Block’s Indicator of Sustainable Growth

by Ray Block

A number of economic studies so far made on carbon capture and storage (CCS) pilot projects in Europe currently show a large and continuing gap in their capacity to capture CO2 at affordable prices.

 

That is not to say that the gap can never be filled without large and continuing subsidies. But that remains to be demonstrated successfully and continuously.

 

It will take well beyond 2015 to demonstrate both the economic and scientific success of the international program of organised carbon sequestration demonstration initiatives.

 

The consultancy, McKinsey thinks the viability of carbon capture and storage won’t be confirmed until 2030. That may be too late in the global clock in terms of keeping greenhouse gases in the atmosphere below 450 parts per million.

 

Environmentalists say the high costs of proving up CCS is a waste of time, delaying the willingness of many countries to adequately subsidise renewable energies, to a point where they can become fully competitive with fossil fuels.

 

By comparison, CCS supporters say that while subsidies will be needed for “early mover” demonstration plants, CCS is expected to “become fully competitive with other low carbon technologies as the industry matures, assuming realistic carbon prices. Indeed, they say, it will be comparable with most renewables, even wind power, in the cost of carbon dioxide avoided.” (Phillipe Paelinck, director of CO2, Alstom.)

 

However, it is hard to dismiss the International Energy Agency, which says that stabilising carbon emissions without CCS is not only “impossible, but raises costs by over 70 per cent.”  IEA forecasts that the share of electricity generated from coal fired plants will rise from 41 per cent now to 44 per cent by 2030.

 

So, that is the dilemma? Is time on the side of CCS? The clock is ticking.

 

The CCS coal fired power plants will be required to demonstrate their capacity to:

Ø      separate and fully capture CO2 from the flue gas associated with the consumption of 1 million metric tons of coal a  year. In then has to be transported by pipelines or tankers safely to government approved sequestration sites, where the gas is injected in deep underground geologic formations, in such a way that the CO2 will remain permanently stored.

Ø      The geological formations include depleted oil and gas reservoirs, un-mineable coal seams, and underground saline formations.

Ø      Geological storage in basalt formations and organic rich shales is also being investigated.

So far, there are a large number of pilot operations proceeding, including around 18 in the European Community, In Salah in Algeria and the Otway Basin in Australia. In addition, there are regional opportunities for CCS projects in the US and China.

 

The European Technology Platform for zero emission fossil fuel power plants (ZEP) unveiled a plan in November 2008 to set up as many as 12 demonstration power plants for CCS, which could be fast tracked, where the demonstration projects were planned and permitted by 2010, built by 2013, and fully operational by 2015.

 

The program which the industry group is lobbying the European Commission for public funds proposes a 9 billion euro plan for testing the viability of CCS in plants above 300 MW in scale. So far, the only new power plant specially designed for carbon capture and storage-is Vattenfall’s tiny 30MW pilot plant opened in 2008 at Schwarze Pumpe, Germany.

 

The aim is for public/ private energy company participation for the overall program to proceed.

 

The EU’s reaction to date has been to set aside only 1.25 billion euros for CCS demonstration, which is a far cry from the 9 billion euros initial ask. The industry group wants to test CCS technologies using a range of different fuel types-coal, gas, biomass co-firing- and possibly in non power industries, such as cement. The aim will be to test also the three primary technologies used in CCS.

 

They comprise Post Combustion, where the CCS can be retrofitted to existing power plants, with amine scrubbers, special membranes or ionic liquids used to pull CO2 out of a mixed set of exhaust gases. Pre Combustion involving gasification, in which liquid or solid fuels are first turned into synthetic natural gas with the CO2 siphoned off. The third process is Oxyfuel, as used at Schwarze Pumpe, where coal is ignited in pure oxygen to produce a stream of CO2 emissions.

 

The economic studies to date involve only pilot demonstration projects, which at this stage of experimentation show the costs of carbon capture to be currently uneconomic. All of the studies were prepared in 2008. They comprise:

 

A French study “Master STEP, Paris, Frontiers in geosciences class March 21 2008” which shows CCS costs at 50 euro per tonne CO2 avoided, against a CO2 market price of 20 euro per tonne. Existing studies suggest 25-40 euro per tonne CO2 in 2020.

 

A Netherlands study July 3 2008 prepared by Clingendael International Energy Program is “CCS: A reality check for the Netherlands.”

 

Conclusions included a broad expectation that the gap between CO2 price and CCS could be closed sometime between 2015 and 2025. However, great uncertainties still exist and additional incentives seem to be needed to get there. Timing depends on many uncertainties and on the envisaged market model. It seems therefore unrealistic to set targets by certain dates.

 

Responsibility for long term storage liability (by a government body) needs to become clear as soon as possible, next to agreed criteria that define safe storage. Active coordination is crucial for timely availability of storage reservoirs, pipelines and large scale CO2 capture.

 

The country on a realistic basis has an estimated storage capacity of 30-35 million tonnes of CO2 for a period of 40 years using onshore and offshore reservoirs. Active coordination is crucial for timely availability of storage reservoirs, pipelines and large scale CO2 capture.

 

The other economic study of 2008 was that made by McKinsey “CCS: Assessing the Economics”. It was based on the first trialling of CCS at the new 30 MW oxyfuel power plant in Vattenfall’s cluster of power plants in Schwarze Pumpe, which opened in August 2008.

 

McKinsey’s director in Stockholm, Tomas Naucler in an interview with EurActiv September 24 2008  said while early demonstration projects will typically have a significantly higher cost of Euro 60-90 per tonne, CCS costs for new coal power installations could come down to E30-45 per tonne of CO2 abated in 2030. The potential then is for CCS to provide around 20 per cent of the total European CO2 abatement potential in 2030.

 

The likely trend in the CCS demonstration program is to go from new power plants of 300 MW to 900 MW. When you triple the scale of operations, a lot of costs come down. The next phase- that of full scale commercial operations can only proceed after a learning curve experience on the carbon capture side, and an increase in cost from CCS storage and transport, as the tonnages of CO2 multiply.

 

In timelines, the base case scenario assumes a long lead time of six to nine years for the demonstration plants, which could be deployed around 2012 to 2015. That gets you to 2023. A more time-aggressive path would see 900 MW plants deployed much earlier.

 

With the USA and China on side in the CCS demonstration program, the McKinsey vision is that “by 2030, we get sound economics in terms of stand alone, commercially viable projects. In the short term, the reference plan would be 60-90 euros per tonne avoided, and there will be an economic gap that needs to be closed in a private-public type of cooperation. The learning curve could come down fast thanks to global deployment.”

 

You can see, 2030 becomes some sort of critical time path, if everything goes well, for much faster action ahead. Otherwise, the global warming consequences could overtake the preparations for avoiding the worst of the outlook ahead.

 

Posted under Carbon Abatement Scheme, Climate Change, Global Warming, Low Carbon Economy, Renewable Energies