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Issues in Finance and Economics, Current Status of ,
CCS International Projects
John KesselsUCD Earth Systems Institute DublinUCD, Earth Systems Institute, Dublin
2008
Introduction
What is the IEA Clean Coal Centre?What is the IEA Clean Coal Centre?Overview and future scenariosStatus of CCS projects internationallyEconomics of CCSHow does CCS compare with other energy technologies?technologies?Conclusions
Organisation
Organisation for Economic Cooperation and DevelopmentCooperation and Development
International Energy AgencyInternational Energy Agency
Implementing Agreements (40)g g ( )
Fuel cells, Motor fuels, Solar, Biofuels, Energy conservation, Wind power etc
IEA Clean Coal Centre
IEA Greenhouse Gas R&D Programme
Mission Statement
IEA CCC will provide a source of unbiased information on sustainable use of coal world-wide. Services will be delivered to governments and industry through
di d idirect advice, review reports,facilitation of R & D andprovision of networks
MEMBERS
JItaly JapanRep. of Korea UK
Spain
AustriaCanada
Germany• Kyoto Protocol signatories• Non-Kyoto signatories
Anglo Coal
USACEC
BRICC
y g• OECD Countries• Developing countries
(China, India, S. Africa, Brazil)
• GovernmentsESKOM
Netherlands Group
BG Group
ACIC
CANZ
Banpu • Governments• Industry – coal and power
and equipment
BHEL
p
Eletrobras
DPG
SuekSIG
Schlumberger
IEA CCC Current Situation
Non-Profit making organisation supported mainly by members subscriptionsmainly by members subscriptionsAnnual turnover around £1.8m (US $ 3.6m)Staff – 25Members – 23 members inc those in process Special Reports – 14 -16 every yearTechnical focus – coal fired power and Technical focus – coal fired power and environment
- Co-firing- Greenhouse towards zero emissions
Databases, AbstractsExpert AdviceExpert AdviceAd hoc consulting for members
Future Scenarios and the R l f C lRole of Coal
How much coal is left?How much coal is left?Where is it?What will be the energy demand?What will be the energy demand?What will be the growth in CO2emissions?What is the status of CCS?
GLOBAL CONTEXT FOR COAL
40% of the worlds power is generated from coal
Very often the coal is indigenous, often poor quality – affects efficienciesAbout than 10% of coal used is traded i i llinternationallyI.6 billion people have no access to electricityShortage of water for cooling in some regions –affects efficienciesChina and India beginning to dominate as global users, marginally interested in CCS
Global energy reserves 2005
Source: BP Statistical Review of World Energy 2006
WEO 2007 Reference Scenario: Scenario:
World Primary Energy Demand
141618
alent
141618
alent
Other renewablesBiomassHydro
101214
s of o
il equ
iva
101214
s of o
il equ
iva NuclearGasOilCoal
468
billio
n ton
nes
468
billio
n ton
nes
02
1980 1990 2000 2010 2020 2030
b
02
1980 1990 2000 2010 2020 2030
b
Global demand grows by more than half over the next quarter of a century, with coal use rising most in absolute terms
Average Annual Power Generation Capacity Additions, 2010 – 2050 p y ,
China up till 2020
Chinese Installed Coal Power Generation Capacity*
2007 US Coal
EIAProjected2020 US Coal
Capacity US CoalCapacity
Source: PennWell, Global Power Review, March 2006
*Does not include substantial Chinese construction of coal facilities (such as gasification) for other purposesor construction of other types of power generation or process industry facilities.
Si tt !Size matters!
Cumulative globally sequestered CO2
Weyburn (2000)Cumulative global need to sequester CO2
Sleipner (1996)
Fl 105 000 t d
Feed and emissions for a 1,000MW utility
Flue gas 105,000 tpd
CO2 22,500 tpd
SOx 72 tpd
NOx 70 tpd
Coal 10,000 tpdC l 10 000 d
Mercury 0.6 kgpdp
Water 50,000 tpdCoal 10,000 tpd
Water 50,000 tpd
Unit size, total capacity, age and operating efficiency range of operating coal-fired plants
worldwideo d de
As of 2004…~50% of the operating fleet - >25 years age, ≤300MWe unit sizep g y g , ≤>80% of the operating fleet – sub-critical unitsaverage operating efficiency ~28.4%, HHV, net Source: Battycharya, IEA 2008
CCS Demonstration Developments
• Currently only 4 full-scale CCS demo plants operating worldwide; none with a coal-fired power plant
• The number of major CCS efforts is growing…– Alberta, Canada: $2B funding
A t li AUD$3 400 illi G– Australia AUD$3-400 million, Gorgon – Establishing also a GHG Institute– Norway’s Gassnova UK CCS competitionNorway s Gassnova, UK CCS competition– US FutureGen– OPEC countries (UAE)( )
• …but finance and policy is slowing development down and the current economic climate will not help
The next decade is critical
The Good News
• Different CCS projects Different CCS projects are underway or planned globally
However ...F l fi d • Few coal-fired power plant projects are funded at large-scale
• A lot of uncertainty yabout full funding for proposed large projects
• UK has announced short list for its CCS tenderlist for its CCS tender
• USA redesigning Futuregen
T, 2
008
Sour
ce: M
IT
Pilot Plant: Cycles of learning
Hydrogen Power Abu Dhabi
Statoil’s CO2 projects
MongstadCO2 injection
capacity illi t /
7
Halten CO2
million tonnes/year
5
6
I S l h
Snøhvit LNG4
Sleipner
In Salah
2
3
p
1
2
Source: Statoil: 2007© IEA Clean Coal Centre www.iea-coal.org.uk
1996- 2004- 2007- 2011/12- 2014-
Development of IGCC by RWE Power
RWE Power will develop a zero-CO2 lignite-fired IGCC in Germany
Plant will be commissioned with CO2 transport and storage if market and regulatory conditions are appropriate
– Capacity: 450 MWgross, 360 MWnetgross net
– Net efficiency (target): 40 %
– CO2 storage: 2.6 million tonnes per year in depleted gas reservoir or saline aquifer
© IEA Clean Coal Centre www.iea-coal.org.uk
q
– Commissioning: 2014
What is the investment needed for CCS and how much
will it cost?
Reference Scenario:
Cumulative Investment in Energy-S l I f t t 2006 2030Supply Infrastructure, 2006-2030
Electricity53%Oil
Power generation
51%
49%
Refining
73%
22%
Exploration and development
Transmission and
24%
Biofuels
Otherg %
5%$5.4
trillion$11.6
trillion
distribution
Gas19%
Coal3%
1%
Exploration and development 55% Mining90%
$4.2 trillion
3%LNG chain
Transmission and distribution 37%
8%Shipping and ports10%
90%
Total investment = $21.9 trillion (in $2006)
Reference Scenario:
Cumulative Energy-Supply Investment in China 2006 2030Investment in China, 2006-2030
Ports
C l
Mining
Oil15%
Coal7%
Electricity74%
$3.7 trillionDistribution
Transmission
CTLRefining
Gas4%
15%Power generation
Transmission& distribution
Upstream
LNGUpstream
China needs to invest $3.7 trillion in energy supply infrastructure – three-quarters of which for the electricity sector
CCS component costs
CCS component Cost range
Capture from a power plant 15 75 US$/tCO net capturedCapture from a power plant 15 - 75 US$/tCO2 net captured
Capture from gas processing or ammonia production
5 - 55 US$/tCO2 net captured
Capture from other industrial sources 25 - 115 US$/tCO2 net captured
Transportation 1 - 8 US$/tCO2 transported per 250km
Geological storage 0.5 - 8 US$/tCO2 injected
Ocean storage 5 - 30 US$/tCO2 injected
Mineral carbonation 50 - 100 US$/tCO2 net mineralized
How much extra for CCS?
7.5
Cost of electricity, c/kWh
5.4
4.9
Extra cost for CO2capture
Cost for
FGDPower plant, excluding FGD
610 700 1000
Capital cost, M$
How much does CCS cost?
(Millions of 2006 U S dollars per 400 MW plant )
Per Plant Incremental Costs of CCS Based on New Plants Based on Plant
Retrofits
(Millions of 2006 U.S. dollars per ~400 MW plant )
Capital Costs
- Capture equipment $210 $250
N t it l $185 $360- Net capacity loss $185 $360
Plant O&M Costs $150 $150
Transport Storage; Admin $190 $190Transport, Storage; Admin. $190 $190
TOTAL (per plant) $735 $950
Source: Kuuskraa, 2007
CCS with carbon at Euro20/tE stim ated n ew -entrant costs for con ventional fo ssil-fuel pow er p lants an d C C S w ith carb on at E uro 20 /t G as p lan t w ith
100% carbon pu rchase
C oal P lan t L ign ite p lan t C C S
C apita l C ost €563 000 /M W €1 313 000/M W €1 650 000/M W €2 222 m mC apita l C ost €563 ,000 /M W €1,313 ,000/M W €1,650 ,000/M W €2.222 m mC apacity 1 ,000 M W 1 ,000 M W 1 ,000 M W 800 M W C ap ital O u tlay €563 €1 ,313m €1 ,650m €1 ,777m R equ ired retu rn (p re-tax)
9 .60% 9 .60% 9 .60% 9 .60%
F uel P rice €6 .2 /G j €2 .23 /G j €0 .7 /G j €2 .23 /G jj j j jE fficiency R ate 57% 47% 45% 35% G as P rice
€39.2 /M W h C oal P rice €17 .1 /M W h
L ign ite P rice €6M W h C oal P rice €22 .9 /M W h
F ixed operating costs
€12/kw €45/kw €45/kw €60/kw
V i b le €2 25 /M W h €2 25 /M W h €2 25 /M W h €3/M W hV ariab le operating costs
€2 .25 /M W h €2 .25 /M W h €2 .25 /M W h €3/M W h
C arbon P rice €20/tonne €20/tonne €20/tonne C arbon In tensity
0 .365 0 .75 0 .93 0
L oad facto r 1 st 7 .5T W h 7 .5T W h 7.5TW h20 yrs L oad facto r fo r rem ain ing 20 yrs
40% 40% 40%
A nnual outpu t fo r rem ain ing
3 .5T W h 3 .5T W h 3 .5TW h fo r rem ain ing 20 years P ow er p rice needed to earn requ ired retu rn
€57.6 /M W h €63.1 /M W h €58.9 /M W h €68.5M W h
Source: D eu tsche B ank 2007
Comparison of power generation costs for various technologiescosts for various technologies
490Power generation costs for newbuilds in €/MWh
120
140
160
Typical fluctuation margin depending oncapacity utilization and fuel price
Steam power plants IGCC-CCS Renewables
80
100
120
20
40
60
0
Nuclear
Lignit
e
Hard co
alGas
(CCGT)
Coal CCS
Gas C
CS
Hydro
Wind
onsh
oreW
ind of
fshore
Biomas
sPho
tovolt
aics
G W W P
Source: VGB (German Technical Association of Large Power Plant Operators), supplemented by CO2allowances costs of €20/t and plants with carbon capture
CCS Commercialization
• There are currently too few large scale demonstrations to accelerate deployment of CCS technologies
• This approach could result in risk of project failure • High profile failures concerning CCS projects will
result in a reluctance to invest in the deployment of CCS technologiesCCS technologies
• What is the path forward to rapid commercialisation of CCS?
• EU plans to have 12 demonstration plants built by 2015 and preparing a proposal for the end of the year to accelerate the use of CCS in the EU ETSyear to accelerate the use of CCS in the EU ETS
Options for Funding CCS
• Expand traditional “technology policy” options (tax credits, subsidies, etc.)p ( , , )
• Set new regulations requiring CCS (e.g., generator CO2 performance standards) (as in California CO2 stds)standards) (as in California CO2 stds)
• Adopt stringent cap-and-trade program w/ CCS bonus allowances and/or a tech fund (e g from auction oftech. fund (e.g., from auction of allowances)
• Use of 500,000 EUA to fund CCS demo projects in Europedemo projects in Europe
Challenges for investorsChallenges for investors
Environmental concernsEnvironmental concerns– Potential climate change regulation– Other potential emissions regulations– Water availability– Rate of return on investment
Unavailability of resources and rising
costs
Public perception– Opposition of Environmental NGOs
CCS finance issuesCCS finance issues
• Development of CCS regulatory frameworks is• Development of CCS regulatory frameworks is underway internationally in a number of regions.
• Several CCS projects underway in North p j yAmerica and future possibilities with the restructuring of FutureGen. Canada intends to have new coal fired plants• Canada intends to have new coal fired plants capture ready by 2018.
• Emissions trading scheme will not accelerate gdeployment of commercial CCS projects in the future and other incentives will be required.
Outcome of CCS finance meetings
• Quantifying the actual liability of CCS projects in• Quantifying the actual liability of CCS projects in dollar terms would assist and allow insurance companies a better means of assessing what underwriting is needed. Otherwise limited insurance on a 1-2 year revolving contract.
• Globally a lack of CCS information with the• Globally a lack of CCS information with the general public and within the financial sector
• Legal and environmental liability is an issue. Insurance companies have several models that could be applied to CCS.
Conclusions
• Clean coal technologies are key for a sustainable energy futuregy
• IEA and IPCC scenarios indicate that coal will dominate the power sector
• Difficult to prepare a strategy with regulatory uncertainty and this is likely to remain for the foreseeable future
• Economics of CCS are marginal and will require Government funding to support projects
Conclusions
• Currently CCS costs including transport and storage are around €35-70/tCO2 costs could drop with 2 ptechnology development to €25/35/tCO2
• Financial issues for investors include Government acceptance of longterm liabilit and a reg latoracceptance of longterm liability and a regulatory environment that is viable CCS otherwise there will be minimal investment in CCS projects
• Status of CCS projects is 4 existing projects, none with coal as yet. Global economic downturn will impact on existing proposed projects however it isimpact on existing proposed projects, however it is likely that several proposed projects will proceed in the UK, Canada, Germany and the USA
“All I’m saying is NOW is the time to develop the technology to deflect an asteroid”p gy
THE ENDTHANK YOU FOR LISTENINGTHANK YOU FOR LISTENING
IEA CCC www.iea-coal.org.uk+44 (0)20 8780 2111 (tel)+44 (0)20 8780 1746 (fax)+44 (0)20 8780 1746 (fax)
John Kessels [email protected]