Economies of Scale vs the Learning Curve Joan MacNaughton, Senior Vice President, Power & Environmental Policies

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1 Economies of Scale vs the Learning Curve Joan MacNaughton, Senior Vice President, Power & Environmental Policies BIEE 8th Academic Conference, 23 September 2010

2 Agenda The challenge Meeting the challenge in the power sector The policy framework Conclusions BIEE - JM - 30/09/ P 2

3 World abatement of energy-related CO2 emissions Gt Reference Scenario 13.8 Gt Share of abatement % Efficiency Gt 450 Scenario End-use Power plants 6 5 Renewables Biofuels 1 3 Nuclear CCS 3 10 Source: International Energy Agency, "World abatement of energy-related CO2 emissions in the 450 Scenario," World Energy Outlook 2009 BIEE - JM - 30/09/ P 3

4 Investment, investment, investment Baseline $ 270 trn Blue Map = 450ppm scenario $ 46 trn $ 750 bn/yr 2030 $ 1600 bn Source: International Energy Agency, Energy Technology Perspectives % of 2030 emissions from existing plants 60% of 2030 plants still to be built BIEE - JM - 30/09/ P 4

5 Agenda The challenge Meeting the challenge in the power sector The policy framework Conclusions BIEE - JM - 30/09/ P 5

Production Efficiency - Fuel Preparation/Retrofit - New generation

6 Meeting the challenge in the power sector Technology Mix - Nuclear - Renewables ALSTOM INVOLVEMENT Source: Power Systems analysis Production Efficiency - Fuel Preparation/Retrofit - New generation plants - Energy management Carbon Capture and Storage BIEE - JM - 30/09/ P 6

7 Meeting the challenge: The full portfolio of technologies is needed Gas Coal Oil Hydro Nuclear (Conv. Island) Wind BIEE - JM - 30/09/ P 7

8 Meeting the challenge Source: EPRI, Creating our future, 2009 Summer Seminar BIEE - JM - 30/09/ P 8

9 Meeting the challenge Source: EPRI, Creating our future, 2009 Summer Seminar BIEE - JM - 30/09/ P 9

10 Meeting the challenge: evolution of cost of CO 2 avoided / tonne CO Public funding Demo phase Early commercial phase Mature commercial phase Source: McKinsey & Company CCS assessing the economics for the cost numbers; policy implications drawn by ZEP BIEE - JM - 30/09/ P 10

11 Meeting the challenge: learning rates Implied learning rates per doubled capacity; various periods Solar PV* Ethanol 15 Assumption for CCS Wind Power 13 Higher learning case 15 LNG 13 Base case 12 Average** 12 SO2 and NOx capture systems 12 Lower learning case 7 PV inverters Solar thermal 3 6 *Sources indicate learning rates between 18 and 23% for solar PV **Unweighted average of the learning curves, with Solar PV taken at 20.5, the midpoint between 18 and 23 Source:Worldwatch Institute; IEA; IPCC; BTM consult; ABS; NREL; IIIEE; ABI; Drewry 2007; UC Berkeley ERG; Navigant consult; McKinsey analysis BIEE - JM - 30/09/ P 11

12 CCS learning curves compared to other industries Learning curve experience from renewables and LNG as capacity is installed Implied learning curve per doubled capacity Capital cost 2004 USD/W Capacity CAGR 1,000 LNG* % 15% CCS differences: more mature component technologies Solar Thermal % 65% Ethanol % Solar PV** % 23% 40% Wind Power % 52% CCS main opportunity areas Improving energy efficiency Standardization of capture technologies ,000 10, ,000 PV inverters Cumulative capacity installed 6% MW 70% *LNG capital cost measured in USD/t and capacity measured in bcm **Other sources indicate learning rates as low as 18% for solar PV Source: Worldwatch Institute; IEA; BTM consult; ABS; NREL; IIIEE; ABI; Drewry 2007; UC Berkeley ERG; Navigant consulting; McKinsey analysis BIEE - JM - 30/09/ P 12

13 Performance is already there We Energies Pleasant Prairie USA - Coal - Chilled Ammonia CO2 capture rate 90% CO2 purity >99% Parasitic load [%] on net efficiency AEP Mountaineer USA - Coal - Chilled Ammonia 90% >99.9% Dow Chemical Co. Charleston USA - Coal - Advanced Amines 90% >99.5% 15 Realistic limit Vattenfall Schwarze Pumpe Germany - Lignite & Bit. Coal - Oxy 90% >99.7% 10 Thermodynamic theoretical limit: assuming ideal separation and compression processes* Pilot phase Demo phase Commercial phase and will continue to improve *Theoretical limit assumes ideal separation and compression processes (110bar): isentropic, no losses BIEE - JM - 30/09/ P 13

14 at a competitive cost Typical cost of electricity OECD new low carbon power plant construction /MWh PSP RoR Hard Gas with Coal with CCS CCS Nuclear Hydro Geothermal Wind Onshore Wind Offshore Solar Thermal Solar PV BIEE - JM - 30/09/ P 14 CCS is competitive with other decarbonized power sources Source: Alstom Analysis

15 Agenda The challenge Meeting the challenge in the power sector The policy framework Conclusions BIEE - JM - 30/09/ P 15

16 Policy framework for CCS Funding for large scale demos Global linked cap & trade systems (EU, US, Australia) Regional strategic plan for transport, storage National - Regulation of CO 2 storage, including liabilities - Regulatory framework foundation for a commercial offering National/Local - Public acceptability BIEE - JM - 30/09/ P 16

17 Policy framework for CCS Risks: Commercial Policy & regulatory (too little too late; inappropriate approaches to e.g. knowledge sharing/ip; tilted playing field) Political risk Absence of infrastructure BIEE - JM - 30/09/ P 17

18 Agenda The challenge Meeting the challenge in the power sector The policy framework Conclusions BIEE - JM - 30/09/ P 18

19 Conclusions Consensus over decarbonising power sector by 2030 Technologically entirely feasible All technology solutions required Policy framework to facilitate: - Level playing field - Targeted support - Tackling co-dependencies - Better risk management - Effective global co-ordination BIEE - JM - 30/09/ P 19

CCS and Its Economics

CCS and Its Economics Presentation to CCS Leadership Forum American Clean Skies Foundation Robert G. Hilton November 4, 2011 Alstom: Three Activities Leading global provider of equipment & services for