Wyoming’s top utility regulator has placed carbon capture at the top of her agenda as increasingly aggressive state clean energy goals around the country threaten the economy of the country’s largest coal producing state.
Regulators should ask “tough questions about carbon capture” when faced with potentially closing a coal-fired plant, Wyoming Public Service Commission (PSC) Chair Kara Fornstrom said at the National Association of Regulatory Utility Commissioners (NARUC) conference in November. But in order to encourage utility investment in the technology, vertically integrated utilities need the opportunity to generate revenue outside their rate base, she said.
The state is “furiously working” to ease some of the pressure on its own coal sector, she told Utility Dive, including through research in carbon capture sequestration and utilization. Other coal-reliant communities have been eyeing the technology as a potential respite as well, most recently in New Mexico.
Pressure for climate action coupled with competitive prices for wind, solar and natural gas has made many states move from coal-fired power quicker than expected, and for a state that supplies 40% of the country’s coal to 29 states, that evolution is a threat.
“All those coal units that are being supplied by Wyoming coal are subject to those state policies,” Fornstrom told Utility Dive. That puts her state in a uniquely vulnerable position as the energy sector rapidly transitions away from coal, she said.
Vistra Energy in June announced plans to shut down four coal plants in Illinois totaling over 2 GW of capacity — and that coal is entirely supplied by the Powder River Basin in Wyoming. “Just that one action significantly impacts what’s happening in our mining sector,” she said.
Wyoming’s reliance on other state and market policy actions as a major fuel supplier is part of the reason she was one of five state regulators to press the Federal Energy Regulatory Commission to take action on a resilience docket opened in response to FERC’s rejection of a Department of Energy coal and nuclear bailout, she said.
The effort was coordinated by the American Coalition for Clean Coal Electricity, which asked coal-dependent states to write letters to the commission expressing concern over retiring baseload power, though the question of how those retirements would impact grid resilience had largely been largely kicked over to grid operators
Wyoming is outside of the wholesale market structure run by independent system operators and regional transmission operators organizations, but its unique position as the country’s largest coal supplier makes impacts to baseload power across the country a concern, she said.
“We didn’t ask for a specific result [from FERC] … I just have a fundamental belief that the various attributes of generation resources need to be properly valued.”
The case for carbon capture
Vertically integrated utilities have no real motivation to invest in carbon capture, because it hasn’t reached commercial scale. Active projects involve significant federal funding and utilities are often wary to get involved because they won’t get regulatory approval to charge customers for the costs incurred by the nascent technology.
The majority owner and operator of the San Juan plant last week took a hard stand against using the technology to prolong the life of its 940 MW coal-fired plant, citing a potential $1.3 billion increase in costs if the plant were retrofitted with carbon capture, though it’s not opposed to the technology as a concept. The risks seem to outweigh the benefits, particularly as cheaper options, such as wind, solar and natural gas remain practical, according to the Public Service Co. of New Mexico.
That broader sentiment can be frustrating for a state like Wyoming that has arguably the most to gain, as well as lose, on carbon solutions that keep coal viable.
“As I look across the landscape, utilities seem at this point somewhat reluctant to” make investments in carbon capture, said Fornstrom. “I spend a lot of time thinking about why that is.”
After the failure of Southern Company’s Kemper carbon capture project that went $4 billion over budget before ceasing work in 2017, “regulators aren’t going to allow these big ticket items” into the rate base, and utilities have no motivation to look beyond that, she said. And that’s where regulators need to allow utilities to be “creative” with their revenue streams, by allowing separate profits from the sale of captured carbon through enhanced oil recovery and through utilization in construction, which in turn could be used to reduce rates, she said.
From a regulatory perspective, “it’s really just trying to challenge the utilities to think differently about how they make money.”
In Wyoming, the legislature last year expanded the PSC’s ratemaking authority, allowing utilities to serve their blockchain customers without putting generation investments that might be used exclusively by those customers into their general ratebase. Utilities bear the risk of the investment, but the ultimate cost or profit isn’t calculated into their final return on equity.
“It’s a strong policy message that utilities can do business outside of rate base for these customers in order to protect existing customers. And I think that concept has relevance and crossover to carbon capture,” she said.