Carbon Capture and Storage: a Very Expensive Silver Bullet?

Sep 26, 2008 - Datamonitor

Scottish Power recently unveiled plans to liquefy CO2 emissions from its coal fired plant at Longannet, and transport the waste gas to burial rocks beneath the North Sea, which it claims have the potential to store all of Europe's CO2 emissions for the next six hundred years. Although doubts over carbon capture and storage technology remain, these concerns are looking increasingly tenuous.

The case for CCS is quite simple: in the past six years the price of gas has soared from around seventeen pence per therm in 2002 to near seventy, in June 2008. Over the same time period, the political risks associated with Europe's dependence on Russia's gas reserves have also become clear. As such, coal has become an increasingly attractive alternative, not least because Europe (not to mention North America and China) is sitting on massive reserves.

Unfortunately, coal produces significantly more CO2 than natural gas per MWh, when burned in a normal power plant. The European Union has committed to reducing its greenhouse gas emissions by 20%, by the year 2030, presenting an apparent obstacle to adopting coal en masse. However, when burned in a plant using CCS technology, coal emissions are actually less than gas. It is little wonder then that the UK government has offered GBP100m in funding for the first 300 megawatt CCS coal fired plant, or that the European Parliament has suggested CCS should become mandatory by 2025.

Critics point to two question marks which continue to hang over the economics of CCS: transport and storage. The technology to transport CO2 exists and is already being used. The US has been successfully transporting CO2 over distances in excess of 5000km for more than 30 years. The costs associated with such technology are largely dependent on the distances involved - one estimate suggests a 100% increase in distance for a single pipeline will roughly translate into a 10% higher cost per tonne emitted. So although it would clearly be advantageous to construct CCS near coastlines (since much storage will be under the sea), the overall transport uncertainties are fairly limited. Moreover, transport costs will only account for around 12% of overall cost per tonne of carbon captured.

Storage accounts for around 20% of overall CCS costs and thus poses a more serious problem. The costs are essentially a function of two inputs: whether the site is on- or offshore (offshore being around twice as expensive), and how large the storage site is. The process of storing CO2 presents significant opportunities for economies of scale, since CAPEX accounts for 80% of total storage costs. Once established, the operation becomes relatively cheap. Hence, the storage costs for a large field which is capable of receiving gas from two different plants could be up to 30% lower than a one-on-one scenario. Additionally, CO2 could also potentially be used for enhanced oil or gas recovery (re-injection into a field to maintain pressure and thus retrieve more fuel), recouping some of the transport costs. The viability of such schemes is highly dependent on the specific characteristics of individual fields and as such, estimating the precise weight of CO2 storage in the CSS value chain is difficult. However, this uncertainty is not enough to call the whole project into question.

In fact the main obstacles standing in the way of successful development of CCS do not lie in economics but in politics. Perceptions of coal fired CCS stations and even the concept of "clean coal" remain overwhelmingly negative among the public and within political parties. In America, CSS is even less popular than nuclear alternatives. The absence of a legal framework for projects to develop in, particularly in regard to storage, presents a further barrier to attracting investment.

CCS has the potential to radically alter the energy landscape of Europe and indeed the world. The EU will, in all probability not be able to meet greenhouse gas emission targets through renewables and improved efficiency alone, and nuclear solutions will take a long time to come into effect. An aggressive roll-out of CCS units across Europe would bring those ambitions within reach, reduce dependency on overseas reserves and most importantly, reduce cost per unit through economies of scale. Unfortunately, few governments seem ready to make that leap of faith.