TCM
Progress toward carbon capture and storage deployment has been painfully slow
Credit: TCM

Europe started funding research into carbon capture and storage 20 years ago and so far around the world billions have been poured into projects. So why is its progress so slow? Penny Hitchin finds out

Decarbonizing global power supplies to avert significant climate change is a pressing concern. Notwithstanding the growth of renewable and nuclear power and energy efficiency measures, the continued use of fossil fuel is essential to meet energy demand in the decades ahead.

Carbon capture and storage (CCS) is a key plank of the battle to combat climate change. However, investment in demonstration plants, let alone full-scale plants, does not reflect this. Is time running out?

Analysis by the International Energy Agency (IEA) shows CCS as an integral part of any lowest-cost mitigation scenario limiting long-term global average temperature increases to significantly less than 4°C.

The IEA says that by 2050 up to one fifth of mitigation will need to come from CCS operating in the power and industrial sectors. Some 3400 projects will be needed, of which around 100 projects need to be operational by 2020. The technology to capture and store CO2 from fossil fuel plant exists and yet progress towards deployment is painfully slow. Why is this, and will it be turned around?

Recent years have seen upheaval and change in the power industry, brought about by the impact of both shale gas and renewable energy, along with the drop in demand attributable to the economic crisis. In the US, exploitation of shale gas has created a strong price differential in gas between North America and the rest of the world. Coal is now being exported from North America to Europe.

Renewable generation in Europe has been growing, replacing some fossil fuel plant operations. Conventional power generation sources are operating less than had been expected a couple of years ago, substantially due to renewables, although Germany’s decision to close down nuclear generation has run led to an increase in fossil fuel generation there, running counter to the general trend.

The economic crisis has reduced demand for power and led to a downturn in investors’ appetite for risk. The investment climate for developing CCS has been at a virtual standstill since 2008.

Abating CO2 emissions from fossil fuel plants adds at least 25 per cent to the cost of energy generation, so CCS won’t happen if the market is left to its own devices. Political and regulatory initiatives are needed.

Andrew Purvis of the Global CCS Institute told PEi: “Insufficient policy support is a key barrier. While CCS projects are progressing, the pace is well below the level required to make substantial contribution to climate change mitigation. The major impediment to CCS progress is not considered to be technical uncertainties, but, rather, insufficient policy support exacerbated by poor public understanding of the technology.

“Overall, public policy for CCS during the past five years has not succeeded in generating the necessary breadth and depth to the CCS demonstration effort necessary to allow it to play its full part in mitigating the predicted rise in global temperature.”

A range of policy instruments might be used for CCS. These include government funding; investment funding via market mechanisms (e.g., Europe’s NER300); carbon tax; emission-trading systems; feed-in tariffs; certificate systems (portfolio standard) and emission performance standards.

Zero’s December 2013 Policy instruments for large-scale CCS report finds that a mix of support mechanisms is needed to get large-scale deployment of CCS. It says these should be designed to initially give sufficient incentive to make business cases for CCS viable and trigger investments in deployment and innovation, and subsequently to encourage scaled-up CCS deployment.

Viable business model

Alstom’s senior vice president of technology, Charles Soothill, says: “If you don’t have a mechanism to incentivize CCS, it won’t happen.” He discussed results from modelling future energy scenarios using the Global Change Assessment Model (GCAM).

“Our modelling shows that CCS is necessary if society wishes to reduce CO2 emissions. With a CO2 price in place, CCS lowers the baseline cost of electricity by 2050. We need to build plants to develop technology but the CO2 price is simply not high enough at the moment.”

Soothill has studied the effects of different support mechanisms. “We re-ran the model with different incentives – new entrant reserve type grants, feed-in premia; CCS certificates and emissions performance standards. We found feed-in premia very effective: FiTs work very well for solar and wind. In the model even a relatively low level would be very effective in ensuring that the plant ran and would capture CO2. This is essential for the demonstration phase as we need operating experience.”

He believes that CCS certificates would create a market which could potentially cause a price interaction with the European trading mechanism, but thinks EPS certificates can be effective in the future.

“What we found for EPS certificates at 450 gm/kWh [equivalent to a gas plant without CCS] was that such a standard has a powerful fuel switching effect from lignite and coal to gas, and the deployment of CCS is quite limited in this case. At a 225 gm/kWh emissions performance standard, CCS is needed on coal and gas to meet theoretical EPS standards, and would provide a strong incentive to move to CCS.”

He adds: “The message from the modelling is: if you are going to do a standard, don’t do it until the technology is ready and don’t set the level too high, otherwise you get fuel switching, not CCS.”

CCS policy: all hot air?

The EU started funding research into CCS 20 years ago. In March 2007, European governments agreed that 12 CCS demonstration plants of at least 250 MW should receive part-funding to become operational by 2015. That objective has fallen by the wayside.

A key plank of Europe’s binding climate change plans has been the Emissions Trading Scheme (ETS) which placed a price on carbon emissions. The European Commission planned to use income from the ETS to help finance development of CCS demonstrators through its New Entrant Reserve (NER300) competition. The economic crisis has led to a drop in energy demand and a carbon price collapse, and has generally diverted attention away from climate change towards economic recovery, effectively shelving plans for CCS.

The European Energy Recovery Programme (EERP), adopted in 2009, includes €1 billion ($1.3 billion) towards CCS demonstration projects. Six CCS projects (in Germany, Italy, the Netherlands, Poland, Spain and the UK) were selected, but by autumn 2013 three of these had been abandoned and the remaining projects face major uncertainties.

Large-scale CCS requires an infrastructure capable of transporting and storing hundreds of millions of tonnes of CO2 every year. The Zero Emissions Project (ZEP) 2013 report estimates €2.5 billion investment in European CO2 infrastructure is needed by 2020.

Chris Davies MEP, rapporteur on CCS for the European Parliament, says: “The EU is relying entirely on carbon price to provide justification for CCS investment. The collapse of the carbon price means the justification for CCS has gone.

“We have to insist – to make it a legal requirement – that EU governments prepare plans for 2050. Some are not engaging with CCS at all, but CCS can be one of the means of reaching low carbon generation at least cost. In the absence of a carbon price providing the financial and business justification, then member states have to be able to encourage and provide financial support on the equivalent level to that given to renewable energy.”

Luke Warren of the Carbon Capture and Storage association (CCSA) believes that CCS should be eligible for support such as that available for renewables.

He told PEi: “The very ambitious 2030 target has focused most of the investment in Member States into low carbon technology into renewables. This meant that resources were not put into technologies such as CCS. Looking forward, I think it is really important that we have a 2030 energy and climate package that incentivizes CCS investment on an equivalent basis to other immature low carbon energy.”

He is positive about the UK’s Electricity Market Reform (EMR) which is now in place.

“Contracts for Difference (CfD) and FiTs, available for all low carbon technology, including renewables, nuclear and CCS, is the type of mechanism that we will need elsewhere in Europe and in the world if CCS in the power sector is to move forward. “We are very excited about EMR: it is an enduring regime to 2030 and beyond and it is a support mechanism that will drive deployment of the technology.”

The first projects are likely to be fairly expensive, with costs per MWh likely to be close to offshore wind. UK work suggests some big cost reductions could accrue over the next decade. Economies of scale for transportation and storage could bring the unit cost down significantly. Improvements in engineering from building more and larger plants should bring down the cost, and the high cost of capital for first projects should reduce once the technology is proved.

Warren believes there is potential to get cost down close to £100 ($168)/MWh in early 2020s with the potential to drop below this in the mid- to late 2020s. In addition, he sees the potential for revenue from selling CO2 to the oil and gas industry, which could lop £10-20 ($17-34)/MWh off the unit cost.

The White Rose Project, an oxyfuel demonstration CCS power plant proposed for East Yorkshire, is the UK’s flagship project. A consortium of Drax Power, Alstom and BOC has been awarded UK funds for a two-year FEED (front end engineering and design) study.

The project, which is also in the running for funding from the NER300 competition, is a £2 billion ($3 billion) proposal for a new 426 MW coal plant with CCS at Drax. It would also have the potential to co-fire biomass. A pipeline – the Yorkshire Humber CCS Trunkline – for transporting CO2 would be developed to take two million tonnes per year for sequestration below the seabed in a depleted Southern North Sea gas field.

The US picture

The Global CCS Institute’s CCS status report for 2012 shows that the US has the largest number of large-scale integrated CCS schemes under way, with 24 active and planned projects. Neighbouring Canada is also active in CCS. However, in both countries the projects revolve around oil and gas and chemical processing rather than power generation.

Lack of growth in the US economy has impacted on the demand for electricity, slowing the requirement for new capacity. Current US Environmental Protection Agency (EPA) CO2 emissions regulations apply to new coal plants but not to new gas power plants. Shale gas has brought down the price of natural gas and new coal plants are not being built because gas is now cheaper, and unlike new coal plants, gas plants do not have to be fitted with CCS .

Dr Jeff Phillips, manager of advanced fossil generation research & development at EPRI, talked to PEi about the prospects for CCS in the US power generation sector.

“There is a lack of progress because there is no need to add CO2 capture to new gas plants. As long as natural gas prices stay where they are, I don’t see how any developer can justify spending money on CCS. The EPA regulation [on emissions levels for new coal plants] is essentially meaningless because it won’t have any impact. It removes any motivation for putting private money into CCS.”

Unlike in Europe where the Large Plant Combustion Directive (LCPD) led to wholesale closures and modernization of the coal-powered fleet, US emissions regulations do not apply to existing plants. Later this year, the EPA will issue draft regulations on CO2 emissions from existing power plants. Dr Phillips says that “the initial smoke signals suggest that there will be no requirement to retrofit CCS”.

North America’s flagship CCS power project is the Boundary Dam project in Canada. Sask Power’s C$1.24 billion CCS project involves retrofitting a carbon capture system to the coal-fired plant. The captured CO2 will be piped 40 miles for use for enhanced oil recovery (EOR) in a nearby oilfield. Canada’s government awarded a grant for the CO2 capture element of the 120 MW project, which is due to start operating in spring 2014.

Demand from North America’s onshore oil and gas industry means there is an active market for CO2. More than 60 million tonnes is used annually for EOR in the US. Around 20 per cent comes from industrial sources while the remainder is extracted from naturally occurring underground CO2 reservoirs.

There is no incentive to extract CO2 from power plants, but removing it from natural gas may be needed to meet utility specifications. The incremental cost of selling the CO2 is compression and pipeline, while the oil company will pay between $15 and $30 for a tonne of CO2. The rate is insufficient to cover the cost of CCS but it provides an additional revenue stream if CO2 is already being extracted. Unlike in Europe, there is existing infrastructure for the transport of CO2, with a network of pipelines serving onshore oil fields.

Mississippi Power is building a 524 MW integrated gasification combined cycle lignite-fired power station in Kemper County. The plant will include carbon capture and sequestration, which aims to reduce 65 per cent of the facility’s CO2 emissions, making it comparable to a natural gas combined-cycle plant. Captured CO2 will be transported by pipeline for use on EOR projects. The scheme is due to be operational by the end of this year.

The project received $270 million in funding from the US Department of Energy’s (DOE) Clean Coal Power Initiative. It has also received $412 million in investment tax credits from the revenue service. The original investment was projected to be $2.4 billion, but has since been increased to $4 billion.

Looking to the future, Dr Phillips believes there is a lot of scope to get CCS costs down. “When we look at energy consumed by today’s technology, it is about three times the theoretical minimum. There is a lot of room to squeeze that down by improving technologies.”

The DOE has created a National Carbon Centre in Alabama where technologies coming out of labs can be tested under realistic conditions with real coal plants. However, Dr Phillips believes over-stringent EPA regulations on the geological storage of CO2 will block development of demonstrator plants by requiring operators to monitor the sites for 50 years once injection is completed. By contrast, permits for injecting CO2 underground for use in EOR require no such commitment.

Norway's Technology Centre Mongstad
Norway’s Technology Centre Mongstad (TCM) aims to capture 100,000 tonnes of CO2 per year
Credit: TCM

Developments in China

China is the world’s largest consumer of energy and the world’s largest emitter of greenhouse gases. It is also the biggest investor in clean energy, with a strong commitment to addressing climate change.

Pew’s recent report Who’s Winning The Clean Energy Race 2012? estimates that in 2012, China invested $65.1 billion in clean energy, an increase of 20 per cent on 2011.

China’s 12th Five Year Plan for economic growth covering the period 2011-2015 aims for a 7 per cent increase in GDP coupled with the need to de-carbonize its coal-based economy. It flags up the need to develop CCS pilot and demonstration programmes in the thermal power, coal, chemical, cement and steel industries, and to develop capture, enhanced oil recovery (EOR) and storage integrated demonstration projects.

China has a significant focus on capturing carbon for industrial use as well as in storage (CCUS). Such schemes have the potential to offset some costs of CCS projects.

Several CCS demonstrations are planned and underway. China is also involved in CCS projects abroad, including Futuregen and the Texas Clean Energy Project in the US. A significant number of Chinese universities and institutions run CCS research programmes and some of the leading companies are planning demonstration units.

A range of technologies offer scope to decarbonize electricity production: nuclear, wind, solar, CCS, and a suite of energy efficiency measures. However, all need industry investment and government support to help bring them onstream and get costs down. If climate change targets are to be met then CCS must play a part, but this will not happen without policy measures and financial incentives from governments.

Nigel Yaxley of the UK Association of Coal Importers says: “Governments have simply got to get on with it. Anyone who is serious about climate change has simply got to see CCS as essential. Given the amount of coal use, the only practical abatement has to come through CCS. The UK government is probably ahead of other governments in terms of support, but because money is short they have applied the brakes.”

Luke Warren adds: “Longer term, the future has to be bright for CCS. Fossil fuels are forecast to remain central to our electricity generation systems for decades to come. CCS is the only technology which enables that compatible with delivering climate change objectives.

“There is a question mark – especially in Europe – about what will happen in the period out until mid-2020-2030. In part, that will be shaped by discussions in Brussels about future energy and climate change policy. We are potentially in a strong place, especially in UK. It’s ours to throw away.”

The commercial future of CCS is in the hands of politicians.

Penny Hitchin is a freelance writer specializing in energy matters.

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