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Potential Black Hills Energy transition to carbon capture very expensive for customers

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Black Hills Corporation

A Wyoming electricity provider is potentially reducing its carbon footprint from two of its coal fired plants as part of a requirement of state law, however, the provider says the transition could prove complicated and expensive for customers.

Black Hills Energy laid out preliminary plans in a Wyoming Public Service Commission meeting. The company has to comply with a 2020 state law that requires public utilities to implement some carbon capture technology at coal-fired plants – Black Hills Energy has two plants in Wyoming.

Carbon capture supposedly helps remove climate-warming gasses from production and the atmosphere. Proponents of the technology see it as a solution to meeting climate change goals and keeping the coal industry viable.

But Kyra Coyle, the director of regulatory and finance for Black Hills Energy, said in reality, the transition could come at a huge cost to some Black Hill’s customers.

“A typical small general service customer would see [an increase of] about a $103.97 per month to their average bill,” she said to commissioners.

The current average monthly bill for similar customers is $107.73. The commission capped the rate increase at two percent, which would prevent the $100 increase, however, it could extend the length of time that the utility charges the increase, perhaps even longer than the lifetime of the coal plants.

Coyle said the company supports carbon capture installation, but only if it makes economic sense. According to the company’s application, the project will likely cost two to three times the original price of the coal plants. For example, the company’s Powder River Basin plant, Neil Simpson II, cost $118.9 million to construct and adding the carbon capture technology would cost $474.8 million.

“The ability to monetize the carbon and ensure the 45Q tax credits are fully qualified for, and when that becomes really economic for customers we’re fully supportive of that,” Coyle said. “We feel like we’re not quite there yet.”

Coyle is referring to the tax credits that were increased as part of the Inflation Reduction Act, which Congress passed in August. The credits incentivize the use of carbon capture by increasing the credit from $50 per tonne of carbon captured and stored to up to $85 per tonne. However, Coyle said the standards are high to qualify for the credit, and if the company falls short they could be responsible for paying back the credit, a process known as “recaptured.”

“So it's quite a process to go through to ensure complete control of the sequestration of carbon or the end use of carbon through the timeframe,” she said. “And if any, if it leaks at all within a three year time period. It's all recaptured.”

Another concern Coyle pointed out is the reliability of Black Hills Energy’s power when using carbon capture. The technology puts a high “parasitic load” on plants, meaning it requires a lot of extra energy that would take away from electricity available to customers. Coyle said this could also raise costs and likely mean building additional sources of electrical energy.

“When you start to install carbon capture, not only does the cost of that electricity go up pretty exorbitantly in the environment we’re in, it also reduces the amount of reliable energy you can get from those facilities,” Coyle said. “So you need to go and replace that capacity and that reliable energy needs with a different generation asset.”

An alternate plan the company proposed in its application is to convert one of the plants to natural gas.

“The low cost, best resource and option for the Neil Simpson II unit was to be converted to natural gas from coal,” she said.

According to the company, this would keep rate increases at a minimum, while also still helping with climate goals.

The commission will deliberate the plans in a couple weeks. Additionally, a similar hearing will be held for PacifiCorp, Wyoming’s other electricity provider, on Oct. 24 and 25.

Caitlin Tan is the Energy and Natural Resources reporter based in Sublette County, Wyoming. Since graduating from the University of Wyoming in 2017, she’s reported on salmon in Alaska, folkways in Appalachia and helped produce 'All Things Considered' in Washington D.C. She formerly co-hosted the podcast ‘Inside Appalachia.' You can typically find her outside in the mountains with her two dogs.
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