Bizness Lounge: We Now Know How to Save the Planet. For $17.6 Trillion

By Jeremy van Loon

Climate: Now or Never

Scientists know only two credible ways to prevent temperatures from rising to dangerous levels: stop burning fossil fuels or capture and bury the carbon dioxide byproduct before it gets into the atmosphere.
The second idea, known in the trade as carbon capture and storage, or CCS, holds the allure of side-stepping the wrenching economic changes and political resistance associated with phasing out oil, natural gas and coal.
One of the world’s most ambitious carbon capture sites opened in
Saskatchewan in October, the first to commercially strip CO2 from an existing coal plant’s emissions.

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The project at the half-century-old Boundary Dam station is designed to remove about 90 percent of carbon emissions, roughly equivalent to the output from 250,000 cars annually. The CO2 is transported 66 kilometers (41 miles) to Cenovus Energy Inc. (CVE)’s oil fields where it is buried underground to coax additional crude from the reservoirs.
It’s this vision of capturing carbon and burying the remains that excites political and business leaders around the world because it would theoretically allow the energy economy to continue pretty much as is. The problem is the costs have proved stubbornly high.

Photographer: Michael Bell/The Canadian Press via AP Photo

Four Initiatives

The Saskatchewan project, for instance, came with a price tag of C$1.4 billion ($1.23 billion) despite favorable geological conditions. At that rate, fitting all the world’s power stations with carbon-capture technology would cost about $17.6 trillion.

Confronting Coal

How to proceed with carbon capture is one of the greatest challenges facing the nearly 200 countries gathered in Lima to lay the foundation for a global climate treaty. The International Energy Agency, a Paris-based policy adviser for developed nations, says CCS is essential to beating back climate change. It’s one of four initiatives -- alongside renewable energy, efficiency programs and nuclear power -- required to hold greenhouse-gas emissions at bay between now and 2050, the agency said last year in a review of the technology.
CCS is being counted on to carry 14 percent of the burden, the equivalent of eliminating hundreds of the world’s coal plants. Without it, those plants would have to go out of business to keep temperature increases to levels scientists consider tolerable.

‘Proper Strategy’

The success of carbon-capture technologies might be just as important for fossil fuel-extracting companies and nations, which would have to strand untapped assets should stricter climate change policies curtail global conventional energy output.
Recognizing the technology’s importance, the groundbreaking agreement last month for China and the U.S. to curtail emissions includes a pledge to fund and develop a CCS project in China that can become a model for use worldwide. BHP Billiton Ltd. (BLT), the world’s biggest mining company, said last week it’s weighing its own investments in developing the technology.
“We have to get answers on carbon capture and storage sooner rather than later, so we can make the right decisions about the proper strategy and the energy mix of the world,” BHP Chief Executive Officer Andrew Mackenzie said in an interview.
As the Saskatchewan project shows, finding those answers hasn’t been easy. The economics only work at Boundary Dam in Saskatchewan for two reasons: a C$240 million government subsidy and a ready nearby customer for the carbon in Calgary-based Cenovus.

‘Massive Subsidies’

“The concept is very valid,” said Cenovus CEO Brian Ferguson. “But you need a lot of things to come together to make it work if you’re not getting massive subsidies.”
The most ambitious undertaking can be found in Kemper County, Mississippi, where Southern Co. (SO) began building the first large-scale plant in the U.S. using CCS four years ago. Since then, cost estimates have more than tripled to $6.1 billion, putting the 582-megawatt lignite project in jeopardy of becoming one of the most expensive power plants ever built.
John Kirton, a director of the G-8 and G-20 Research Groups at the University of Toronto, says CCS projects may never be affordable.
“If you don’t want to roll the dice on a technological fix, it’s not the best place to put your money,” Kirton said in a telephone interview.

Bumpy Road

The template for CCS was drawn as far back as the 1970s by U.S. oil producers, who began pumping carbon dioxide into aging fields to force more crude from the wells. Now coal-fired power plants and mining smelters are able to capture CO2 using chemicals -- in a similar way to how scrubbing technologies were employed three decades ago to strip out sulfur dioxide -- and either store the carbon underground or sell it to oil companies.
The road to adapting the technology has been bumpy. Five years ago, rich nations with the means to fund big engineering experiments held out great hope for CCS. Countries like Canada, Norway and Germany embraced the technology. As Europe’s largest consumer of coal, Germany viewed CCS as a natural fit. In 2009, the Bundestag introduced legislation that would have seen the state ease adoption by assuming liability for companies injecting the gas underground.
Politicians including then Environment Minister Sigmar Gabriel touted the technology as one of several key measures to managing carbon emissions. “Carbon capture and storage simply can’t be ignored,” he said.
In short order it was.

‘Hype and Hope’

The German parliament failed to pass the legislation amid mounting public concern about the risks, such as a massive leak of CO2, which can be poisonous in high concentrations. After that, pilot projects by Swedish utility Vattenfall AB and researchers working separately in eastern Germany were abandoned.
Vattenfall had worked on CCS since 2001 and operated pilot plants including Schwarze Pumpe in northeastern Germany, where the company tested the process for three years. The utility also planned to turn the existing Jaenschewalde coal plant into a CCS demonstration project in the German state of Brandenburg.
“There was a lot of hype and hope for the technology in 2007 and 2008 on the political level and some big companies like Vattenfall had plans to build out CCS-ready coal power plants,” said Karsten Smid, a Hamburg-based energy campaigner for Greenpeace. “But since then no one talks about it any more. CCS is history now.”
It’s not completely history in places like Norway, the U.S. and Canada’s oil province of Alberta, although it’s flirting with extinction.

‘Science Experiment’

In Norway, oil and gas driller Statoil ASA (STL) is the only major company that has dedicated geological storage for CO2. Statoil separates carbon dioxide from natural gas processing at three sites in Norway and Algeria and stores it in empty oil and gas fields. It too says the process is incapable of standing on its own.
“Today the cost per ton is economically prohibitive,” said Olav Skalmeraas, Statoil’s vice president for carbon capture and storage. “We need public-private partnerships where the government takes commercial exposure and some of the risks.”
It’s a similar story in Canada, where carbon capture was once touted as the technological answer to emissions from the oil sands. Alberta’s new premier, Jim Prentice, served as national environment minister from 2008 to 2010. His predecessors earmarked C$2 billion for four major carbon capture projects to slash emissions and blunt environmental criticism.

Other Alternatives

Today his government has changed its tune, estimating costs at $200 to bury each ton of carbon. He called CCS a “science experiment.”
“The carbon reductions are extraordinarily expensive relative to other alternatives,” Prentice said in an Oct. 31 interview in Calgary.
Economists say a carbon tax of half that amount would spur development of low-carbon technologies like wind power.
CCS would have a better chance of success if there were more practical uses for carbon dioxide. But with so few markets, there are cheaper alternatives to CCS, such as investing in renewable-energy projects or efficiency improvements in buildings and transportation, said Claudia Kemfert, who heads the energy unit at the DIW economic institute, a research group in Berlin.

No Sense

“CCS is expensive, and does not work without subsidies and high CO2 prices,” she said.
Private-sector partners are taking their leave too, even with huge subsidies on offer. TransAlta Corp. (TA), a utility that operates coal and gas plants in Canada, pulled out of a C$1.4 billion coal plant with a CCS component two years ago, even with C$779 million of the cost covered by the government. Without a buyer for the carbon, the economics made no sense, CEO Dawn Farrell said.
“We have learned a great deal from this project and continue to believe that CCS will ultimately play a role in reducing the carbon footprint from our energy supply,” Farrell told investors on April 26, 2012. Just not yet.
As in Canada, carbon-capture projects in the U.S. are struggling. In 2011, American Electric Power Co. (AEP) abandoned plans to apply the technology at a generator in West Virginia, a project estimated to cost $668 million. At Southern’s large-scale project in Mississippi, the company expects “many challenges” after the startup and integration of the plant, CEO Tom Fanning told analysts on an Oct. 29 conference call.

‘The Real World’

Small wonder that out of the thousands of polluting sites, only 13 carbon capture projects operate around the world.
Not everyone has given up.
John Thompson, director of the fossil-fuel transition program at the Clean Air Task Force in St. Louis, points out that smokestack scrubbers were once saddled with the same debilitating cost problems as CCS. Since 1990, improvements have enabled them to reduce sulfur-dioxide emissions more than fivefold and nitrogen-oxide emissions threefold.
“I’m seeing a lot of progress on CCS,” Thompson said in an interview. Renewables, he said, are insufficient on their own.
“If you want to solve the climate problem, you need to clean the baseload,” he said, referring to the fuel types that allow power plants to run reliably around the clock.
There’s little question that the high hopes of a half-decade ago are badly faded today, leaving a gaping hole in the arsenal of measures identified to reverse the tide of greenhouse-gas emissions.
Even optimistic estimates by Bloomberg New Energy Finance for CCS expanding its footprint have it offsetting just 1/1,565th of current global emissions in the coming years.
“It’s certainly a big challenge,” Juho Lipponen, who leads the IEA’s CCS division, said in an interview. “We have scenarios that tell us in an ideal world what would need to happen. Then we have the real world.”

Monday, 8 December 2014

We Now Know How to Save the Planet. For $17.6 Trillion