CCS at a crossroads

Howard Herzog
Insights

CCS at a crossroads

The following Insight is an excerpt from an article by Howard Herzog, Senior Research Engineer in the MIT Energy Initiative. Howard is a leading figure in the carbon capture and storage (CCS) industry, driving greenhouse gas mitigation technology research at MIT since 1989. He was a Coordinating Lead Author for the IPCC Special Report on Carbon Dioxide Capture and Storage and a co-author on the MIT Future of Coal study. This article is part of the Global CCS Institute thought leadership series. Read the full article here.

Every Saturday night
I felt the fever grow
Do ya know what it's like
All revved up with no place to go
- Meatloaf (1977)

Last October, the world’s first commercial-scale Carbon dioxide (CO2) Capture and Storage (CCS) coal-fired power plant came on-line in at Boundary Dam in Saskatchewan, Canada. Also last year, CCS was front and center in the Intergovernmental Panel on Climate Change Fifth Assessment Report on the Mitigation of Climate Change, being mentioned 39 times in its Summary for Policy Makers (compared to wind and solar at four times each). In its roadmap for mitigating climate change, the International Energy Agency has repeatedly said CCS is a key technology.

Given the above, this should be a time of great joy and optimism in the CCS community. Yet the reality is CCS is at a crossroads and its role in a carbon mitigation portfolio is very uncertain. In the immortal words of Meatloaf, we are “all revved up with no place to go”.

To understand how we arrived at this crossroads, we need to review the history of CCS. Significant research programs in CCS were first initiated in the early 1990s, around the time the United Nations Framework Convention on Climate Change (UNFCCC) was being drafted at the Earth Summit in Rio. This timing was not a coincidence as there is a strong relationship between technology development and policy development. This relationship is critical to the future of CCS and understanding why we are at a crossroads today.

From the 1990s to about 2009, there was great growth in CCS. Statoil’s Sleipner project, which captured CO2 from a natural gas processing plant, started-up in 1996 in the North Sea off Norway. It was the world’s first large-scale (greater than a million tons of CO2 per year) CCS plant, demonstrating that CCS was a commercial reality. Over the next decade, CCS saw explosive growth, as measured by a variety of metrics such as size of research budgets, number of papers published, and number of pilot and demonstration projects.

CCS was flying high in 2009. President Obama was just elected and there was immense optimism that the US Congress would pass cap-and-trade legislation. There was also optimism that the Conference of the Parties (COP) to the UNFCCC meeting in Copenhagen would produce a new international agreement to supersede the Kyoto Protocol. In the US, the CCS research, development & deployment (RD&D) budgets were effectively tripled for the next seven years with the injection of $3.4 billion of stimulus funds. In Europe, the NER300 program was established to incentivize up to a dozen CCS demonstration projects to come online by 2015.  

However, things did not turn out as planned. In the US, instead of cap and trade legislation, we now have snowballs in the Senate. Copenhagen was a failure. The NER300 program produced exactly zero demonstration projects, while the US saw the cancellation of FutureGen, its largest and most visible demonstration project.

The news was not all bad. In addition to the previously mentioned Boundary Dam project, CCS projects at a refinery and an ethanol plant are operational. Two additional CCS power plant projects, Kemper and Petra Nova, are under construction, and a third, the Texas Clean Energy Project, may follow.

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The Boundary Dam project is a good example of how market pull and technology push can work together to incentivize CCS. On the policy side, Canada requires that all coal-fired power plants that turn 40 years old either have to do a CCS retrofit or shut down. One of the coal-fired units at Boundary Dam needed upgrading, so this left SaskPower with two choices, either retrofit the unit with CCS or replace it with a natural gas combined cycle (NGCC) unit. Since Boundary Dam is powered by lignite, an asset that SaskPower owns and would become stranded if they repowered with gas, they preferred the former option. To proceed, they needed to show that the retrofit option was economically competitive with the NGCC option. This was accomplished with the help of a $240 million subsidy from the Canadian government (about 20% of the original projected capital cost), as well as the opportunity to sell the captured CO2 into the Enhanced Oil Recovery market.

Going forward in the US, the market pull can come from the newly released Clean Power Plan, which will require utilities to reduce CO2 emissions by 32% by 2030 from 2005 levels. On the technology push side, the US Department of Energy’s fiscal year 2016 budget request to Congress included a 30% investment tax credit for CCS, as well as a production tax credit of $50 ton/CO2 stored. These incentives compare very favorably to those that drove Boundary Dam forward and, if approved, should help incentive some CCS projects in the US.

Technology push can take many forms. In the UK, a £1 billion competition is underway to help fund two CCS demonstrations. In addition, these facilities would qualify for a “contract for differences”, which would have a similar impact as a production tax credit. In the EU, there is talk of a new NER program (hopefully better thought out this time) to help pay for pay down the capital costs of a CCS plant.

While having a robust climate policy to limit CO2 emissions is necessary for CCS to flourish, it is not sufficient. CCS has to be competitive with the other large-scale, low-carbon supply technologies, specifically renewables and nuclear. Study after study has shown all of these low-carbon technologies are needed. Furthermore, they say without CCS, the costs of meeting stabilization targets are greatly increased. These results are not surprising because of the inherent strengths of CCS. It produces dispatchable power, as opposed to intermittent power from wind and solar. It provides the major pathway to negative emissions when combined with biomass-fired power plants. Finally, it is the only mitigation technology that can rescue potentially hundreds of trillions of dollars of stranded fossil assets.  

In summary, CCS is a critical technology if we want to meet long-term climate goals. However, CCS needs to be driven by climate policy and the resulting climate markets. These have been very slow in developing. In order to keep moving CCS forward, stronger technology push programs are needed today. These programs have been successfully applied to renewables. If similar efforts are applied to CCS, the results would be even more successful.

This is an excerpt from an opinion piece by Howard Herzog, Senior Research Engineer in the MIT Energy Initiative. The views expressed are those of the author and not necessarily of the Global CCS Institute. Click here to read the full version.