NRG Energy (NYSE: NRG) Saves Coal
+Alternative Energy Investments
As our government tries to kill coal in the U.S., one project in development is trying to save it.
NRG Energy (NYSE: NRG) and Japanese company JX Nippon Oil & Gas Exploration have started a joint venture called the Petra Nova Carbon Capture Project. The goal of the project is to capture 90% of the carbon emitted from NRG's 240 megawatt WA Parish coal plant.
Now before I go any further let me be clear about one thing: even though this involves carbon capture and storage which can be expensive and – at times – suspect, it will have a broad reach across the U.S. energy industry.
For one, it could help save coal in the U.S. which, as you'll see below, is on its way out, and it could also help improve oil recovery in shale formations in a big way.
The chart above shows the projections made by the EIA about the reduction of coal in U.S. electric generation. And as you can see, the plan is to cut coal in half by 2035. That's why the recent rules against coal fired power plants are causing such a stir.
The EPA is effectively changing the entire grid to reduce carbon dioxide emissions.
And whether you believe carbon dioxide is a pollutant or not, this is happening and investors should prepare themselves.
The Petra Nova Carbon Capture project has us excited at Energy and Capital because it is a project that can silence environmentalists, keep coal companies (and the jobs they create) relevant, and enhance oil recovery for drillers all over the U.S.
The project will use carbon capture technology engineered by Mitsubishi Heavy Industries and Kansai Electric Power that uses a solvent to absorb carbon dioxide and then later separates the solvent and ships the carbon via pipeline to an oil field.
All told, the process can remove 90% of the possible carbon emissions from a coal plant. And in this case that would mean 1.6 million tons of carbon per year.
Of course this has been tried before. If you remember a few years ago, Chinese company Sinopec had an engineering contract with Summit Power Group in Texas to capture and store their carbon dioxide.
Of course, a big detractor for these projects, as with renewable energy, is that they are very expensive. The Petra Nova Project will require $1 billion in up front costs.
That's not to mention that the technology uses 45 megawatts of electricity to scrub the coal from the plant's exhaust.
But this project will sell the captured carbon to oil producers who can inject it into an oil well to enhance recovery. One of the leaders of the project said it should enhance oil recovery from 500 barrels per day to 15,000 barrels per day where it's used.
And there could certainly be some financial benefits once the initial investment has paid off...
Keep an eye out for similar projects, especially as the next phase of our oil boom kicks into high gear. As I've often mentioned, only the most efficient players that survive.
Expect companies to start employing the technology as it becomes more profitable. In fact, I don't think it's a coincidence that we're seeing more of these projects, considering how Occidental Petroleum was able to use enhanced oil recovery to make up 74% of their production in the Permian, and wanted their share of profits from carbon capture technology.
There's even a chance that we won't see the death of coal so soon if these projects pan out.
Until next time,