Political will fading for carbon capture and storage

As the governments of the world are locked in talks and negotiations on climate change at the United Nations (UN) climate change conference in Durban, South Africa. Sadly, once again, it is highly unlikely that a positive or useful consensus will result and to use the words from an old Clint Eastwood movie perhaps the best we can expect is that governments will “vow to endeavour to persevere” to cut emissions. Whether our planet has already reached, or is close to, a climate change tipping point only hindsight will tell us. In the meantime, one of the once highly-vaulted and hoped-for methods of tackling greenhouse gas (GHG) emissions, carbon capture and storage (CCS) appears to be losing its political shine.

Nowadays, carbon is a commodity and, just as the European Investment Bank (EIB) was set to start selling 300m European Union Allowances (EUAs) on the Emissions Trading Scheme (ETS) for funds intended to pay for up to 12 CCS projects and over 30 renewable energy projects, the price of carbon has plummeted 25% during the first week of December 2011. The EIB is likely to release only around 50% of the €3bn in funding that was originally expected meaning that only maximum of four and possibly only three CCS projects can be funded by the EU. With Reuters Point Carbon now predicting a carbon price of €12/tonne for 2013 to 2020 instead of €22 that it forecast in July 2011 to say that the financial appetite for private investment in CCS may be lessened is somewhat of an understatement. And furthermore, with many governments staring years of bleak austerity in the face it is somewhat unlikely that significant government funding may, or indeed, can be found for CCS.

Swedish utility Vattenfall is already experiencing the CCS fall-out as it revealed that it had terminated a EUR1.5bn investment for a CCS demonstration project in Jänschwalde, Germany. The project would have been supported by the EU and was set to be operational by 2015-16. “We must unfortunately accept that there is currently insufficient will in German federal politics to implement the European directive so that a CCS demonstration project in Germany could be possible”, said Tuomo Hatakka, Vattenfall´s head of business division production and country manager for Germany, in a statement. “This is a harsh setback for innovation, climate change and the German economy.” The rejection of a bill in the Bundesrat on 23 September 2011 for a legal framework on CCS in Germany seems to have forced Vattenfall’s hand with the company saying that the existing CCS law was insufficient for multi-billion investments in developing CCS.

Vattenfall, however, is involved in the recently-opened Ferrybridge Power Station project in the UK along with fellow partners Scottish and Southern Energy (SSE) and Doosan Power Systems. The GBP20m project is the first CCS demonstration project in the UK.
SSE has also entered into a joint development agreement with Royal Dutch Shell regarding its gas-fired power station in Aberdeen. The CCS facility once developed will capture carbon dioxide and transport it to Shell’s Goldeneye natural gas field in the North Sea.

Nonetheless, while the UK government is “talking the talk” CCS price tags seem to be making it extremely uncomfortable in “walking the walk” as it pulled the plug on a GBP1bn investment in a CCS trial at Scottish Power’s Longannet power station when it reportedly discovered that the trial would cost GBP1.5bn. One gets the impression that the UK government would like to push heavy CCS investment into the future where hopefully it may get forgotten about.

The UK government’s recent publication of “The Carbon Plan: delivering our low carbon future” was welcomed in a statement by the Carbon Capture and Storage Association (CCSA). However, CCSA’s chief executive, Dr Jeff Chapman, would like to see more. “We await with anticipation the delayed publication of DECC’s CCS Roadmap, which we hope will set out a higher level of ambition, providing investor confidence going forward. However, whilst we request clarity on the longer-term commitment to CCS, we urgently need to see details of the process to build the first CCS projects in the UK – to ensure the industry gets off the starting line,” said Chapman in a statement.

In Alberta, Canada, CCS seems to be the football that no one wants to kick. Former Alberta premier Ed Stelmach’s government unveiled a CAD2bn CCS commitment in 2008, just before the world fell off the financial rails, in a move that was perceived by many at taking some of the negative attention from the oil sands. Now, in 2011, with the possibility of another looming world recession, new premier Alison Redford’s government is being reported as not being committed to CCS. In fairness, the government has committed to spend CAD1.5bn on three projects related to CCS and may spend another CAD440m on another one. However, Redford did not make the commitment to spend and circumstances have changed. It would not be surprise to see the funds committed spent and perhaps the rest, despite a 15-year pledge that has been reported in the Canadian media as “a ball and chain” to Redford, may go to other GHG-reducing projects. If the feasibility of CCS is substantially damaged globally then perhaps Redford may have a get out opportunity.

On the upside, a CAD1.24bn CCS project by SaskPower and its partners at Boundary Dam, Saskatchewan, recently got the go-ahead. The demonstration project will be of a commercial scale and will capture CO2 for enhanced oil recovery (EOR). And that is probably at the root of the problem with CCS. On a business or indeed common sense approach there is something pretty silly and pretty costly in developing technology and building infrastructure for storing something deep underground. Capturing CO2 for EOR, enhanced gas recovery (EGR), growing algae for bio-mass or any other process that comes up with a viable end product must be the way forward and should attract investment from the private sector. It is little wonder that governments are backtracking.