Last month, carbon capture and storage came in for strong criticism in a report from the Global Warming Policy Foundation (GWPF) entitled ‘The Bottomless Pit’. It should be noted that the GWPF is a UK-based think tank which has gained some notoriety for being openly sceptical of climate change and generally critical of CO2 emission reduction policies. Nevertheless, the new report authored by Edinburgh University economist Prof. Gordon Hughes is an interesting read, and has triggered a small war of words with notable CCS-proponents including Mike Monea of Saskpower (owners of the Boundary Dam CCS plant) and Scottish CCS.
The key conclusions of the report are that coal with CCS is not likely to ever become economically interesting as a low-carbon source of power – either in the developing world or (still less) in developed countries. While it paints a somewhat more positive picture for new gas plant with CCS, these too are thought to be too costly to play a significant role in the next few decades, with the OECD, China, and India turning instead to nuclear, unabated gas, and renewables. There are two main arguments on which these conclusions are largely based. Firstly, that estimates of the potential cost reductions as CCS becomes more widely deployed are far too ambitious. Secondly, that the widespread deployment of intermittent renewables (wind and solar) has seriously damaged the economics of any thermal plant by drastically reducing their operating hours (load factor) to run only around 50% of the time. Both of these points merit further scrutiny.
It is generally assumed that new technologies become cheaper as they progress from early experimental plants to the stage where they are more mass-produced, larger scale, and better understood by operators and investors. The report argues that this cost reduction will be much less and take much longer for CCS than is generally thought. Much of its argument is based on an unfavourable comparison with the now-famous, dramatic cost reductions seen for photovoltaic and (to a lesser extent) wind turbines. These are relatively small, modular technologies which benefit hugely from high unit numbers and the associated potential for mass production methods. It is not clear from the report which studies have tried to claim similar cost reductions based on economies of scale for CCS, and I suspect that few have made this comparison in reality. The most well-known study of CCS costs in the UK is the 2013 study by the government commissioned ‘CCS Cost Reduction Task Force (CRTF)’ which concluded that the cost of electricity of a CCS power plant could decrease from £161/MWh to £94/MWh by 2028. Notably, the largest contributors to these savings were increased scale of shared transport and storage infrastructure, followed by improved project financeability, and with improved engineering and design making up the remainder. The need for a new CO2 transport and storage infrastructure presents a significant hurdle for initial investment in CCS, but if investment risks are appropriate managed by governments, costs for early projects could drop significantly. Future generations of carbon capture plant could then plug into an existing infrastructure at much lower cost and risk. The CRTF estimates may seem ambitious, but both the developers of the UK’s cancelled CCS demonstrations insisted they could have already reached <£100/MWh a second time around, based on their findings from the first attempts. In any case, it would be more helpful if the GWPF report addressed these assessments directly. The report also makes a few glaring errors concerning coal and capture technologies generally, such as the assertion that it is challenging to remove 90% of CO2 from power plant flue gases – apparently based on the lower rates achieved in Boundary Dam’s first year of operation. This plant has since resolved these teething issues to achieve its design target of 90%, and the only other coal plant operating with CCS, Petra Nova in Texas, has managed 94% since starting up in January this year. Indeed, there are no major technical barriers to even going to 98% if necessary, and this issue is not seen as a major concern for the industry. The report also argues that the current largest capture plant (Petra Nova’s 250 MW) would have to be scaled 10 times to meet the scale of typical coal power plant. 1300 MW is about as large as coal units currently get, and 600-800 MW is a more typical size range. Prof. Hughes seems to think a CO2 capture unit should take the flue gases from all the units at a power plant (potentially 2000-3000 MW), but this huge scale is not generally envisaged in the industry, nor taken into account in estimates of future economies of scale. His argument that this unit-based approach would conflict with the desulphurisation units (FGD) which currently share flue gases from several units does not really hold up – FGD can also only go up to around 1000 MW, and are usually separate for each unit. The report also wrongly claims that all Chinese coal plant would require other pollutant controls such as FGD fitted before carbon capture. In fact, China currently has stricter standards for SO2 and NOx emissions than most of the world, and almost all its utility coal fleet has FGD and other controls installed. To come to the second main point, it is incontestable that growing proportions of intermittent wind and solar power in many countries has wreaked havoc with the profitability of many thermal power plants, which are increasingly obliged to run as ‘back up’ rather than baseload. In an open electricity market, a plant’s operating hours are dictated by its running costs (mostly fuel), so inefficient plants or those with more costly fuel can expect to only run when power consumption peaks. Surprisingly, Prof. Hughes devotes some time to pointing out that a gas plant with CCS is expensive to run and will therefore have even less time to cover its costs. The notion that a CCS plant would be expected to compete in an open market with unabated plant is bizarre – of course, some policy mechanism is required to reward and favour dispatch of low-carbon plant, and such measures already exist. In the UK, contracts for difference (CfDs) are used to compensate low-carbon plant such as nuclear, wind, and biomass above the market price of electricity, and would have also been used for the proposed and cancelled CCS demonstration projects. Strangely, the report only addresses these in an appendix, conceding that CfDs could ensure investment but ‘would amount to an abandonment of the principle that power prices should be set in decentralised competitive markets’. That boat has probably sailed, given that a large and growing proportion of the country’s power supply is subsidised in one form or another. It is simply inevitable that encouraging investment in low carbon capacity will require some form of intervention in power markets. The most ‘hands-off’ approach would be to use a carbon price alone, but this may not lead to the best solutions, given that many important technologies need higher levels of support during early stages of development. This principle has been applied to wind and solar, allowing costs to fall dramatically, and could also be applied to CCS. Prof. Hughes clearly disagrees with this strategy and the costs to society involved, but that is a much wider debate. However, it is true that CfDs are essentially aimed at rewarding baseload generation, and any new CCS plants with these contracts would be expected to run as much as possible. This is somewhat at odds with the role many see for CCS (in the UK at least) as ‘mid-merit’ plant which provides cycling back-up to wind power, while nuclear provides a constant baseload. The UK and many other countries currently ensure profitability in this kind of plant through capacity contracts, which pay out regardless of operating hours. As rightly noted by the report, this starts to look less appealing if paying for a costly carbon capture plant to operate for a small amount of time. Unfortunately, there are few other options available for filling this vital role, and all of them are expensive. In future, we may indeed need to turn to new mechanisms to reward flexible, low-carbon generation. Despite its manifestly slow progress, carbon capture is still part of the climate and energy debate because it brings unique value to the herculean task of reaching ambitious decarbonisation targets such as the ‘well below 2áµ’C’ of COP21. As is constantly pointed out by economists, there are many other, lower cost ways to reduce carbon intensity in the short term, but once these low hanging fruit are picked, decarbonisation starts to become much more difficult and expensive. Regardless of advances in renewable power, global coal and gas capacity continues to expand enormously as developing nations industrialise, and fossil fuels are projected to make up the majority of global energy supply for decades. Alongside this, CO2 emissions from industrial processes such as cement and steel manufacture are also growing, with no real abatement options in sight besides CCS. At some point, it will become abundantly clear that humanity must resort to the seemingly drastic measure of storing CO2 in the earth on a large scale. This will also open up unique possibilities for net removal of CO2 from the atmosphere, such as through the capture of CO2 from biomass power plants. However, developing CCS infrastructure is time consuming and investment must start now if it is to be ready in time. This kind of action requires long-sighted policy decisions, not adherence to a short-term path of economic least resistance. Follow the debate here: http://leaderpost.com/opinion/letters/letter-report-critical-of-carbon-capture-and-storage-is-unbalanced-incorrect http://leaderpost.com/opinion/letters/letter-professor-defends-conclusions-on-carbon-capture-and-storage http://www.sccs.org.uk/news/410-carbon-capture-and-storage-is-viable-sccs-op-ed