Leading the Energy Transition: Bringing Carbon Capture & Storage to Market

“Leading the Energy Transition: Bringing Carbon Capture and Storage to
Market” is the first in a series of reports to be undertaken by the SBC
Energy Institute on the energy transition in collaboration with Bloomberg
New Energy Finance. It highlights the status of current technologies,
identifies needs in research and development, analyses the situation of
demonstration and deployment projects, and gives perspectives on the future
of both concerned technologies and CCS projects.

EXECUTIVE SUMMARY

CO2 emissions reached a record high in 2010, despite international goals to
limit global warming to 2°C (1). Based on the range of projections of the
Intergovernmental Panel on Climate Change (IPCC), the International Energy
Agency (IEA) recently warned that average global temperatures are on track
to rise by more than 3.5°C by 2100.

The margin for maneuver to mitigate global warming is becoming dangerously
slim; emissions from existing infrastructure alone are projected to account
for 80% of the entire CO2 emissions cap required to stabilize global
warming at 2°C.(2) Carbon capture and storage (CCS) is an essential
technology to mitigate climate change and could help to reduce cumulative
emissions by 18% over 2011-2035 under the 450 Scenario (3).

The SBC Energy Institute's Leading the Energy Transition survey focuses on
the outlook of low-carbon energy technologies over the next five years,
with a specific focus on CCS. Based on extensive interviews with companies,
government agencies and NGOs, the survey aims to clarify the status of
current and future CCS projects from the viewpoint of the biggest players
in the sector.

CCS is a viable technology and is commercial under certain circumstances
-it is not a hypothetical or laboratory-stage technology that will take
decades to materialize. Seven Large Projects (4), built before 2008,
capture CO2 from natural gas processing or coal gasification plants, and
store it in deep saline aquifers or in oil reservoirs through enhanced oil
recovery (EOR). In this way, they abate 15MtCO2 of emissions each year -
equivalent to the annual emissions of a 2.5GW supercritical pulverized
black coal power plant (5).

Industry players are adamant that CCS component technologies have proven
technically feasible and are ready to be demonstrated on a large scale for
power generation, or in steel, cement and hydrogen plants. Capture
technologies have long been used for industrial purposes such as natural
gas processing and hydrogen production for the manufacture of ammonia and
synthetic fuels. Oil and gas companies have considerable experience in CO2
transport and underground injection after three decades of EOR projects in
depleting onshore reservoirs. Players do not view monitoring CO2 storage as
a major technical barrier although field demonstration is needed to prove
the potential and feasibility of deep saline aquifers. Provided that
large-scale demonstration is successful, CCS is expected to be one of the
most efficient and costeffective technologies available to mitigate large
volumes of CO2 emissions (6).

* Natural gas processing plants have been proven to mitigate emissions
using CCS for as little as $14/tCO2 avoided (7);
* Industrial hydrogen plants (8) with CCS could also avoid CO2 at just
$20tCO2;
* For power generation, first-of-a-kind CCS power plantswith current
capture technologies would avoid CO2 emissions at $53-92/tCO2 for coal, and
$67-106/tCO2 for gas. However, this would increase the levelised cost of
electricity (LCOE) by 37-95% compared with the same plant without CCS,
depending on the technology used. Such an increase would not be directly
transferred to consumers' electricity bills as the LCOE usually represents
60% of the final cost of electricity. CCS power generation is more
affordable than replacing coal with renewables such as offshore wind or
solar, and is competitive with biomass power. (Geothermal, hydro and
onshore wind offer cheaper but limited opportunities.) In addition, there
are no alternative technologies available that can substantially reduce
'process CO2' emissions from steel, cement, natural gas processing, paper,
synthetic fuels and chemical plants.

(1) A target recommended by the International Panel on Climate Change
(IPCC) and officially recognized in the United Nations Framework Convention
on Climate Change (UNFCCC) at the Conference of the Parties - Sixteen
session: Decision 1/CP16 at Cancun, 2010

(2) IEA, World Energy Outlook, 2011

(3) The 450 Scenario is the least-cost pathway to stabilize atmospheric CO2
concentration at 450 parts per million, thus giving a 50% chance to limit
global warming to 2 degrees Celsius. Source: IEA, World Energy Outlook,
2011

(4) Integrated from capture through to storage, with CO2 storage rate above
0.6 Mt per year (equivalent to 100 MW of coal-fired power plant with CCS)

(5) While these projects do not always monitor CO2, the IPCC estimates that
EOR operations like these ultimately retain and sequestrate nearly all the
CO2 injected.

(6) The cost of CO2 avoided (or abatement cost) represents the additional
price to pay for CCS to avoid emitting one ton of CO2 from the plant. It
equals to the increase in levelised cost of production divided by the
volume of CO2 avoided by unit of output

(7) At In Salah ($14/tCO2) or Sleipner ($17/tCO2). Source: MIT CCS
Initiative.

(8) Synthetic fuel plants (Coal-to-liquid, Steam Methane reforming,
Advanced biofuels), Chemical plants (Ammonia), Refineries (fuel upgrading).

Please download the full report for more detailed analysis.