Help is now at hand – perhaps?

I mentioned in an earlier post that there are really only four things that can be done to reduce emissions from energy production, namely – using less, switching to renewables, switching to nuclear and utilising carbon capture and storage (CCS) in conjunction with fossil fuels.

The one we know least about is CCS, although much of the technology already exists. For example, if we start with coal as the fossil fuel, CCS may be easier if we gasify the coal first to make syngas (H2 + CO), which can then be chemically shifted and physically separated to give hydrogen and CO2. The hydrogen is then used to generate electricity [or the syngas can be sent directly to a gas turbine producing CO2 as a byproduct] and the CO2 is compressed to liquid form and pumped into storage sites, which could be two or more kilometres below the surface. Much of this technology exists today in South Africa, where coal is gasified as a precursor to liquid hydrocarbon manufacture for transport. The SASOL Secunda facility processes some 15+ million tonnes of coal per annum, much more than a 2 GW coal fired power station, so the scale is possible. Most of the CO2 is vented to atmosphere in nearly pure form – i.e. it is close to storage ready. But there is no CO2 storage happening anywhere on this scale – the best example today is in Norway where some one million tonnes of CO2 is stored annually in the Sleipner project.

So integrated large-scale CCS still needs to be demonstrated and governments around the world are finally putting together significant funding packages to get this to happen. Three significant funding packages are now on the table;

  1. Phase III of the EU-ETS sets aside 300 million allowances for the EU 10-12 project CCS demonstration programme. Depending on the prevailing CO2 price, this could be worth some EUR 6-9 billion.
  2. The Province of Alberta and the Federal Government of Canada have established funds totalling some CAN$ 3 billion for the large scale demonstration of CCS.
  3. This week the Australian Government announced AU$ 2 billion in funding for large scale demonstration projects.

This week also saw the American Clean Energy and Security Act of 2009 presented to the House of Representatives. In it there is a provision to collect US$ 1 billion per annum for 10 years from electricity suppliers for the demonstration of large scale CCS through five major projects. The Act also provides some 1 billion free allowances to underpin the cost of CCS deployment through 2014-2020, in lieu of the revenue that would otherwise be collected if the CO2 price is passed through in the cost of electricity (which the Act does not allow for – more on that another day).

So it appears that CCS is on its way. Or is it? In reality there still exists something of a chasm between the funds that are now on the table and the actual delivery of real projects. First will be the selection of projects – a process that could be very protracted. Second, there will be the temptation to spread the incentive widely, rather than a laser like focus on bringing a smaller number of projects rapidly to completion. The latter is essential, but it means very significant funding for single projects, which means that not all states, provinces, countries, sectors or technologies can be satisfied early on.

But even if funding decisions are focussed and rapid and therefore projects are accelerated, timescales will be challenging. The first generation of CCS facilities need to be operating by 2014, but that may not be possible. Going back to the SASOL technology above, the following comes from a posting on the SASOL website on October 22nd 2007:

Sasol said the order to construct a Sasol Advanced Synthol reactor, placed with the Hitachi Zosen Mechanical Corporation, will enable the company to increase capacity at its Secunda plant from the current level of 150 000 barrels per day by 20% to 180 000 barrels per day by 2015. . . Synthol reactors use either gas or coal as feedstock to produce synthesis gas . . . .  The reactor will be about 12 stories (38 metres) tall, eight meters in diameter and will weigh about 867 tons.

Whilst I don’t know the full context of this announcement, it does indicate that the timelines are long for large scale advanced technologies such as coal gasification. Shell has experience in this area as well, as gasification (of natural gas) is at the heart of our Pearl GTL project in Qatar. Again, timelines are long. Final investment decisions were announced in July 2006, with production anticipated to start in 2010. But in July 2006 much of the engineering design had been done, the decision was then the final trigger for firm equipment orders.

So we might see big CCS [linked to a coal fired power station] up and running in 2015. But it may not be in China or India, where arguably some of the early demonstartions need to be. The big funding announcements are so far focussed on developed countries with carbon markets either in place or on the drawing boards. Looking at developing countries, there is no mechanism for providing the CO2 price incentive (and little positive progress to have CCS included in the CDM) and no major clean technology funds ready to put down the billions that CCS will need for a demonstration programme of (say) 10 projects in China for example.

Before 2015 there is a good possibility of CCS projects linked to exisitng sources of nearly pure CO2, such as from exisitng gasifiers. Some of these projects may be quite large and will help build early industrial scale experience.

But the numbers struggle to add up. 20% or 30% reductions by 2020 are being asked for (and some say it needs to be 40% for developed countries by 2020), but not one big coal based CCS facility may be up and running until 2015. Yet CCS is likely to be an integral part of the solution to reducing emissions and I would argue is necessary just to meet the ambitious 2020 targets.