CO2 capture will need support beyond 2020-study

Thu Jul 14, 2011 6:00pm EDT

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* Carbon capture and storage untested at commercial scale

* Has high capital cost plus efficiency penalty

* Likely to need carbon price plus extra support beyond 2020

By Gerard Wynn

LONDON, July 15 (Reuters) - Power plants fitted with carbon capture technology will need government support beyond 2020, especially following a sharp drop in European carbon prices, an EU and industry-funded study found on Friday.

Carbon capture and storage (CCS), untested at the commercial scale, is meant to trap and bury carbon dioxide emissions from fossil fuel power plants.

The European Union's emissions trading scheme (ETS) forces polluting factories and power plants to pay for carbon emissions, in a scheme partly intended to make green technologies competitive.

The price of pollution permits called European Union allowances (EUAs) have fallen 25 percent in the past month, however, following concerns about the pace of European economic recovery.

Friday's report said that CCS would need continued support after 2020, to compete with unconstrained fossil fuel power and give energy companies time to fine-tune the technology.

"It's likely that it will require additional support over and above what's provided by the EU ETS to enable deployment in the early 2020s," said Graeme Sweeney, chair of the Zero Emissions Platform, an EU-industry initiative.

Sweeney, who is also head of CO2 at Anglo-Dutch oil company Shell, stressed that it would be able to compete with other low-carbon power options, however.

"We're saying that fossil fuels with CCS are cost-competitive with the onshore and offshore wind, solar and nuclear group. They're a viable low-carbon power option."

The G20 has called for 20 commercial-scale CCS plants worldwide by 2020. EU states are preparing funding for 10-12 commercial projects by then.

CCS has a high capital cost and also inflicts a penalty on power plant efficiency. Pilot projects around the world have been repeatedly delayed or cancelled and no commercial-scale plant has yet been built.

Most recently in the United States on Thursday power producer AEP said that it was putting on hold plans to commercialise CCS, ending an agreement with the U.S. Department of Energy, citing uncertainties over U.S. climate policy and a weak economy.

Sweeney was confident that CCS projects would proceed, however, pointing for example to Shell's own project in Alberta which last month won local and Canadian government funding.

COST

Friday's ZEP report, "The Costs of CO2 Capture, Transport and Storage", estimated that the cost of cutting emissions using CCS ranged from about 35-90 euros per tonne of CO2, after 2020, depending on the type and price of fossil fuel.

That compares with an EU carbon price of about 12.3 euros on Thursday, meaning at the moment it is much cheaper for coal plants simply to buy emissions permits than to fit CCS.

The ZEP study reported wide ranges in its cost estimates depending on for example on assumptions about fuel prices. It concluded that, regardless of those assumptions, the cost would be less if projects were coordinated into clusters, transporting CO2 from several sources into a single sink.

"A strategic plan we show has a substantial impact on the transport and storage costs," said Sweeney. (Reporting by Gerard Wynn)

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