Carbon capture and storage: the global state
Carbon Capture and Storage (CCS) will help us to carry on using fossil fuels to generate electricity. Boosted by its inclusion in the Emissions Trading Scheme (ETS), projects such as Vatenfall's Schwarze Pumpe are now in action but its use in abating climate change within the Kyoto protocol is unclear.
The world's newest energy industry, Carbon Capture and Storage (CCS) from coal and gas-fired power stations, is on the cusp of extreme growth. Or is it?
Some would argue that, when the true costs and technological challenges become apparent, CCS may well fade quickly from sight. But who's right?
The CO2 agenda that is driving world energy policy in the 21st century may have sounded the death knell for fossil fuels. Oil, coal and gas dominate the global electricity generation market but their carbon footprint has suddenly made them environmental enemy number one.
Energy use can be roughly divided up into heating and cooling, electricity, and transport fuel. But nearly all the technological environmental progress in the last few decades has been in the production of electricity.
That's why the decarbonisation of electricity generation is now at the top of the agenda. Few doubt that achieving this outcome would involve a radical, rapid switch of generation from fossil fuels to renewables and nuclear which is, in the short-term, not technologically feasible or financially affordable.
Consequently, CCS has become the great hope of those who believe that fossil fuels will continue to have a role in the energy sector.
However, CCS is far from geared up. There are 72 projects in planning or at development stage. It's unlikely that all will come to fruition. To date, only six plants are in operation and, perhaps surprisingly, only one of them, Vattenfall's Schwarze Pumpe in Germany, captures CO2 from coal.
While great emphasis is regularly given to these early plants, one must pay attention to where CCS is not happening in any shape or form, and why. And that's why there has to be some focus on China and India.
China may consume 40 per cent of annual global coal production, but what exists so far in CCS in China is very small scale. Huaneng Beijing cogeneration power plant, which opened in July 2008, captures a mere 3,000 tonnes of carbon each year and uses the captured CO2 for carbonated drinks and dry ice, meaning that it is captured, but not stored. Other work that is promised in China but yet to appear is a plant in Shanxi which will capture CO2 and use it as a fertiliser, while another may pump CO2 into oil deposits to extract the fuel.
In 2007, India burnt less coal than China did in 1971 - no one seriously doubts that India's coal consumption will grow rapidly from such a relatively low base. There are currently no drivers whatsoever towards CCS in India. This might change if CCS were to be included and eligible for permits under the Clean Development Mechanism (CDM) of the Kyoto Protocol, as India is one of the biggest recipients of CDM projects.
As a relatively recent technological development, CCS was not considered for inclusion for the instigation of the Kyoto Protocol's CDM or in the European Union's Emissions Trading Scheme (ETS). Like nuclear power, it was also not a technology that readily found favour with traditional advocates of low carbon energy.
Unlike nuclear power, however, the EU has recently seen fit to include it in the ETS, up to 300 million allowances which makes its financing future much more certain. The same is not true for the CDM of the Kyoto Treaty. It may well be that the successor treaty to Kyoto, the UN Climate Change Conference 2009 in Copenhagen from 7-18 December 2009, seeks to redress this imbalance if they reach an agreement on a successor treaty.
With Matoon in the US, the FutureGen Industrial Alliance underestimated the risk of cost overrun for the deployment of new and untested technology. The US Department of Energy promptly withdrew its support when it was discovered that its percentage share of the projects costs would rise from $620m to $1.33bn, quickly torpedoing the scheme.
In Norway, after spending some NOK 400 million (around $60m) on the project including external studies, Shell and Statoil concluded that Tjeldbergodden, although technically feasible, was not commercially defendable. The projected extra oil volumes that the injected CO2 was meant to provide were deemed to be too low to justify the investment.
Hydrogen Energy (HE) and BP's failure at Peterhead, UK Power Station represents a quite different kind of risk - a change of government policy.
Having already invested $50m in a full-chain CCS scheme well-suited to the UK's conditions, HE was disappointed to learn that instead of the competition to provide CCS going ahead in March 2007, it was postponed to November 2007. It no longer became economic to hold onto the 70 staff, especially as the Department for Business Enterprise & Regulatory Reform changed the rules of the competition. It was now to be a demonstration competition which would be "relevant and transferable to key global markets - particularly in emerging economies". That firmly ruled in coal over gas and land-based sequestration and transport over offshore disposal.
At Kwinana in Western Australia, Hydrogen Energy ran into a major hurdle - the rock formations that had been selected to hold in CO2 were not fully sealable. Absolute certainty of the long-term storage potential for any site is a must and, in this case, it could not be assured which ended the viability of the scheme.
The chief risk appears to be financial followed by fickle government support, whereas the technological and geological risks are relatively low.
Like renewables and nuclear power, CCS is going to need support in some form from governments worldwide. That support may fall short of being in the form of subsidy, but will have to include regulatory and financial frameworks. In the UK, across Europe and further afield, it seems certain that markets alone will simply not be willing or able to risk investment on largely unproven new technology and new thinking. The danger is that market conservatism will default to easier but less carbon positive options - like CCGT gas - without CCS, or on a promise of it at a distant later date through capture ready technology.
All in all, a careful study of the facts suggests that CCS is a new industry that can grow fast from a small base, but with current restrictions on cost, technology and regulation, nothing like as fast as some of its advocates fervently believe.
Dan Lewis is CEO of Future Energy Strategies www.future-es.com [new window] and author of 'The Global State of Carbon Capture and Storage 2009'