The role of CCS in global climate-change mitigation

Carbon capture and storage (CCS) is a series of technologies and applications which enable the capture of CO2 from large source points, its transport via pipelines and ships and its safe storage in geological formations such as saline aquifers and depleted oil and gas fields. Capture applications can be implemented as part of electricity production, as well as in various industrial sectors. The technologies involved in CO2 capture, transportation and storage already exist and are in use in various industries. There are currently five large integrated CCS installations in the world, each of them capturing and storing in the order of 1 megatonne (Mt) of CO2 per year. None of these five, however, are in the power sector.

A range of technologies will be required to halve current levels of global CO2 emissions by 2050. In the IEA Energy Technology Perspectives 2010 BLUE Map Scenario, CCS will contribute around one-fifth of total emissions reductions in 2050, representing some 10 gigatonnes (Gt) of CO2 captured and stored in 2050, and a total of approximately 140 Gt over the next four decades. While in the power sector there are other options such as renewable and nuclear energy or fuel switching, in other industries such as cement, iron and steel production, CCS is very often the only way to dramatically cut emissions. According to IEA analysis, while coal-fired power production is the single largest sector where carbon capture could be implemented, the importance of CCS in other industrial sectors is likely to increase over time (IEA, 2010). Non-power CCS applications could make up in the order of 50% of the CO2 captured by 2050. IEA analysis also suggests that without CCS, the total cost of reaching a 450-parts-per-million (ppm) level of CO2 emissions would be significantly higher. CCS is thus a crucial part of the portfolio of technology solutions for meeting global climate goals (see also Azar et al., 2010 and Edenhofer et al., 2010).

Where is CCS today?

There are currently five large CCS installations globally: at Sn0hvit and Sleipner in Norway, in Salah in Algeria, at Rangely in the United States and at Weyburn in Canada. Each of these operations capture and store about 1 Mt of CO2 per year. Four of the projects capture CO2 stripped from high-emissions natural gas processing, while one project captures CO2 from coal-based synthetic natural gas production. Three of these projects store CO2 in saline formations; the other two store CO2 in conjunction with enhanced oil recovery.

Large-scale CCS projects do not yet exist in the power sector. Instead, there are numerous smaller-scale pilot projects across the globe, where CO2 is captured from slipstreams of flue gas. The first large-scale power-sector projects in the hundred-megawatt (MW) range and above are in planning in Europe, North America and China. Many of these projects are currently working to secure sufficient funding and, if successful, could be operational between 2014 and 2016.

Across different regions in the world, post-, pre- and oxy-combustion CO2 capture are considered options for large-scale demonstration of CCS from power generation. To date, no individual capture route or technology can claim a general competitive advantage over other processes. The status of development in large-scale demonstration is therefore described for all capture routes through the illustration of major flagship projects.

Two examples of large-scale post-combustion CCS demonstrations are the Mountaineer project in the United States and the Porte Tolle project in Italy:

► The Mountaineer project in West Virginia, operated by American Electric Power, is planning to capture up to 1.5 Mt of CO 2 per year starting in 2015. Chilled ammonia will be used as a post-combustion capture solvent on a 1 300-MW bituminous coal-fired power plant. The separated CO2 is piped to nearby injection wellheads for storage in a saline formation. The US Department of Energy (US DOE) will share 50% of the project cost, with a limit of up to USD 334 million. The large-scale project is the second phase of a smaller pilot plant's activity, which started in late 2009 on a 20-MW fraction of the power plant's flue gas. This smaller Mountaineer pilot project was the first power-sector project to cover the whole process from capture to storage.

► The Porte Tolle project in Italy aims at capturing up to 1.5 Mt of CO2 per year by retrofitting a 660-MW bituminous coal and biomass-fired power plant with amine-based post-combustion capture by 201 5. The CO2 will be transported by pipeline 150 kilometres and stored offshore in a saline aquifer in the northern Adriatic Sea. The project by the Italian utility company ENEL is one of six European projects that secured co-funding from the European Economic Recovery Plan. This project will also be eligible to apply for funding from the European Union Emissions Trading System's NER-300 (New Entrants Reserve-300, described further in this paper).

Pre-combustion capture is planned on a large scale by several consortia, including the GreenGen project in China and the Hydrogen Energy project in the United States:

► The GreenGen project in Tianjin is under development by the China Huaneng Group, the largest shareholder. Integrated Gasification Combined Cycle (IGCC) technology, primarily based on Chinese technology, is demonstrated at 250 MW in its first step. In a second phase, CCS is planned to be added to the gasification step to capture 1 Mt CO2 per year and use it for enhanced oil recovery. The project is funded by a variety of sources, including the Chinese Ministry of Science and Technology and the Asian Development Bank. Another possible channel of funding could be the Clean Development Mechanism (CDM) under the Kyoto Protocol, although the recent decision that CCS is eligible as a project activity under CDM is subject to the satisfactory resolution of a number of specified issues, including for example monitoring and verification, the use of modelling and long-term liability (UNFCCC, 2010).

► The Hydrogen Energy California project, a joint venture between BP and Rio Tinto, plans pre-combustion CO2 capture from a new 250-MW IGCC plant in Kern County by 2016. The plant would capture and store some 1.8 Mt of CO2 per year. The gasification plant is designed to run on a blend of bituminous coal and petroleum coke. CO2 captured from the power plant will be transported 7 kilometres by pipeline to an oil field. The estimated capital cost for the project is USD 2.3 billion, with an expected contribution of USD 308 million by US DOE.

Plans for large-scale oxy-combustion CO2 capture are illustrated by the Janschwalde project in Germany and the FutureGen project in the United States:

► Based on their existing pilot-scale CO2 capture experience from the Schwarze Pumpe plant that has been capturing CO2 since 2008, the utility company Vattenfall plans a large-scale oxy-combustion capture facility in Janschwalde. In conjunction with a 1 25 MW post-combustion-capture pilot plant, a 250-MW oxy-combustion capture unit is to be installed by 201 5. Up to 1.7 million tonnes of CO2 per year could be captured and stored in saline aquifers; investment costs are estimated at EUR 1.5 billion. The project is one of six European projects that secured co-funding from the European Economic Recovery Plan. This project will also be eligible to apply for funding from NER-300.

► The FutureGen 2.0 project aims at repowering an existing power plant at Meredosia, Illinois, with oxy-combustion for a net power output of 1 39 MW, which would result in 1.3 million tonnes of CO2 captured per year. Operation of the full-scale capture process is planned for 2016. CO2 will be transported by pipeline to a CO2 storage hub for storage in a saline geologic formation. USD 1 billion in Recovery Act funding has been committed to the project.

Cost: the defining factor

Deploying CCS is presently not economical in power generation. The cumulative cost of capture, transportation and storage of CO2 is currently too high for any investment to take place without some form of public support, particularly within the power sector. CCS technology is thus faced with the challenge of lowering its costs in the short to medium term. Other challenges include finding, obtaining permits for, and operating storage sites; building the necessary transport infrastructure; ensuring public acceptance of the technology; and establishing relevant policy and regulatory frameworks.

Since CCS from power generation has not yet been demonstrated on a large scale, cost and performance information is limited to estimates from engineering studies and pilot projects.

Based on recent IEA analysis,1 average cost and performance projections for early commercial CO2 capture from coal-fired power generation are similar across all capture routes: overnight costs of power plants with CO2 capture in OECD regions are on average USD 3 800 per kilowatt (kW), or about 74 % above the cost of a pulverised coal-fired power plant without CO2 capture. Costs of CO2 avoided are estimated to be about USD 55 per tonne if a pulverised-coal power plant without CO2 capture is used as a reference. These costs include net efficiency penalties that are significant for all capture routes, reaching 10%-points for post-and oxy-combustion CO2 capture relative to a pulverised-coal plant without capture, or 8% for pre-combustion CO2 capture relative to an integrated gasification combined-cycle plant. Based on current technological and economic data, no single technology for CO2 capture from coal-fired power generation clearly outperforms the available alternative capture routes.

For natural gas combined-cycle power plants, postcombustion CO2 capture is most often analysed and appears to be the most attractive option for the short term. Costs of CO2 avoided for such plants are on average USD 80 per tonne if a natural gas combined-cycle reference is used, based on overnight costs of USD 1 700 per kW including CO2 capture (82% higher than the reference-plant cost without capture), and average net efficiency penalties of 8%.

Costs for transportation and storage of CO2 have yet to be included in these estimates. These costs are more difficult to generalise, given that they are very site-specific or even unique for every single CCS project. Although a number, albeit small, of large-scale storage operations exist, storage capacities and associated costs still remain subject to significant research in many regions of the world. However, it is widely accepted that capture costs are the most significant expenditures in the CCS chain, and that costs associated with transport and storage are likely to be subsidiary.

Specific costs for pilot plants or new commercial-scale plants can substantially exceed the above-mentioned projections. Even at average CO2 avoidance costs of USD 55 per tonne of CO2, or above for recent commercial units, currently available incentive mechanisms or CO2 prices, where they exist, are still insufficient to stimulate commercial deployment of CCS technology.

The need for enabling policy framework and incentives

Because of the above considerations, CCS will not be deployed in the power sector without a clear set of policies and financial incentives. If capturing CO2 was to be profitable solely on market incentives, an average power price of roughly USD 100 per megawatt hour (MWh) would be required. This sum does not take into account the costs of transport and storage, although they are estimated to be a relatively small share of the total CCS cost.

Incentive mechanisms are obviously needed for the successful deployment of CCS both in the short and long term. Other than in the context of climate-change mitigation, CCS will not serve any energy policy goal. This is important to keep in mind when discussing long-term incentive frameworks for CCS. In the short term, incentive mechanisms are required to initiate a number of first-generation plants, or "large-scale demonstration." With low electricity and CO2 prices, and in the absence of feed-in-type subsidies or other mechanisms, the industry is presently not willing to risk investing in large CCS installations without additional financial incentive. To alleviate some of this first-mover risk, many governments are in the process of putting incentives in place. These are typically "one-off" mechanisms, designed to motivate a small number of large installations for a limited period of time. In most cases, these mechanisms allocate cash funds for additional investment and/or operating costs for 10-15 years. Governments, mostly from OECD countries, have announced public financial support in the amount of USD 25 billion for a number of large-scale demonstration plants (GCCSI, 2011). This funding includes various capital grants, for example the European Union's NER-300 scheme, through which the European Community will make available 300 million emissions allowances from the New Entrants' Reserve under the EU Emissions Trading Directive to finance large-scale demonstration in CCS and innovative renewable energy technologies.

While this development is necessary to get first-mover plants operational, the debate must now address the next phase of projects and long-term incentives. At the basis of this discussion is the recognition that the only driver for CO2 capture in the vast majority of cases is government willingness to reduce CO2 emissions, except in some niche areas such as the chemical and food industries and enhanced hydrocarbon recovery.

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