(The author is a Reuters market analyst. The views expressed
are his own.)
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By Gerard Wynn
LONDON, May 17 European policymakers face a
difficult decision on building carbon capture and storage (CCS)
- saving money in the long run requires spending more upfront.
CCS captures carbon dioxide (CO2) emissions from a fossil
fuel power plant and then pipes it to an underground storage
site such as a depleted gas or oil reservoir.
In theory, CCS would allow energy producers to continue to
burn fossil fuels and still meet carbon emission targets. In
practice, the technology is expensive and unproven.
Clustering a number power plants at one end of a central
pipeline and multiple storage sites at the other end would save
money over the long term. More savings could from using CO2 to
help produce oil from aging wells, which would generate revenue
to help cover the costs.
Not only are starting costs higher but also these options
entail a risk that the bigger and longer pipelines required
would never be fully used if the technology fails to prove
Britain's Department of Energy and Climate Change (DECC)
published a report this week on the potential for reducing the
costs of CCS, drafted by an advisory group it established a
year. ("The Potential For Reducing The Costs of CCS in The UK",
The report found two main options for near-term cost cuts.
(See Chart 1) but concluded that even after these savings, CCS
would require some kind of government subsidy through the 2020s.
Chart 1: (page 15) goo.gl/Ui6r8
One cost-cutting option would be to cluster CCS projects
into hubs, which would allow the sharing of pipeline and storage
"Virtually all of the CCS projects proposed in the UK to
date are based on isolated full-chain schemes in which a single
power station is connected via a single dedicated CO2 pipeline
to a storage site in the UK Continental Shelf," it said.
"Leveraging early CO2 infrastructure, if it is designed
correctly, can reduce the incremental cost of transport and
storage substantially for later projects."
The report estimated that clustering would reduce storage
costs from around 25 pounds ($38.27) per megawatt-hour in early
projects to 5 to 10 pounds/MWh. That compares with total CCS
costs estimated at 161 pounds/MWh before any savings.
Transport costs could drop from 18 to 23 pounds/MWh for
early projects carrying 1-2 million tonnes of CO2 per year to 5
to 10 pounds/MWh for large, full pipelines carrying 5-10 million
tonnes, the report estimated.
A report published last year by consultants Mott MacDonald
summed up the benefits and risks from investing more, earlier in
outsized infrastructure. ("Potential cost reductions in CCS in
the power sector", May 2012)
"In principle, additional sources can be added in the
future, provided CO2 pipeline capacity is sized and designed
accordingly. A coordinated network approach can then lower the
barriers of entry for all participating CCS projects, including
for emitters who subsequently do not have to develop their own
separate transportation and storage solutions," it said.
"These benefits arising from economies of scale need to be
weighed against the risk of being left with an underutilised or
stranded asset. This means that the development of transport and
storage clusters needs to be carefully coordinated with
ENHANCED OIL RECOVERY
Another way to cut costs is to use the CO2 to force out the
dregs of crude oil from nearly depleted fields, through the
enhanced oil recovery process (EOR).
It would require greater upfront investment, by comparison
with non-EOR CCS, to build longer pipelines to transport the CO2
to suitable oilfields. Such a project may need a cluster of at
least 10 oilfields to be economic, according to an industry
But Britain last October dumped the only EOR proposal when
it put together a short list of projects for CCS funding,
presumably on the basis that it was too expensive.
The rejected Don Valley EOR project proposed to transport
the CO2 400 km to two North Sea oil fields.
As for the two that made it to the short list, the Peterhead
project in north-east Scotland would involve a 100 km pipeline
to a depleted gas reservoir, and the White Rose project in
eastern England a roughly 165 km line to a saline aquifer.
The advantage of EOR clearly is that it would generate oil
revenue, which could pay for the entire CO2 storage and possibly
some transport costs, Thursday's report estimated.
"(The) potential additional EOR benefit is in the range of
5-12 pounds/MWh for gas CCS and 10-26 pounds/MWh for coal CCS,"
It appears that Britain is still far from grasping the
nettle of large, upfront costs, even though they would cut costs
over the longer term.
The implication is that CCS development will remain
piecemeal and more expensive, with a slower larger rollout, if
($1 = 0.6533 British pounds)
(editing by Jane Baird)