA finalized a plan in March 2023 to help downwind states meet the 2015 national air quality standards by setting tighter ozone season NOx caps on power plants covered by CSPAR as well as new limits for industrial facilities in more than 20 upwind states. But by the time the justices issued the stay, the number of covered states had already shrunk by more than half because of lower-court orders pausing implementation in 12 states. Prices for seasonal NOx allowances have flatlined and the market has been illiquid over much of 2024 because of uncertainty over how numerous legal challenges against the good neighbor plan would play out. Argus has assessed Group 2 allowances at $775/short ton (st) and Group 3 allowances at a record low $1,250/st since January. This could change, albeit at a slow pace, because EPA finalized an interim rule in November to comply with the nationwide stay. Power plants that had been covered by the good neighbor plan are now under less-stringent NOx budgets tied to older air quality standards, and the 10 states that had been participating in the Group 3 market prior to the stay are now reshuffled into Group 2 and a separate 12-state "expanded" Group 2 market. All that remains is… uncertainty In the new year, the market will wait to see how the Trump administration will deal with the good neighbor plan and the associated legal challenges in the US Court of Appeals for the DC Circuit and the US Supreme Court. Because of the stay, there is no hurry for the new administration to address the legal woes, and it is unlikely the DC Circuit will soon rule on the legality of EPA's rejection of state ozone reduction plans. The Trump EPA, following precedent of prior administrations, will likely ask the court to pause litigation until it decides whether to continue defending the plan, according to Jeff Holmstead, assistant administrator at the agency under former president George W Bush. The agency will likely revoke the plan at some point and replace it with a rule that is more "modest" and would not significantly affect allowance prices, he said. The EPA under Trump could ultimately decide that upwind states do not significantly contribute to interstate pollution, reversing a determination that has underpinned the good neighbor plan. That could lead to downwind states asking the agency to address specific sources that contribute to their air quality problems, said Carrie Jenks, executive director of Harvard Law School's Environmental and Energy Law Program. The Supreme Court is also hearing a case to decide the proper court venue for Clean Air Act disputes, which involves the good neighbor plan. The Trump administration likely will agree with various states and industry groups that say EPA's rejections of individual state plans are not a "nationally applicable" action and must be litigated in the regional circuit courts, but the Supreme Court is likely to continue the venue case, Jenks said. Oral arguments will likely be held early next year. It is also unclear how Lee Zeldin, Trump's pick to lead EPA will affect the regulation. Zeldin is a moderate, given his history, and will likely "not want to impose significant new burdens on fossil fuel power plants", Holmstead said. Trump's plans to downsize the federal bureaucracy could also affect future rulemakings, according to Jenks. "Nobody really knows what's going to happen," she said. As a result, market activity is likely to remain limited in the coming months as participants await legal and regulatory clarity. In addition, markets are likely to be oversupplied now that power plants are under lighter NOx caps. Most states in the seasonal NOx markets were well below their limits for the 2024 ozone season, despite a 9.2pc increase in cumulative emissions in the expanded Group 2. EPA will also allow some power plants to convert vintage 2021-23 Group 3 allowances to Group 2 or expanded Group 2 allowances, adding to supply. With low demand and a potential oversupply, seasonal NOx allowances could see prices fall . By Ida Balakrishna Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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