Part 3: The economic cost of CCS
Despite 15 years of advocacy by the fossil fuel industry incumbents, 10 years after a lengthy Special Report by the Intergovernmental Panel on Climate Change (IPCC) highlighting the many technical opportunities and economic benefits of “low-carbon” CCS, there are still only thirteen CCS projects worldwide, using CO2 for commercial use of enhanced oil exploration and recvovery (EOR) and in the power sector. Overall CCS projects store about 27 mio tons CO2 per year.
That isn’t a lot, and it accounts for less than 0.1 per cent of all energy-related CO2 emissions. But worse, according to the International Energy Agency (IEA), only eight projects, with an estimated emission reduction of about 6 mio tons CO2, have undergone an independent monitoring review which is less than 0.02 per cent of the CO2 emitted by all fossil fuel products.
Though the global fossil fuel-sponsored CCS Institute expects another 30 or so CCS projects to become operational in the next few years, the estimated CO2 captured and stored of all these projects would equal about 70 mio t CO2 annually.
This is far less than what the IEA suggests is needed for a viable CCS future in a decarbonised energy sector. The IEA proposed that CCS in the power sector should be able to avoid up to 1 billion tons of CO2 per year by 2030. The verified 6 mio tons of stored CO2 today are about 0.6 per cent of that amount. That is a rather miserable record for a large and rich fossil fuel producing industry that had at least a decade to showcase the effectiveness of that technology.
They are not investing in CCS because they do not believe in the economic viability of the technology. So why then should governments do that? The fossil fuel industry keeps on demanding public subsidies for CCS, not because they are cash-stripped newcomers or entrepreneurial actors on the energy market. No, it is because it is expensive.
That is why the coal industry argues that governments should remain “technology-neutral” and give CCS the same support as renewables received in last 10 years. This, in principal, might be a solid argument for a functioning energy market but is bogus in practice.
Firstly, support for renewables has resulted in large manufacturing cost reductions of 60 per cent to 80 per cent for wind and solar since around 2010. And secondly, the coal industry had received many times more “subsidies” in the form of non-accounted-for externalities such as air pollution and global warming. If the affected industry believes that coal CCS contributes to a zero-carbon economy, it’s up to them to finance that and foremost pay back the burden they posed illegitimately on our global commons.
But they don’t and won’t – at least not in the scale potentially required.
The present economics of CCS with coal is disastrous and will likely destroy this silver lining for the industry to become “carbon-free” and part of decarbonisation. Based on a recent IEA report (Energy and Climate Change, June 2015), the 2014 CCS retrofit of the “Alaska” coal plant in Canada costed around $US 6,000 per kilowatt capacity. This does not include the original capacity investments, nor CO2 operational, transport and storage costs.
According to the IPCC those might add 30 per cent of all plant costs. Similarly, according to the same IEA source, the first CCS-equipped new coal plant in the US, the “Kemper Project”, is estimated to cost $US 9,500 per kilowatt. The IEA further assumes that “strong deployment of CCS” from now on will bring costs down to $US 4,000 per kilowatt by 2040. By 2040! And both institutions, the IEA and the IPCC, are usually supportive of CCS.
Those coal CCS costs must be compared to today’s cost of renewables in US and elsewhere. In South India, another coal-rich country where the coal industry is considering “clean coal”, the new utility scale solar plant in Cochin is suggested to cost $US 800 per kilowatt capacity. In the US, present utility solar and onshore wind power cost about $US 1,500 per kilowatt as the US-based Lazard consultancy showed a year ago (Levelised Costs of Energy, version 8.0).
The International Renewable Energy Agency (IRENA) showed in 2014 that in increasingly more regions of the world, solar and wind power costs of electricity over lifetime of projects are already in the middle to the lower end of the average fossil fuel electricity costs. In developing countries like South Africa and Morocco, real costs per electricity generation for today’s solar and particularly wind power plants are considerably cheaper than those for conventional coal. With CCS the difference would be much larger.
Even when taking account of the ‘variability’ of weather-dependent renewables, lower electricity load factors and assuming a major investment for electricity storage in future to accommodate large shares of variable power in any given economy, the generation cost per kilowatt-hour over a lifetime is considerably lower today in new renewables plants than those associated with coal CCS in 2040.
In addition, from an economic point of view, there is growing evidence that in a carbon-constrained society, particularly after Paris, it is cheaper to close coal plants well ahead of retirement age and replace the power needs with clean renewables rather than retrofitting the plant for its remaining 15 to 25 years or so with CCS equipment.
There are many smarter ways to burn money than investing in “clean coal” and coal CCS.
The World Coal Institute suggests repeatedly that the $US 2 trillion spend on renewables in the last decade were government-sponsored “subsidies” and biased to only a small set of technologies and coal should receive the same support. Wrong. Those were not “subsidies” but investments by all actors, utilities, developers and consumers alike.
Wind and solar dramatically reduced production costs by between 60 per cent to 80 per cent in the last six years – which we cannot say about coal, with or without CCS. For the last 15 years, we have instead heard about how “wonderful” and cheap coal CCS might become. But nothing happened. Rather, the coal industry was busy fighting climate change science, funding sceptics and otherwise begging for public CCS financing while also opposing mandatory CCS for their operations what some “friends” of the coal industry proposed.
But they keep on burning bridges.
In a rare moment of enlightment, Brian Ricketts, secretary-general of Eurocoal said in a memo to his members and the media after the approval of the Paris Agreement that the coal industry will be “….hated and vilified in the same way that slave-traders were once hated and vilified”. Well, if so, then I have no arguments anymore.
So in sum, CCS for coal power is not an economically viable nor environmentally-friendly option for steeply reducing carbon pollution and should not be part of any planning in the future.
Dr Stephan Singer is WWF International’s director for global energy policy. firstname.lastname@example.org
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