Oxburgh’s CCS Illusion

By Paul Homewood

 

http://www.telegraph.co.uk/business/2016/09/12/parliament-calls-for-carbon-capture-to-revive-british-industry-a/

 

Ambrose Evans-Pritchard writes:

 

A high-level Parliamentary inquiry has called for a massive national investment in carbon capture to revive depressed regions of the North and exploit Britain’s perfectly-placed network of offshore pipelines and depleted wells.

Lord Oxburgh’s cross-party report to the Government has concluded that the cheapest way to lower CO2 emissions from heavy industries and heating is to extract the carbon with filters and store it in the North Sea oil.

The advisory group said the technology for carbon capture and storage (CCS) is ready to go immediately and should cut costs below £85 per megawatt hour by the late 2020s if launched with sufficient conviction and on a large scale, below the strike price for the Hinkley Point nuclear project.

It could be fitted on to existing gas plants or be purpose-built in new projects, and could ultimately save up £5bn a year compared to other strategies. Unlike other renewables CCS does not alter with the weather or suffer from intermittency. It can be “dispatched” at any time, helping to balance peaks and troughs in power demand.

“I have been surprised myself at the absolutely central role that CCS has to play across the UK economy,” said Lord Oxburgh, a former chairman of Shell Transport and Trading.

“We can dramatically reduce our CO2 emissions, create tens of thousands of jobs, and give our domestic industry a great stimulus by making use of technologies which are now well understood and fully proved,” he said.

No other country is likely to take the plunge first since few have the magic mix of industrial hubs, teams of offshore service specialists, and cheap, well-mapped, sea storage sites all so close together. “CCS technology and its supply chain are fit for purpose. There is no justification for delay,” says the report, to be released today.

Lord Oxburgh said the state must take the lead and establish the basic infrastructure in the early years.

The report called for a government delivery company modelled on Crossrail, or the Olympics Authority, taking advantage of rock-bottom borrowing costs. It could be privatised later once the CCS has come of age.

The economic calculus of CCS is sophisticated. There is no avoiding the fact roughly 18pc of the power from gas or coal is lost in the process, the so-called “parasitic load”. The technology is not viable today without subsidies, given that carbon prices in Europe are barely $5 a tonne.

But the COP21 climate deal agreed in Paris implies a ratchet effect of higher carbon penalties for the next half century. The equation will look very different at $50 a tonne; at $100 the storage sites will be worth more than fossil fuels. Countries able to dispose of CO2 most effectively may become the new masters of the energy world.

Other renewables have a 20-year head start on CCS technology. Advocates say costs would plummet once there was a concerted push. Managers of the world’s first utility scale CCS plant at Boundary Dam in Canada say they could shave 30pc off the next plant.

For the industrial hub of Teesside – once home to the world’s greatest iron works, and now reeling from the loss of the Redcar steel plant – it may mean the difference between regeneration and slow death. The valley hosts 58pc of Britain’s chemical industry and five of the UK’s top 25 CO2-emitting plants. CCS could ultimately help it to leapfrog rivals with the cheapest decarbonised energy in Europe, and reclaim some of its former glory.

The initial outlay for the state body would be £200m to £300m spread over four years, with a second body exploring how to decarbonise heat. An earlier study for the Government concluded that the total capital costs for transport and storage for all sites would be £4.4bn, with an offshore lifetime of 40 years.

The push for CSS divides green activists. Some fear the stored CO2 may leak and cause further acidification of the oceans. “Rather than being a solution, it risks perpetuating the problem,” says Friends of the Earth.

http://www.telegraph.co.uk/business/2016/09/12/parliament-calls-for-carbon-capture-to-revive-british-industry-a/

 

The full Oxburgh report is here.

 

There are a number of points:

 

1) The covering letter to the report states:

I have had a long association with CCS and the CCS industry as do many members of the group. However, after so many false starts I began this study, as I know a number of my colleagues did, quite prepared to advise you to write-off CCS as a part of UK energy policy. As you will see, our report recommends the opposite of this.

An uncharitable person would perhaps come to the opposite conclusion – that their closeness to the CCS industry has biased the report’s findings.

 

2) Amongst the members of the Group is Bryony Worthington, formerly of Friends of the Earth. Can she really be a suitable member?

 

3) None of the Group members appears to have had any industrial experience, especially energy intensive industries which will be heavily affected by high energy prices and regulation.

 

4) Even AEP admits that CCS comes with a price. But then goes on to repeat earlier claims that Paris will result in higher carbon penalties.

The economic calculus of CCS is sophisticated. There is no avoiding the fact roughly 18pc of the power from gas or coal is lost in the process, the so-called “parasitic load”. The technology is not viable today without subsidies, given that carbon prices in Europe are barely $5 a tonne.

But the COP21 climate deal agreed in Paris implies a ratchet effect of higher carbon penalties for the next half century. The equation will look very different at $50 a tonne; at $100 the storage sites will be worth more than fossil fuels. Countries able to dispose of CO2 most effectively may become the new masters of the energy world.

As we already know, CO2 emissions will continue to rise sharply in China, India and the rest of the developing world, at least until 2030. There is simply no way that China and co will then agree to hamstring all of this CO2 intensive power with carbon taxes.

 

5) The essence of the report’s recommendations is that work on developing CCS power stations and the transport and storage network will be undertaken by a state owned company, the CCS Delivery Company or CCSDC.

A budget of up to £300 million will be required, but this does not include construction work. It purely covers design and planning work.

There is still no guarantee, even after this stage, that billions won’t be poured down the drain building CCS systems that don’t work.

 

6) Even if everything goes to plan, the report still estimates that power from CCS fitted plants will still cost £85/MWh, twice the current price.

This is claimed to be economic, because it is cheaper than nuclear or offshore wind power.

It is recommended that the price the CCSDC can charge is capped at £85/MWh. But can you honestly see a state owned company, effectively a monopoly, not charging more if it is losing money?

It sounds to me like an open cheque book.

 

7) One particularly pernicious recommendation is for a CCS Obligation System:

 

 

So when you fill your car up, you will also have to pay for CCS certificates. Industry of course will be hit even harder.

 

 

 

The bottom line in all of this is that we should plough on with CCS in the hope that, someday, it might actually be commercially viable. In the meantime, it is not clear whether Lord Oxburgh and co believe we should carry on building offshore wind farms, solar farms or Hinkley Point.

If we do, we simply end up with far too much capacity. And if we don’t, pray tell me where we will get our power from in 2030? 

 

And one final thing. 

 

There is a very interesting graph in the report:

 

 

Just to emphasise, the red curve is the equivalent electricity demand for heat, (presumably on top of the actual electricity demand). Most heating is currently supplied by natural gas.

It is well recognised that, if heating is decarbonised, electricity consumption will rise. Figures of around 30% are sometimes estimated.

But average figures, such as this, don’t take into account the effect on peak demand. What this graph shows is that we could need more than 300GW of electricity capacity for those peak periods in winter, compared to the approximate 60GW which we currently have.

To pretend that we could ever have 300GW of dispatchable capacity is simply pie in the sky.