|The Vattenfall CCS power station under construction at Schwarze Pumpe, Germany. The main power station can be seen in the background. Image credit: Vattenfall AB.|
A powerful US coalition of large industrial companies, power producers, and environmental defence organisations has produced the first sensible plan for incentivising the early introduction of carbon capture at solid fuel electricity plants. The scheme proposed by the US Climate Action Partnership (USCAP) addresses the most important environmental issue in the world – the burning of coal to generate electricity – in a plausible and coherent way. Coal, which is almost exclusively burnt in power stations or in steel-making, is responsible for about 36% of US emissions. If we can find a way of cheaply capturing the CO2 from power stations and storing it underground, we can then also provide the technology to Chinese and Indian generators.
The key points are as follows:
- The cap and trade scheme that the new US administration is likely to implement may not produce a carbon price that is high enough to force coal-fired power stations into CCS. Therefore CCS may need a special financial regime.
- USCAP says the US should pay power stations to sequester carbon. Payment should be highest for the first power stations to fit CCS equipment. The proposal suggests that $90 a tonne is sufficient to incentivise the first 3 gigawatts of power capacity to switch to using CCS. 3 gigawatts is approximately the power output of two large power stations such as Didcot A in the UK.
- The paper states that $90 a tonne is enough to cover the costs for the first projects. This statement is hugely encouraging because it is lower than many people expect. USCAP has members that operate coal-fired power stations so the number will not have been lightly chosen. Expressed in terms of cost per megawatt hour, the proposed payment is perhaps $80-$100, depending on the age of the plant. For comparison, UK baseload power prices are currently about $80 an hour. Prices are much lower in the US. Once 3 gigawatts of CCS plant have been installed, the report proposes that the price per tonne drops. The scheme therefore provides the highest incentive to the first-movers.
- A floor price of $30 is suggested for years 11 to 20 of the scheme. Let’s be absolutely clear: if we can actually get coal CO2 sequestration for $30 a tonne, then CCS is a viable technology. If we could decarbonise the entire UK economy for this price (i.e. not just coal-fired electricity generation), then the cost would be about 1% of GDP.
- USCAP proposes that all new payments should stop once 72 gigawatts of power generation with carbon capture has been installed. This is about a quarter of current US coal generation capacity. This further incentivises operators to move quickly down the CCS road.
- Financial measures need to be accompanied by a national programme of R+D on geologic storage and CO2 pipeline networks. (A skeleton CO2 pipeline infrastructure already exists in the US.)
- Quantitative restrictions. In addition to the CCS proposals, USCAP says that:
- a) All new power stations should have to pay for their carbon allowances.
- b) Tightening restrictions should be placed on all new power stations from 2015 onwards. I suspect that the levels proposed would only be achievable using what is loosely called ‘clean coal’ technology, probably the largely unproven IGCC approach (Integrated Gasification Combined Cycle – the coal is gasified and then burnt in a turbine). IGCC ought to be able to achieve emissions levels not far above today’s natural gas power plants and within the 800lbs (less than 350kg) CO2 per megawatt hour proposed as the cap in 2020.
Taken together, this package of proposals is a sensible way of paying power station owners to invest quickly in CCS. The levels of payment that are suggested are much lower than most people believed were possible.
The UK and other countries must take note of this package. It is a very much better set of proposals than any European scheme because it creates pressure for power station operators to start to push CCS now. In the UK, by contrast, the generators are sitting on their hands waiting to see how much they can extract in direct subsidy from government. A further advantage of the US scheme is that it provides limited reason for the inventor of any technology to restrict other generators from using the successful approach.
The rest of the extremely sensible package of proposals from USCAP can be found at http://www.us-cap.org/.