Wyo. law pushing utilities into carbon capture projects deemed 'not economical'

PacifiCorp is readying a request for proposals to build carbon capture and sequestration projects intended to extend the life of three Wyoming coal plant units, investments that could cost its 147,250 state ratepayers $1 billion per project.

In Wyoming, PacifiCorp and Black Hills Corp., the state's other investor-owned utility, have no choice but to explore carbon capture even though it could send power costs soaring. Wyoming in 2020 adopted the nation's only law requiring that at least 20% of an electric utility's portfolio be made up of coal-fired power plants equipped with carbon capture, utilization and storage, or CCUS, technology by 2030.

The companies hope their requests for proposals will shed light on what is financially and technically possible — or not.

"None of our IRPs have selected CCUS, largely because of cost and performance," PacifiCorp spokesperson David Eskelsen said in an interview, referring to the utility's biennial integrated resource plans. "However, the legislature in Wyoming requires us to do this study and to come up with a cost estimate. If it's within the cost of what the [Public Service Commission allows for], we would do our best to implement it."

Staying under that acceptable cost threshold will be a challenge for any company bidding for the projects. The Wyoming legislature set a 2% cap on rate increases to try to shield homes and businesses from billions in carbon capture costs.

But a 2% rate increase would raise only a fraction of what Black Hills and PacifiCorp say they need to build their projects. Eskelsen said given the shortfalls, the utilities may seek to spread out the recovery of the costs over many decades.

The Wyoming Public Service Commission is holding hearings this month on how the power companies plan to implement the state law. The utilities must issue requests for proposals by the end of December that would be due by the end of March 2023. Those proposals will then be evaluated for feasibility and cost.

Wyoming Republican Gov. Mark Gordon and the state's GOP-dominated legislature have said the carbon capture mandate is necessary to protect the state's fossil fuel-heavy economy and tax base and help position Wyoming as a CCUS leader.

As of June, 4,859 people worked at Wyoming coal mines and another 936 at coal-fired power plants, according to the U.S. Department of Energy's 2022 U.S. Energy & Employment Report. Wyoming produces more coal than any other state, and 73% of its electricity is generated by burning coal.

A $104 monthly bill increase

Black Hills, which serves 44,000 power customers in Cheyenne, Wyo., has estimated that the state's CCUS mandate will raise an average residential bill by $25.34 between 2029 and 2030 to pay for retrofits at its 91-MW Wygen 2 power plant, a 15.6% increase. The estimate includes households in Black Hills' South Dakota and Montana service territories.

A typical commercial customer served by the Wygen plant could see a $40.71 jump in their monthly bills in 2030, while a carbon capture retrofit at the 80-MW Neil Simpson II plant would cause bills for small general service companies to increase by as much as $103.97, the company has told the Wyoming state commission.

But such estimates assume that states beyond Wyoming are willing to saddle their electric customers with costs from those carbon capture projects. If not, Wyoming ratepayers would have to pick up an even larger bill, said Eric Frankowski, executive director of the Western Clean Energy Campaign, who follows the issue for the Colorado-based advocacy group.

"There haven't been any rulings from either South Dakota or Montana in that case yet, but I can imagine that there would be," Frankowski said in an interview. "And then the Wyoming commission has to justify why it's agreeing to stick cost increases that are probably two or three times [higher than current estimates] to customers in Wyoming."

Wyo. ratepayers pick up the bill

PacifiCorp has no plans to ask customers in states like Oregon and Washington to pick up part of a future Wyoming carbon capture tab.

The company's 2021 integrated resource plan "determined that carbon capture, utilization and storage was not economical, and it was therefore not a part of the least cost/risk-adjusted preferred portfolio," Stacy Splittstoesser, PacifiCorp's Wyoming regulatory affairs manager, told the commission in July. "Accordingly, the costs related to CCUS permitting, installation, and ongoing operations and maintenance costs are considered incremental costs incurred to serve Wyoming customers to comply with state policy and would be assigned to Wyoming customers."

PacifiCorp's preliminary estimates showed that capital costs for one "full-scale carbon capture system" will range from $400 million to $1 billion. Its subsidiary Rocky Mountain Power Inc., which serves Wyoming, has already requested a 0.5% customer surcharge to raise money for the bidding process and subsequent analysis, expected to cost up to $2 million.

In addition to carbon capture project costs, new investments would be needed to replace the power that the energy-hungry carbon capture technology would consume, costs that would also be passed on to ratepayers. Black Hills Energy said it would have to add 94 MW of new power generation capacity to make up for such losses.

And then there is the issue of water: coal-fired plants consume a lot of the increasingly scarce resource and even more when equipped with carbon capture equipment.

"The number from PacifiCorp was a 35% to 40% increase in water usage," Shannon Anderson, an attorney for the Powder River Basin Resource Council, said in an interview. "That's substantial for Wyoming."

As they prepare the bid process and analyze their options, Wyoming's utilities must also consider whether their aging coal plants are up to the task.

Both plants that will be part of PacifiCorp's request for proposals — the 2,119-MW Jim Bridger plant's units 3 and 4 and the 755-MW Dave Johnston plant's unit 4 — operated in 2021 with capacity factors, or utilization rates, slightly higher than the nationwide average of 49% for coal-fired plants, according to the U.S. Energy Information Administration.

Black Hills Energy's two power plants had higher capacity factors, although barely high enough to break even for carbon capture, and still short of Wyoming's mandate.

"For CCUS to be economically viable a generating unit would have to run at full capacity except during planned and forced outages, equating to approximately an 85% capacity factor," Emily Wegener, a Rocky Mountain Power attorney, wrote in the company's March application to the PSC to comply with the 2020 state law.

Typically, however, modeling shows that plants with carbon capture and support from federal 45Q tax credits will operate more than they did in the past, Benjamin Longstreth, global carbon capture director for the Clean Air Task Force, said in an email.

In the end, lawsuits from ratepayer groups could render the whole issue moot, some observers say.

"The politicians and decision-makers in Wyoming have to make it seem like they're doing something to protect the state's bread and butter," Frankowski said, "but there's no chance in hell this is ever going to happen."

Only one coal plant in the world operates with carbon capture today, Canada's Boundary Dam. A handful of additional projects are in early development in the U.S. and China, according to the Global CCS Institute.

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