ENGLISH

DANISH

Information about Carbon Capture and Storage - CCS

THE ECONOMICS OF CCS

CCS is expensive. There is no disagreement about that. But how expensive is hard to establish:

In the industry’s “promotional material” these estimates can be found:

- In demonstration projects 60-90 euros per tonne of reduced CO2

- full-scale projects (in 2030) 30-45 euros per tonne of CO2 reduced.

But the first example that is more thoroughly calculated from Mongstad in Norway gives a cost of approx. 230 euros per tonne of CO2 reduced. (Figures from 2009).

In comparison, the price of allowances in the EU ETS was below 5 euros per tonnes of CO2 in the fall of 2013.

The quota price can fluctuate widely, but it must be multiplied many times before CCS can become profitable under market conditions.

One of CCS most obvious weaknesses is in any case the cost.

CCS is not a single technology, but rather a comprehensive set of technical devices like the capture plant, the transport infrastructure, injection facilities and monitoring installations, etc. Each of these requires large investments.

In a climate-economic context, the system’s technological scope is in itself a handicap, because the construction and operational phases all link to a number of costs as well as a number of energy consumptions and associated CO2 emissions.

This inherent contradiction makes it virtually impossible to see how CCS in the longer term could be competitive in a climate-economic sense.

What is meant by the climate-economic efficiency of a particular technology?

The climate-economic efficiency of CCS

The climate-economic efficiency can be expressed in [dollars] per tonne of CO2 reduced. Here, all the costs of a given technology are included. And it must be related to the net CO2 reductions, the technology can deliver.

The lower the cost, the stronger the technology will be from a climate-economical perspective. CCS is in this sense a very weak technology. With respect to CO2 reduction CCS requires both very high capital and operating costs.

How large these costs precisely are is not possible to determine with any certainty today.

There are two reasons for that:

1) There is no market price for full-scale CCS plants

2) The CCS system consists of a large number of heterogeneous components. The composite cost varies dependent of the choices in techniques, fuel type, scale, mode of transport and distance etc.

If you want a true idea of what it will cost to reduce CO2 using CCS at full scale, it is worth looking at the projected but now called off plant at the gas powered Mongstad in Norway. See below.

Cost Chain for a coal-fired CCS plant – an overview

There are costs and CO2 emissions in these link of the chain:

• mining and transport of approx. 40% extra amount of coal,

• construction of CCS plants,

• capture of CO2,

• construction of transport infrastructure,

• transport of captured CO2 (boosting, maintenance, etc.)

• injection and storage of captured CO2,

• ensuring storage

• monitoring and control etc. of storage.

What are the costs for each of these areas?

The cost per tonne of CO2 depends on the size of the plant, the technology used (pre-combustion, post-combustion, oxyfuel), fuel type (coal, gas, oil , biomass and mixtures of these), demand for purity of the CO2 stream, transport, distance between source and storage etc. Taken together this allows for numerous combinations. To get an idea of CCS ‘ climate-economic efficiency, all these costs are calculated in [dollars] and subsequently distributed to the total net reduction of CO2 as a result of the effort.

What is the net reduction?

It is the difference between the CO2 that will be captured in the system and finally stored in the subsurface and the sum of the CO2 emissions that take place in all the steps of the process (including leakages during transport and storage) including CO2 emissions, which occur in connection with the additional energy requirement (about 40 %. See estimates from a variety of sources.) They are the emissions from energy consumption associated with the production and transport of the extra fuel – they should not be confused with the CO2 emissions that occur during the capture at the CCS facility.

These emissions are inevitable with CCS. They obviously need to be charged to the debit side of the account of the system’s overall climate-economic efficiency. It is difficult to say what the total cost of reduction of one tonne CO2 with CCS considering all the variables mentioned above.

It is however not difficult to see that CO2 emissions from all links in the chain must be included and compared with the amount that is finally stored.

A number of suggestions from the IPCC, IEA/OECD , MIT, WRI and McKinsey

(IPCC is the UN’s climate panel; IEA is the International Energy Agency - OECD is the Organisation for Economic Co-operation and Developement; MIT is Massachusetts Institute of Technology; WRI is the World Resources Institute; McKinsey is the management consulting firm.)

A number of reports have given suggestions for cost level: IPCC, IEA/OECD, MIT, WRI and McKinsey. (Links will identify the specific CCS reports. )

All those sources operate with large uncertainties and large intervals, and they account for the effects of different (and not always comparable) developments, they operate with different baseline prices and they are generally – with McKinsey as a clear exception – opaque in terms of the conditions for the calculations.

IPCC (2005) indicates a range of 20-270 USD/tCO2.

The calculation is made in 2005 and includes following statements: “Most modelling as assessed in this report suggests that CCS systems begin to deploy at a significant level when CO2 prices begin to reach approximately 25–30 US$/tCO2.”

IEA (2004) speaks of “likely costs” in the range of 5-50 USD/tCO2 in the capture part, 2-20 USD/tCO2 for transporting the captured CO2 and 2-50 USD/tCO2 for injection and storage. This adds up to a span of 9-120 USD/tCO2.

MIT (2006) reports costs from 48-71.4 USD/tCO2 with a number of different power plant types.

WRI (2008) does not mention figures for CO2 costs, but stresses the likelihood of rising costs for CCS in the future and also the energy companies´ interest in giving deliberately low prices :

“Engineering, procurement, and construction costs for all power plants are currently on the rise. Increasing material input costs (e.g. metals, steel, and cement), as well as labor costs, are pushing construction costs for all power plants higher. Cost estimates vary greatly throughout the industry; much depends on whether capitalized interest and soft costs are included. Many power companies will cite the “overnight cost” of a plant rather than total cost in order to minimize the figure, which is misleading.”

McKinsey (2008) has published a report based on background information and data provided by 50 large companies in the power sector, the oil and gas industry, manufacturers of energy equipment and others with an interest in CCS.

They analyse three categories of CCS projects:

1 ) demonstration projects with typical cost differentials of 60-90 euro/tCO2,

2 ) early commercial CCS projects: 35-50 euro/tCO2 and

3 ) full-scale projects by 2030: 30-45 euro/tCO2, which is identical to estimates of the price of allowances in the EU ETS from some observers

A working paper titled Economic Optimality of CCS Use: A Resource – Economic Model from the Kiel Institute for the World Economy (April 2009) stresses the importance of operating with increasing storage costs as exploitation and replenishment of the most optimal storages progresses. This paper is more theoretical and does not include specific figures for the costs.

The above estimate for the cost of CCS is miles below the scale as an example from the real world suggests. Much indicates that the cost of these reports is significantly underestimated.

An example of the full scale: Mongstad

Statoil’s project at Mongstad just north of Bergen was about CO2 reductions from CCS from a natural gas-fired power plant and a refiner. It was terminated in 2013. But the published cost calculations can help us get more insight into the real cost of CCS.