​CCS can’t compete with renewables, nuclear energy; Boundary Dam coal plant a costly example: economist

On the heels of U.S. utility Southern Co. appearing to scupper its long delayed and massively over budget “clean coal” project, with plans to rejig the facility to run on natural gas, a U.K. economist says carbon capture and storage will in fact never be viable.

In a report published by the Global Warming Policy Foundation this week, Gordon Hughes, professor of Economics at the University of Edinburgh and a former adviser to the World Bank, said claims that costs will fall quickly are unlikely to be borne out in practice and even if they are, the total investment required makes CCS little more than a utopian dream.

"We have spent countless millions trying to get carbon capture to work for coal-fired power stations. But in the future coal will mostly be used in the developing world, where CCS is going to be too expensive. Everyone else is moving to gas, for which CSS isn't yet an option," he said.

Most of the R&D devoted to CCS has been focused on baseload coal plants that run at 85-90 per cent capacity, rather than the natural gas plants more likely to be built today, and costs have not declined as rapidly as anticipated. And even if the technology can be made to work for gas, it would come at a price that "would make renewables and nuclear look cheap," in part because of a lack of joined up policy.

"Successive governments haven't thought their policies through. The focus on renewables is making CCS—already a marginal technology—even less viable. A coherent strategy could reduce carbon emissions at a fraction of the current cost by switching to gas with the option to install CCS if/when it makes economic sense."

The average cost of reducing CO2 emissions by fitting CCS to coal or gas plants “will be at least $120 per tonne CO2 for baseload plants and may be $160–200 per tonne CO2 at plants operating with load factors of 60 per cent or even 50 per cent for gas plants.”

In the West, the potential role of coal with CCS has been undermined by renewables that have enjoyed a high level of support but which favour investment in flexible gas plants rather than the type of large scale coal plants for which CCS might be economic, according to the report, The Bottomless Pit: The Economics of Carbon Capture and Storage. In the developing world, there is less pressure to reduce emissions and CCS is considered unaffordable.

“The boat has already sailed for new coal plants fitted with CCS. There is no plausible economic future for this option,” states the report. “Equally, the costs of retrofitting existing coal plants look prohibitive. Even if they adopt national programs to reduce CO2 emissions, there are many alternatives for achieving this goal at a lower cost per tonne of CO2. In China, for example, the switch from coal to gas for industrial energy use and domestic heating is both relatively cheap and has large associated benefits, namely reductions in air pollution.”

In terms of CCS fitted to gas plants, there is the advantage of a lower parasitic consumption—the amount of power the unit must divert to operate the carbon capture add-on—of only 12-15 per cent. But the disadvantages include lack of study and experience for gas plants and the fact the cost increases for plants not expected to operate on baseload, but rather as backup for renewables like solar and wind.

“The penalty for operating under partial load (down to 50 per cent of capacity) and for frequent ramping up/down is rarely examined. This can only be established in the light of the experience of operating commercial gas plants with carbon capture,” it states.

“In future, policymakers could require that [gas] plants are fitted with carbon capture. This would be very expensive—at least doubling the cost of the capacity contracts—and it would require substantially longer lead times to commission new capacity—up from two-three years to four-five years.”

To justify the added costs to offset a future carbon tax, the tax would have to approach $150 per tonne, a level at which there is little evidence it would be considered acceptable to consumers who would be required to cover the cost. “There must be considerable doubt about whether the public will be willing to accept the implications of such a carbon price in the next two decades.”

Boundary Dam CCS

The CCS retrofit of the Boundary Dam coal power plant in Saskatchewan “is an object lesson in the uncertainties and difficulties of managing the installation of a new technology,” the study concludes. “The project was widely publicized as a model, so the disappointment over the combination of cost overruns and poor performance has been correspondingly greater.”

The original cost to retrofit the almost 60-year-old unit of $1.24 billion rose to a reported $1.5 billion. “It is not clear what these cost estimates cover but they are at least eight–10 times the cost of a simple repowering with a net output of 110 MW.”

While planned to capture 90 per cent of CO2, actual storage has been only half that due to CO2 releases at the plant and the oilfield targeted for enhanced oil recovery, it states. Parasitic energy consumption to operate carbon capture equipment was expected to amount to 21 per cent (110 MW output to the grid rather than 139 MW).

The carbon capture unit has not performed up to expectations, with breakdowns and maintenance outages knocking its operations back to just 40 per cent of plant hours, causing operator SaskPower to incur significant penalties and to renegotiate its CO2 supply contract last summer to a level that is expected to reduce annual revenues over the life of the plant by about a third.

“If the costs of zero carbon are compared with low-carbon alternatives, the marginal costs of the additional reductions in CO2 emissions are extraordinarily high,” it found.

“There is very little prospect that retrofitting coal power plants with CCS will make economic sense relative to the alternative of replacing them with more efficient gas plants… Replacing the Boundary Dam plant with an efficient gas plant would have drastically cut CO2 emissions at five–10 per cent of the cost that has been incurred.”

That appears to be the extremely costly conclusion of Southern Co. this week after deciding Wednesday to scrap plans to gasify coal with carbon capture in favour of switching its Kemper County power plant to run on natural gas.

At a cost of US$7.5 billion and counting (original estimate at start of construction seven years ago was US$2.88 billion), the Mississippi plant is now estimated to have cost about 10 times that of an average gas-fuelled generator. Southern Co. could still end up with a US$3.4 billion second-quarter charge if regulators don’t allow it to recover costs from ratepayers.

“It’s no surprise to see Kemper clean coal abandoned, given the underlying economics,” William Nelson, an analyst for Bloomberg New Energy Finance, told Bloomberg, which said abandoning coal incineration at Kemper stands to deal a heavy blow to advocates of clean coal technologies.

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