The economics of power generation, combined with the need to keep the grid energized under all scenarios, can provide guidance for determining the least costly way to avoid carbon emissions while maintaining grid reliability. The metric that should inform decision-making as to how to best lower carbon emissions is based on the total investment and operating cost per avoided ton of CO2.&nbsp; A recent FutureMetrics white paper compares analytics of two scenarios that provide on-demand dispatchable power: retire coal power plants and replace them with new, natural gas combined-cycle (NGCC) generating stations, or modify existing pulverized coal power plants to use renewable industrial wood pellets as a substitute for coal.&nbsp; When comparing the two scenarios and factoring in the CO2 emissions reduction from each technological solution, the solution that provides significantly higher CO2 reduction at a lower net monetary cost per avoided ton is repurposing existing pulverized coal power plants to run on industrial wood pellets. As governments legislate policy with the goal of reducing carbon emissions, lower-carbon-emitting generation is required. Wind and solar power provide a zero carbon-emitting solution, but also variable, and sometimes zero, power output. If the power grid is to remain reliable constantly, it needs generation sources that can be depended upon at any time to provide, in worst case scenarios, nearly 100 percent of the demand. Because of low natural gas prices and natural gas&rsquo;s lower-carbon emissions versus coal, many utilities are choosing to build new high-efficiency, natural gas combined-cycle plants.&nbsp; This is a relatively easy-to-deploy pathway to lowering carbon emissions while keeping reliable baseload or peaking power on the system.&nbsp; Policymakers and utilities often see natural gas generation as a compromise between coal and the need for reliable on-demand low-carbon power. While natural gas (NG) is a fossil fuel, it offers lower CO2 emissions per MWh than coal. But if CO2 reduction is the primary goal of policy and the utility, the correct decision metric is not simply the capital cost for the plant and operating costs to make power. It should include a recognition of the impact that the project will have on CO2 emissions. Comparing the cost of each scenario with the avoided CO2 emissions realized from using a lower-carbon-emitting fuel yields a decision metric based on both financial and environmental concerns. Calculating the lowest cost per avoided ton of CO2 combines good environmental policy with good business. The alternative to building a new (NGCC) plant is to leverage existing power plants that are designed to efficiently combust pulverized coal (PC).&nbsp; Modern PC power plants can, with easy-to-deploy modifications and additions to the equipment, substitute industrial wood pellets for coal.&nbsp; The carbon reduction from a fully converted pulverized coal power plant using wood pellet fuel versus coal is significantly better than that from a new NGCC plant versus coal, and is the least-costly pathway for achieving the goal of lowering carbon emissions. The conversion scenario results in a 23.1 percent lower cost per ton of CO2 not placed into the atmosphere. Operating costs, due primarily to the higher cost per unit of energy for wood pellet fuel, are higher for the converted plants. That is why government policy with respect to the revenues of the generating entity are essential. Decarbonization policies are necessary to address climate change. The best strategic plans should be broader than only including support for wind and solar generation. If policymakers&rsquo; primary goal is to lower carbon emissions, it makes better economic and environment sense to choose the pathway with the lowest total cost per avoided ton of CO2. That suggests that complimenting any decarbonization policy should be support for converted PC power plants, which will have higher fuel costs. If there is no policy support to compensate the utility for maximizing CO2 reduction via the lowest net cost pathway, NGCC will be favored.&nbsp; As a result, the aggregate quantity of CO2 emitted will be significantly higher, and the total net cost per avoided ton will also be higher. Those outcomes are worse for the environment, and worse economically than the conversion alternative. Converting coal plants to pellets cannot replace all of the on-demand generation fleet. The quantity of industrial wood pellets that could be produced is limited by the sustainability requirements that govern the sourcing of the pellet fuel feedstock. Within sustainability boundaries, there is the potential for many power plants to consider conversion from coal to pellets.&nbsp; But policy mechanisms must compensate generators for higher fuel costs. When comparing NGCC and coal-to-pellet conversions, and factoring in the reduction in CO2 emissions from each technological solution, the solution that provides significantly higher CO2 reduction at a lower net monetary cost to society per ton avoided is by repurposing existing PC power plants to run on industrial wood pellets. Author: William Strauss President, FutureMetrics William.strauss@futuremetrics.com 207-824-6702&nbsp;

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The economics of power generation, combined with the need to keep the grid energized under all scenarios, can provide guidance for determining the least costly way to avoid carbon emissions while maintaining grid reliability.

Maximizing Decarbonization, Maintaining Grid Reliability

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