On behalf of the Zero Emissions Platform, amdelightedto beheretoday to sharewithyou the result of a markedlyinnovativepiece of work by ourplatform on the costs of CCS in the EU in the post-demonstration phaseAs has been outlined by my colleagues, in order to keep global warming below 2ºC – cost-effectively – CCS technology must provide 20% of the global emission cuts required by 2050Indeed, the costs of doing so without CCS are estimated to be over 70% higher, amounting to an additional $1.3 trillion every year.In turn, CCS will enable Europe to enjoy a surge in economic growth – creating new jobs, boosting industry and promoting technology leadership – while ensuring a secure energy supply.In order to establish a reference point for the costs of CCS, the companies, scientists, academics and environmental NGOs that together make up the ZEP undertook a ground-breaking study based on new data provided by member organisations on existing pilot and planned demonstration projects. The aim: to estimate the costs of complete CCS value chains (i.e. the capture, transport and storage of CO2) for new-build coal- and gas-fired power plants located at a generic site in Northern Europe, from the early 2020s.
Let’s first outlinewhythisstudycan claim to actually break new ground in the area of costing CCS.Firstly, publiclyavailable data related to the costs of CCS is rare, with the use of new, in-house data virtuallyunheard of…Given the reports cover the complete CCS value chain – capture, transport and storage – itshould come as no surprise that over 100 contributorsfromZEP’s Taskforce Technologyspent 2 years to produce the finalised reportsThe costs were then estimated for new build coal- and natural gas-fired power plants, located at a generic site in Northern Europe from the early 2020s.BASE and OPTI represent normal technology refinement and development following a successful demonstration. It should be noted though, that it does not describe a mature technology, which will only be available in the longer term.With these key parameters in place, a reference point for the costs of CCS was established based on existing pilot and planned demonstration project.
A number of key conclusions were reached.CCS can technically be applied to both coal- and natural gas-fired power plants.Their relative economics depend on power plant cost levels, fuel prices and market positioning, whereas applicability is mainly determined by load regime.Future updates will also cover co-firing with biomass as it provides significant abatement potential when combining CCS with sustainably-produced biomass feedstock.
ZEP’s study indicates that the EU CCS demonstration programme will not only prove the costs of CCS, but provide the basis for future cost reductions, enhanced by the introduction of second- and third-generation technologies.CCS is therefore on track to become one of the key technologies for combating climate change – within a portfolio of technologies, including greater energy efficiency and renewable energy.Indeed, recent reports such as the IEA’s “Projected Costs of Generating Electricity - 2010” indicate that the costs of post-demonstration CCS with coal and gas, as presented in ZEP’s study, will be cost-competitive with other low-carbon power options.
This figure shows the Levelised Cost of Electricity (LCoE) of integrated CCS projects compared to the reference plants without CCS. In the figure one can see that the application of CCS to fossil fuel power plants will result in higher electricity generating costs (increasing from ~€50/MWh up to ~€70/MWh for hard coal) This is valid if excluding the EUA costs for the conventional plant. As can be seen, the two coal cases are almost similar in cost (~€70/ MWh excluding EUA costs), while the gas case shows a higher cost (~€95/MWh excluding EUA costs).At lower EUA prices, the coal cases with CCS also come out more favorably than the gas case when compared to the reference plants.Gas CCS plants though produce less than half the amount of CO2 to be captured per MWh than coal, resulting in lower transport and storage costs per MWh.A conclusion that can also be drawn is that Natural gas-fired power plants without capture have an LCoE of ~€70/MWh, rising to ~€90/MWh with capture (at middle fuel prices). This means that a gas plant (at an EUA price of ~€35/ton of CO2) without CCS is competitive with coal with CCS.The blue bars show that the combined cost of the power plant with capture comprises 80-90% of the total LCoE (~75% of the additionalLCoE for CCS vs. the reference plants). However, CO2 transport and storage to a large extent determine the location and decision to proceed with a project.Posing substantial development and scale-up challenges, costs are dominated by upfront investments, while any reward depends on volume streams, suitability of the storage site, utilization and the development of an infrastructure.
As can be seen, the EUA break-even cost corresponds to a price of €37/ton of CO2 for hard coal; ~€34/ton of CO2 for lignite; and ~€90/ton of CO2 for gas.At an EUA price of €35/ton of CO2 (in accordance with EU estimates of EUA prices for 2025), these full-size, coal-fired CCS power plants are therefore close to becoming commercially viable, while the gas case is not.However, unabated gas power plants remain a commercial option, as shown in Figure 1 at reasonably low gas fuel prices.
In this figure, one can see that on an LCoE basis, there is no significant difference between the three capture technologies for coal (within the available accuracy): hard coal-fired power plants without capture have an LCoE of ~€48/MWh (excluding EUA costs), rising to €65-70/ MWh with capture for an OPTI plant at middle fuel prices.However, complexity differs considerably between the three options and none will become fully commercial until several large-scale plants have been operating following the demonstration phase. Achieving high plant availability is therefore a critical key to keeping costs competitive.
As anticipated, an analysis of natural gas CCGT power plants with post-combustion capture shows a heavy dependence of fuel costs on the final result.At the lower end of the cost range of natural gas, CO2 avoidance costs are still more than double those of a hard coal-fired power plant……but due in part to the lower quantities of CO2 to be captured, the LCOE is competitive with other fuel sources, being ~€65/MWh for a natural gas price slightly under €5/GJ.
Typical capacity of 2.5 Mtpa and “point-to-point” connections are assumed. This table shows the unit transportation cost (€/tonne) for such projects, depending on transport method and distance.Pipeline costs are roughly proportional to distance, while shipping costs are only marginally influenced by distance. Pipeline costs consist mainly (normally over 90%) of CAPEX, while for shipping, CAPEX is normally under 50% of totalannual costs.If the technical and commercial risks are also considered, the construction of a “point-to-point” offshore pipeline for a single demonstration project is obviously less attractive than ship transportation for distances also below 500 km.
Once CCS is a commercially driven reality, it is assumed that typical volumes are in the range of 10 Mtpa serving one full-scale coal-fired power plant, or 20 Mtpa serving a cluster of CO2 sources. Pipelines benefit significantly from scale when comparing costs with the 2.5 Mtpa point-to-point solutions in the previous table, whereas the scale effects on ship transport costs are less significant. Combining ship and pipe transport in the development of clusters could provide cost-effective solutions – especially for volume ramp-up scenarios. For short to medium distances and large volumes, on the other hand, pipelines are by far the most cost-effective solution, but require strong central coordination.
This figure clearly shows the costbenefitsbehindonshore pipelines and clusters, whichcanprovide far largerquantities of CCS bringingcosts down dramatically…
The left hand diagram shows results for short distance CO2 transport, of 180 km, while the right diagram is valid for medium distances of 500 km.
Conclusions are that for short to medium distances and large volumes, onshore pipelines are by far the most cost effective solution, but require strong central coordination.Since high upfront costs, (CAPEX and risk) are barriers to rapid CCS deployment, combining ship and pipeline transport via the development of clusters could provide cost effective solutions, especially for volume ramp-up scenarios.However, this entails the development of an infrastructure – including start-up costs, central planning and the removal of any cross border restrictions. Technology and final costs therefore appear to be less of an issue than the development of a rational system for transport.
Publicly available data on CO2 storage costs barely exists.This figure shows the costs for storage of CO2 in six different typical cases. Off-shore and on-shore; Depleted gas and oil fields and Saline aquifers; with and without usable existing infrastructure, legacy wells.As can be seen the cost range is large – from €1 to €20/ton of CO2. On the assumption that the cheaper available storage sites will be developed first, and the more expensive when capacity is required, it could be argued that storage costs for theearly commercial phase will be at the defined ranges for onshore SA at €2-12/ton; onshore DOGF at €1-7/ton; offshore SA (with the largest capacities) at €6-20/ton; and offshore DOGF at €2-14/ton. In other words: – Onshore is cheaper than offshore – DOGF are cheaper than SA (particularly if they have re-usable legacy wells) – Offshore SA show the highest costs and the widest cost range – Sensitivity is dominated by field capacity, injection rate and depth.
In conclusion, abundant CO2 storage capacity is available in Europe. However, the best known storage sites are also the smallest and not sufficient for a larger system. Offshore – followed by onshore – SA have the largest potential, but also the highest costs. If the best options can be used, costs could be as low as a few €/tonne, rising to tens of €/tonne if the larger and more remote SA have to be used. Given the large variation in storage costs and the risk of in the exploration of deep saline aquifers that are ultimately found to be unsuitable, a risk-reward mechanism is needed to realize their significant potential. Developers of these more efficient, but less known, storage sites must therefore be rewarded for taking on the risk and upfront costs.
ZEP acknowledges that the costs of CCS will be inherently uncertain until further projects come on stream. The study therefore does not provide a forecast of how costs will develop over time.The study will be updated every two years in line with technical developments and the progress of the EU CCS demonstration program.While this study focuses on power generation only, future updates will also discuss co-firing with biomass, combined heat and power plants, and the role of industrial applications in greater detail.
The Post-2020 Cost- Competitiveness of CCS
The Post-2020Cost-Competitiveness of CCS Eric Drosin Director of Communications
Why is this Work Ground-Breaking?Publicly Reliable base Over 100available cost for ZEP contributorsdata on CCS estimations and 2 years new, in-house data of work… provided exclusively by 15 ZEP member organisations…remains scarceComplete CCS Focus on new- The study Referencevalue chains; build coal- and features a point for costsindividual gas-fired BASE of CCS, basedreports power plants and an on a “snapshot”analyse costs located at a generic OPTIMISED in time CO2 Capture site in Northern case (investment costs Europe from the referenced to Q2 CO2 Transport early 2020s CO2 Storage 2009) 2
Key ConclusionsCCS is applicable to both coal- andgas-fired power plants CCS can technically be applied to both coal- and gas-fired power plants Relative economics mainly depend on power plant cost levels, and fuel prices In the 2020s all CCS equipped power plants will operate in base-load since the variable generation cost of a CCS equipped plant will be considerably lower than the variable cost for a corresponding conventional plant. It is too early to distinguish a technology winner, due to uncertainties that are still large and differences small 3
Key ConclusionsCCS will be cost-competitive withother low-carbon power technologies EU CCS demonstration programme will validate and prove the costs of CCS technologies and form the basis for future cost reductions (introduction of 2nd- and 3rd-gen. technologies) Results of the reports indicate post-demonstration CCS will be cost-competitive with any other low-carbon energy technology (on-/offshore wind, solar power & nuclear), but also will form a reliable low-carbon power source CCS is on track to become one of the key technologies for combating climate change ZEP will undertake a complementary study on the costs of CCS in the context of other low-carbon energy technologies 4
Levelized Cost of Electricity (LCOE) forIntegrated CCS projects (coal and gas)The Levelised Cost of Electricity (LCOE) of integrated CCS projects (blue bars)compared to the reference plants without CCS (green bars) 5
CO2 Avoidance Costs – Price of EUAs toJustify Building CCS Projects vs. Plant w/o CCSCO2 avoidance costs for possible plants commissioned in the mid 2020s – the price of EUAsrequired to justify building CCS projects vs.a plant without CCS from a purely economicpoint of view (calculated on the same basis as previous graph)
LCOE for Hard Coal Plants w/CO2 Capture(capture costs only)The LCOE for hard coal-fired power plants with CO2 capture (using Middle fuel costs) 7
LCOE for Natural Gas Plants w/CO2 Capture(capture costs only)LCOE and CO2 avoidance costs for natural gas-fired power plants with CO2 capture areheavily dependent on the fuel cost. The vertical blue lines for €4.5, €8 and €11/GJ representthe Low, Middle and High cases used for gas fuel cost. 8
Key ConclusionsAll three CO2 capture technologies could becompetitive once successfully demonstrated Currently no clear difference between capture technologies & all could be competitive once successfully demonstrated (using agreed assumptions & LCOE as main quantitative value) Fuel/investment costs are main factors influencing total costs Reports include the three main capture technologies (post-combustion, pre-combustion and oxy-fuel)… …but exclude second-generation technologies (e.g. chemical looping, advanced gas turbine cycles) The LCOE and CO2 avoidance costs calculated are higher than those of previous European capture cost studies, but tend to be slightly lower than majority of recent international studies 9
CO2 Transport Cost Estimates for DemoProjects 10
CO2 Transport Cost Estimates for Large-ScaleNetworks 11
CO2 Transport –Onshore vs. Offshore Pipelines Short distance (180 km) pipeline; Short distance (180 km) pipeline; € small volume transported € large volume transported (2.5 MT CO2 per year) (20 MT CO2 per year) 9.3 €/tonne CO2 5.4 €/tonne CO2 3.4 €/tonne CO2 1.5 €/tonne CO2 onshore offshore onshore offshore 12
Total Cost Euro Per TonnePoint-to-Point 180 km Point-to-Point500 km €/t €/t 15 25 20 10 15 10 5 5 0 0 2.5 10 20 Mtpa 2.5 10 20 Mtpa onshore pipeline onshore pipeline offshore pipeline offshore pipeline ship ship 13
Key ConclusionsEarly strategic planning of large-scale CO2transport infrastructure is vital to reduce costs Clustering plants to a transport network can achieve significant economies of scale – in both CO2 transport/storage in larger reservoirs (on- and offshore) Large-scale CCS requires the development of a transport infrastructure equivalent to the current hydrocarbon infrastructure Greatly reduced long-term costs can be ensured with early strategic planning – including the development of clusters and over-sized pipelines – and the removal of cross-border restrictions 14
CO2 Storage Cost RangesStorage cost per case, with uncertainty ranges; purple dots correspond to base assumptions 15
Key ConclusionsA risk-reward mechanism is needed to realisethe significant aquifer potential for CO2 storage 1 €/tonne CO2 - 20 €/tonne CO2 = CO2 storage cost range Location and type of storage site, reservoir capacity and quality are the main determinants for the costs of CO2 storage Onshore is cheaper than offshore Depleted oil and gas fields are cheaper than deep saline aquifers Larger reservoirs are cheaper than smaller ones High injectivity is cheaper than poor injectivity Risk-reward mechanism required for large variation in storage costs (up to a factor 10) & risk of investing in saline aquifer exploration Such a mechanism will aid realisation of saline aquifer potential and ensure sufficient storage capacity 17
General Conclusions from the StudyCCS requires a secure environmentfor long-term investment Price of Emission Unit Allowances (EUAs) will not, initially, be a sufficient driver for investment after the first generation of CCS demonstration projects is built (2015 - 2020) Enabling policies required in the intermediate period – after the technology is commercially proven, but before the EUA price has increased sufficiently to allow full commercial operationThe goal:to make new build powergeneration withCCS more + = €attractive to investors than without it 18
What’s Next? ZEP acknowledges costs of CCS will be inherently uncertain until further projects come on stream Cost reports don’t provide a forecast of cost development but… …will be updated every two years in line with technological developments and the progress of the EU CCS demo programme Future updates will also refer to co-firing with biomass, combined heat and power plants, and the role of industrial applications ZEP aims to undertake further work on costs to put the cost of CCS in perspective with other low carbon energy technology options 19