Low Carbon Energy Technologies Series October 2015 Carbon Capture and Storage

Transcription

1 Low Carbon Energy Technologies Series October 215 Carbon Capture and Storage At a crossroads

2 Carbon Capture and Storage At a crossroads Carbon Capture and Storage (CCS) is a viable and costcompetitive technology for limiting carbon dioxide emissions. At the top of political agenda in the late 2s, the demonstration of commercial-scale CCS projects has since lost momentum, and only projects related to upstream oil and gas are moving forward. Now at a crossroads, CCS demands strong policy support due to its high up-front costs and project complexity. It is only likely to play a significant role in climate-change mitigation if there is genuine determination to reach the 2 C target. The content of this summary is based upon the Carbon Capture and Storage at a Crossroads FactBook. For the complete FactBook and other FactBooks by the A.T. Kearney Energy Transition Institute, please visit 2 Summary FactBook Low Carbon Energy Technologies Series October 215 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes.

3 CCS is expected to play an important role in achieving least-cost portfolio approaches to mitigating CO 2 emissions The rise of atmospheric CO 2 concentration needs to be mitigated As CO 2 emissions and the atmospheric concentration of CO 2 reach record highs, room for maneuver in mitigating the adverse effects of climate change is becoming dangerously tight. There are three complementary options for mitigating CO 2 -induced climate change: limiting fossilfuel consumption, expanding CO 2 sinks (e.g. forestry), and preventing fossil-fuel combustion emissions from escaping into the atmosphere in a process called Carbon Capture and Storage (CCS). CCS is one of several mitigation options In the lowest-cost pathway to limiting the global increase in temperature to no more than 2 C (2DS Scenario), the IEA estimates that CCS will contribute to 13% of cumulative CO 2 emission reductions by 25. The IPCC, meanwhile, estimates that attempting to achieve the 2 C target without CCS would more than double mitigation costs, and may not be feasible at all. Figure 1. Global annual CO 2 emissions (excluding land-use) GtCO 2 per year % 195 Historical emissions Future emissionreduction levers -2.6% Fossil-fuel use has been responsible for the majority of manmade CO 2 emissions since the Industrial Revolution 6DS Scenario do-nothing Cumulated contribution (212-25) 3% 13% 8% 49% 2DS Scenario: lowest-cost pathway to limiting the concentration of GHGs to a level that would give a 5% chance of limiting the global increase in temperature to a maximum of 2 C Cement Gas Oil Coal and solid biomass Renewables CCS Nuclear Efficiency & fuel switching Source: IEA (215) Energy Technology Perspective ; Carbon Dioxide Information Analysis (CDIAC) 3 Summary FactBook Low Carbon Energy Technologies Series October 215 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes.

4 CCS refers to a set of CO2 capture, transport and storage technologies that are put together to abate emissions from various stationary CO2 sources Figure 2. CCS value chain CO 2 Sources Capture Transport Storage Upstream O&G Gas sweetening Underground geological storage Natural Gas Processing CO 2 /CH 4 separation Deep saline aquifers Depleted oil and gas fields Unmineable coal seams Heavy industries Steel Cement Power generation Coal Gas Petroleum coke Biomass Industrial hydrogen production and use Chemicals (ammonia) Synthetic fuels Coal-to-liquid Steam methane reforming Biomass-to-liquid Refineries (fuel upgrading) Post-combustion CO 2 /N 2 separation Oxy-fuel combustion O 2 /N 2 air separation unit Oxy-fuels boiler Pre-combustion Gasification or reformers CO 2 /H 2 separation Additional equipment Compression Dehydration Pipelines Ship Networks & hubs Beneficial reuse of CO 2 Enhanced oil/gas recovery Enhanced coal bed methane Synthetic fuels Algae biofuels Formic acid Synthetic natural gas Urea yield boosting Mineralization Polymer processing Other options in R&D Storage in basaltic formations Ocean storage Working fluid for enhanced geothermal systems Source: A.T. Kearney Energy Transition Institute analysis 4 Summary FactBook Low Carbon Energy Technologies Series October 215 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes.

5 CCS is already a reality in power generation, natural-gas processing and industrial hydrogen plants CCS is real 15 large-scale integrated projects are already capturing 28.5 MtCO 2 per year in order to store it in deep saline aquifers or in oil reservoirs as part of enhanced oil-recovery (EOR) operations. This is equivalent to the CO 2 output of 9 GW of coal-fired power capacity. In addition, seven other projects have reached a final investment decision. Overall, all but one of the projects are related to the oil and gas industry, in which CO 2 is either captured at a low cost from oil & gas processing plants or is sold for use in EOR. Demonstration, rather than R&D, is mostly needed Industry players are adamant that the individual components of CCS have been proved to be technically feasible and are ready to be demonstrated on a large scale in other industrial sectors, such as cement, steel, and pulp and paper production. Research and development (R&D) efforts accelerated in the early 2s, and investments are now substantial (~$1.6 billion in 213, equivalent to that in wind or biofuels). Public laboratories and corporate players chemicals companies, utilities, and oil and gas firms are focusing on developing efficient capture processes that would reduce the CCS energy penalty (about 2%) and water-consumption penalty (between 1% and 8%, depending on the capture process. Innovation needs in CO 2 transport are less obvious: 5 CO 2 pipelines, with a combined length of 6,6km, already operate in North America, transporting over 6 MtCO 2 annually, mostly for EOR purposes. As for CO 2 storage, field demonstrations rather than lab tests are most needed, in order to improve scientists understanding of how CO 2 behaves when injected underground. Storage site identification remains of prime importance Early estimates of available underground storage space seem to indicate massive theoretical potential globally, mostly in deep saline aquifers. Yet, these global estimates mask local constraints: according to the Global CCS Institute, the importance of undertaking storage-related actions this decade to prepare for widespread CCS deployment post-22 cannot be overstated CCS is a necessary and technically viable technology for limiting emissions from thermal power plants, heavy industries, and oil & gas processing Figure 3. Distribution of the 22 large projects 1 in operation or past final investment decision (FID) As of October 215 Lower costs Passive storage Storage via enhanced oil recovery (EOR) Decrease of capture costs High costs O&G Processing 2 Industrial Hydrogen 3 Power or Heavy Industry O&G-related large projects 1 past FID 4 operating large projects 1 past FID large projects No storage revenues Proven Final investment descissions made Standstill large projects 1 past FID 7 operating large projects 1 past FID 3 operating large projects 3 past FID 1 operating Storage revenues + Note: 1 Large projects refers to integrated CCS projects above.6 MtCO2/year. 2 Natural-gas processing plant, oil sand upgraders or synthetic natural gas 3 Steam methane reformers or coal gasification plants producing hydrogen for chemicals or fertilizers. FID: Final Investment Decision Source: A.T. Kearney Energy Transition Institute analysis based on GCCSI database (accessed October 215) 5 Summary FactBook Low Carbon Energy Technologies Series October 215 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes.

6 Individual technologies are now sufficiently proved to enable large-scale integrated demonstration projects in the power sector Figure 4. Investment-risk curve of CCS technologies and integrated plants Capital Requirements x Technology Risk Enhanced coal-bed methane Post-combustion power plant Pre-combustion power plant Oxy-combustion power plant Cement with CCS Steel with CCS Atmospheric CO2 scrubbing CO2 shipping 2nd gen. CO2 seperation (solvents, sorbents, membranes, looping, pressure and temperature swing) 3rd gen. separation technologies (mineralization, bio-sequestration, cryogenic, ionoc liquids ) Aquifier storage and monitoring Syngas plant with CCS (synthetic natural gas, fertilizer, industrial hydrogen) Oil and gas field storage and monitoring Natural-gas processing with CCS 1st gen. solvents for CO2/N2 (flue gas) seperation Membranes for CO2/CH4 seperation Large EOR projects for oil and gas industry Integrated CCS project Capture technology Transport technology Storage technology 1st gen. sorbents & solvents for CO2/N2/CH4 separation CO2 injection in oil fields CO2 pipelines Air-seperation unit Valley of Death First-of-a-kind commercial projects Labwork Bench scale Pilot scale with ongoing optimization Widely-deployed Research Development Demonstration Deployment Mature Technology Maturity Source: A.T. Kearney Energy Transition Institute 6 Summary FactBook Low Carbon Energy Technologies Series October 215 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes.

7 CCS can be a very competitive mitigation option, but its high up-front costs demand strong political will CCS is perceived as a costly technology because its large, indivisible up-front costs only bring long-term, uncertain climate benefits. Each commercial-scale CCS project can cost up to a billion dollars in capture costs alone, although they are capable of abating over 1 MtCO 2 per year for several decades (the equivalent of taking more than 2, cars off the road over the lifecycle of the plant). First-of-a-kind projects incur high risk premiums, and, in the absence of robust carbon-pricing mechanisms ( 7/tCO 2 in Europe, $2/tCO 2 tax credit in the U.S.), direct public financial support is required to cover the up-front cost of large-scale CCS projects. Yet CCS could be an effective way to curb CO 2 emissions in the power sector: in power generation, current abatement costs range from $48 to $114/tCO 2 avoided in the U.S., which is no more expensive than installing offshore wind or solar plants, especially if the carbon-intensity of the electricity being displaced is significantly lower than that of coal (for instance, if nuclear or hydropower account for a high share of a country s power fleet). In the U.S., cheap natural gas prices have brought down cost estimates of gas-ccs electricity below their coal-ccs counterpart, and might provide baseload, carbon-free electricity at prices similar to nuclear. With capital costs of CCS expected to decrease by 8% for each doubling of capacity installed, CCS power could be fully competitive with other clean electricity supply between 23 and 24 in Europe and in the U.S. under the IEA s 2DS scenario. Perhaps more importantly, no alternative exists for cutting emissions from industrial applications Steel and cement production, for instance, are carbonintensive industries, indispensable for the construction of our future infrastructure. Some other industrial plants with CO 2 separation already built into their processes such as natural-gas processing or steam methane reforming could easily abate their CO 2 emission via CCS, at costs as low as $14/tCO 2 avoided. Finally, bioenergy coupled with CCS (BECCS) could scrub CO 2 out of the atmosphere while producing renewable energy, allowing a return to pre-industrial atmospheric carbon conditions over the long run. Carbon prices are generally too low to render CCS commercial on their own Figure 5. Current costs of CO 2 avoided by CCS in the U.S., relative to the same plant without CCS $/tco 2 avoided CCS (Gas processing) 2 CCS (Hydrogen) CCS (Steel) 15 CCS (Cement) CCS (Coal) CCS (Natural Gas) PV abatement costs in 215 in Germany 2 US sequestration tax credit: $2/tCO 2 stored EU carbon trading scheme, and average grant per CCS project 1 : ~7 /tco 2 avoided Note: Range of studies at 8% discount rate for CCS power plants, and 1% for other; 1 Sum of all allocated grants over the cumulated CO2 abatement of all large projects that have received public capital grants, assuming a plant lifetime of 3 years; TWh of Solar PV generated in Germany in 214 avoided about 23 MtCO2 during the year (.66tCO2/MWh), at a cost of about 143/tCO2 avoided if using the January 215 feed-in-tariff price of 95/MWh for utility-scale PV plants (Fraunhofer 215) Source: GCCSI (215), The costs of CCS and other low-carbon technologies for coal and gas; IEA (211) Industrial Roadmap for Hydrogen ; GCCSI (211), Economic assessment of CCS technologies. Fraunhofer (215), Recent facts about PV in Germany 7 Summary FactBook Low Carbon Energy Technologies Series October 215 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes.

8 The CCS project pipeline has been dramatically reduced in size since the demonstration phase began and will largely miss its initial targets CCS entered the demonstration phase in 29 At that time, CCS was at the top of the political agenda: declared global public financial support exceeded $3 billion through various economic-stimulus packages; 7 integrated projects were in various stage of planning; and the IEA had recommended that 1 projects be storing 25 MtCO 2 / year by 22. The demonstration phase has stalled As of end-214, the pipeline of large-scale CCS projects had progressed far more slowly than initially hoped. Final investment decisions taken since 28 have amounted to less than $14 billion and involve only 13 new integrated projects. More worryingly, very few new projects have been identified since 212, several promising ventures have been cancelled and almost no new firm investment decisions have been taken. As a result, committed public funding has decreased Money spent or that remains committed to supporting CCS initiatives has been reduced from $3 billion to $1 billion. In reality, the financial support required for each project has been so large that governments have rarely had the political will to subsidize CCS to the extent required: proposed grants have represented $4-$3 per tco 2 avoided over the lifetime of the plant, which is generally lower than required to pay for the installation costs of CCS. In addition, depressed carbon prices in Europe, public opposition to onshore storage, and the complexity of CCS projects have resulted in promising projects being cancelled in the advanced stages of planning. Furthermore, public funds allocated to cancelled projects have not been reallocated. Figure 6. Maximum potential CCS capacity installed in various forecasts MtCO 2 /year GCCSI (21) maximum projected capacity 2 GCCSI (211) maximum projected capacity 2 GCCSI (212) maximum projected capacity 2 GCCSI (213) maximum projected capacity 2 GCCSI (214) maximum projected capacity 2 GCCSI (215) maximum projected capacity 2 64 MtCO 2/year in 22 (39 projects) 22 IEA (29) 22 target MtCO 2/year (1 projects) Year end Note: 1 BLUE Map target, lowest-cost pathway to stabilize global warming below 2 C; 2 Total identified project pipeline; Source: A.T. Kearney Energy Transition Institute; GCCSI (21, 211, 212, 213, 214, 215), Global Status of CCS ; IEA (29) Technology Roadmap for CCS Investments in CCS projects remain insignificant compared with those in renewables and amounted to less than $2 billion per year on average over the period Figure 7. Cumulative spending on integrated CCS plants $ billion Public spending on R&D and projects prior to FID Public spending on demonstration plants past FID Note: Private R&D figures are undisclosed Source: IEA (215) Energy Technology Perspective Private funding on demonstration plants past FID 8 Summary FactBook Low Carbon Energy Technologies Series October 215 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes.

9 Committed public funding is a fraction of initially hoped-for levels, due to depressed carbon prices, projects being cancelled and funds not being reallocated Figure 8. CCS political attractiveness curve Atractive IEA CCS Roadmap Announced global public support to CCS exceeds $3 billion as part of recovery plans COP 19 conference in Copenhagen postpones global climate-change mitigation plans to 215 Public opposition to onshore storage in Europe EU CCS Directive G8 leaders pledge to build 2 new large-scale CCS demonstration projects Economic crises deepens in Europe CCS included in Clean Development Mechanisms of the Kyoto Protocol Unatractive IPCC Special Report on CCS First large-scale projection aquifer (Sleipner) NER 3 round 1 results in zero projects selected for funding. Funding is re-routed to other climate-change mitigation projects China increases focus on CCS under its 5-year plan 12 new large, integrated CCS projects are identified IPCC new report confirms CCS as critical part of least-cost mitigation portfolio Shale revolution makes cheap natural gas available in the US: various coal CCS projects cancelled EU ETS carbon price collapses UN COP 21 on Climate Change? NER 4 and EU 23 energy and climate policy announced First CCS power plant begins operation NER 3 round 2 results 7 EU projects cancelled? FutureGen 2. cancelled Oil-price fall threat to CO2-EOR? US and China issue joint statement on climate change 2 and announce CCS collaboration initiative Large methanol project with CCS & EOR cancelled for economic reasons Note: COP: United Nation Conference of the Parties. NER: New Entrant Reserve fund for climate mitigation in Europe. EU ETS: European Emission Trading Scheme. 1 EU GHG reduction goal: 4% by U.S. GHG reduction goal: 26-28% by 23. China s reduction goal: from 23 onwards. Source: A.T. Kearney Energy Transition Institute 9 Summary FactBook Low Carbon Energy Technologies Series October 215 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes.

10 Figure 9. CCS Project pipeline: by region and lifecycle stage (Excluding earliest stage of planning*) Rest of the World Europe In Salah 1 Lula Uthmaniyah Abu Dhabi Gorgon 2 = 1 Mtpa of CO2 (area of circles proportional to capacity) Operate Execute Define Sleipner Sno hvit ROAD Peterhead Don Valley White Rose China Sinopec Qilu Yanchang PetroChina Jilin Sinopec Shengli Canada Great Plains Boundary Dam Quest ACTL Agrium ACTL Sturgeon Spectra 2 United States Val Verde Enid Fertilizer Shute Creek Coffeeville Air Products Lost Cabin Century Plant Illinois Industrial Petra Nova Kemper TCEP HECA Operating Note: *Given the long lead time from planning to operation, typically 7-1 years, only projects past or near FID (define stage) are shown in this graph. Projects in the earliest stages of planning, such as identify and evaluate, have little chance of actually operating before Injection currently suspended. 2 Institute estimate of start date. Source: GCCSI (215), Global Status of CCS 1 Summary FactBook Low Carbon Energy Technologies Series October 215 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes.

11 CCS is advancing at two speeds: the only projects making headway are those related to the upstream oil and gas industry There are 33 large integrated projects in sufficiently advanced stages of planning to be representative of the current CCS landscape: The vast majority are located in North America, driven by EOR. In Europe, until relatively recently, there were plans to have 1 projects in operation by 215. But this has been scaled back to four projects all in the North Sea none of which has even passed final investment decision. Australia s former ambition to demonstrate power or industrial CCS has ended. In the Middle East, low-cost CCS opportunities exist, but large-scale CO 2 demand for EOR is generally considered to be 2-3 years away. China is the only country in which the CCS project pipeline is growing. It is also rapidly driving down the cost of capture, having openly expressed an ambition to become an exporter of capture-ready plants. Globally, only five out of the 33 are clean power plants that do not involve EOR, and none has reached a final investment decision. This trend is likely to continue until 22, as non-eor storage projects are more complex to coordinate, depend on benign climate policies, and raise publicacceptance issues and reservoir-discovery costs that can be avoided in EOR storage projects. By the end of the decade, operating CCS capacity should reach 6 MtCO 2 / year, three quarters of which will be related to the production of oil or gas, and less than a third to power generation (year end) Plant type 215 Storage type 65 Power plants may account for 3% EOR may account for 7% of the 6 of operating capacity by 22 operating capacity by (year end) CCS has become a reality in the power sector, but remains dependent on synergies with the upstream oil & gas industry Figure 1. CCS integrated project pipeline, excluding those in the earliest stage of planning In MtCO 2 /year Steel Power plant Industrial hydrogen O&G processing Dedicated resevoir EOR Note: Projects in the earliest stages of planning, such as those categorized by the terms identify and evaluate, have been excluded from these graphs as they have little chance of operating before 22. Source: Adapted from GCCSI (215) Global Status of CCS 11 Summary FactBook Low Carbon Energy Technologies Series October 215 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes.

12 EOR might help drive CCS forwards during the present decade, but CCS will only play a significant role in climate change mitigation if ambitious climate policies are pursued Growing demand for the beneficial reuse of CO 2 for EOR could drive CCS forwards during the present decade in the U.S. and, potentially, China. Preliminary studies expect EOR to be technically capable of storing enough CO 2 to allow for full-scale CCS deployment in various regions, with the notable exceptions of Europe and Asia. Although the recent fall in oil prices may have some negative impacts on demand for and the price of CO 2 for EOR in the U.S., it could also accelerate CCS projects in the North Sea, which are sometimes viewed as opportunities to postpone the decommissioning of unprofitable offshore infrastructure. In the long term, the IEA estimates that the contribution of CCS to climate mitigation is likely to remain marginal if only energy policies adopted and proposed as of mid-215 are considered. CCS will only play a significant role in climatechange mitigation if there is genuine determination to reach the 2 C target. Stricter carbon policies will be required to develop CCS beyond upstream oil and gas, and the outcome of the 215 UN climate talks in Paris will be critical to the long-term success of CCS. Figure 11. CO 2-EOR in the U.S.: Oil production and CO 2 supply ( ) The outcome of future UN climate talks will be critical to the long-term The success outcome of CCS. of future UN climate talks will be critical to the long-term success of CCS. Kbbl/Day In 214 there are 136 CO2-EOR projects MtCO2/year 65 in the US, connected to 17 CO2 sources, 15 US oil production from CO2-EOR (left scale) 12 of which are from industrial capture US CO2 sources for EOR (right scale) Capture from power or industrial plants Historical data Projections 12 5 Capture from gas processing plants Natural CO2 sources MtCO2/year anthropogenic CO2 supply, equivalent to 1 GW of coal power plant with CCS Source: US DOE NETL (214), Near-Term Projections of CO2 Utilization for Enhanced Oil Recovery 12 Summary FactBook Low Carbon Energy Technologies Series October 215 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes.

13 Conclusion Carbon Capture and Storage is one of the most underrated climate-change mitigation options available today. It is widely regarded as technically capable of abating vast amounts of carbon dioxide from the atmosphere at competitive costs. Yet, unless associated with a beneficial reuse of CO 2, CCS represents only a cost center for project owners. Therefore, the CCS industry is at risk of never developing beyond the few subsidized projects, unless proper prices are associated with carbon emissions. A.T. Kearney Energy Transition Institute FactBooks Natural Gas Series Introduction Gas Hydrates Low Carbon Energy Technologies Series Carbon Capture and Storage Wind Solar PV Solar CSP Storage Hydrogen Water & Energy Smart Grids Climate Change About the A.T. Kearney Energy Institute The A.T. Kearney Energy Transition Institute is a nonprofit organization. It provides leading insights on global trends in energy transition, technologies, and strategic implications for private sector businesses and public sector institutions. The Institute is dedicated to combining objective technological insights with economical perspectives to define the consequences and opportunities for decision makers in a rapidly changing energy landscape. The independence of the Institute fosters unbiased primary insights and the ability to co-create new ideas with interested sponsors and relevant stakeholders. Acknowledgements A.T. Kearney Energy Transition Institute wishes to acknowledge Mr. Juho Lipponen, Head of the CCS Unit at the International Energy Agency (IEA). His review does not imply that he endorses this FactBook or agrees with any specific statements herein. The Institute gratefully acknowledges the 45 companies (oil and gas, utilities, coal, equipment providers) interviewed during the preparatory phase of the study and also extend acknowledgements to the International Energy Agency (IEA), the Global CCS Institute (GCCSI) and Bloomberg new Energy Finance (BNEF) for their support in providing data and reviewing the report. Finally, the Institute also wishes to thank the author of this FactBook for his contribution: Bruno Lajoie. For further information about the A.T. Kearney Energy Transition Institute and possible ways of collaboration, please visit or contact us at contact@ 13 Summary FactBook Low Carbon Energy Technologies Series October 215 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes.