Energy and Energy Policy Team 8

capturing

CO2

Co-Authors Victor Gutwein Brittany Agostino Erik Landry Nathan Wilson Alexis Morris Woyou Zeng

Table of Contents

1. Introduction

2. Definition of terms

3. Overview of capture technology in coal power plants

3.1 Post-combustion

3.1.1 Process

3.1.2 Capture technologies

3.1.3 Post-combustion commercialized techniques

3.2 Pre-combustion process

3.3 Oxy-combustion process

4. Economics

4.1 Costs

4.1.1 Sample coal powered plants

4.2 Overall project costs and financing

5. Carbon capture policy

6. Conclusion

7. Annexes

7.1 References

1. Introduction

Coal power plants provide 42% the electric power in the United States. The U.S. has abundant

coal resources, the technology used in coal burning power plants has been in place for decades

and coal is one of the cheapest sources of electricity generation in commercial use. However,

there is a growing awareness that there are negative externalities presented by coal electricity

production that are not reflected in the price of coal, specifically that the tones of CO2 released by

coal plants are harming the environment in a variety of ways. It is for this reason that carbon

capture and sequestration (CCS) is being developed, and this paper attempts to evaluate the

feasibility of different carbon capture processes.

In the most basic terms, CCS takes the CO2 that would have been released into the atmosphere (as

a byproduct of industrial processes) and buries it under the ground in cisterns or wells –

theoretically ensuring that it is not a contributor to climate change.

CCS involves three steps, of which approximately 75-percent of the cost incurred to power plants

is the relatively uniform carbon capture (CC) process; transport and storage costs and techniques

vary greatly and will not be explored in this paper. Most of the coal burned in the U.S. is used in

electrical power plants, with the remainder being used in a wide array of industrial manufacturing

processes. This paper will further limit its focus to CC in the electricity production sector.

Within this space there are three technologies available to capture carbon from coal power plants;

two of them- post-combustion through pulverized coal with carbon capture (PC-CC) plants and

pre-combustion through integrated gasification combined cycle with carbon capture (IGCC-CC)

have been developed on a commercial scale in the U.S. and other countries. Throughout the

paper, PC will be synonymously with post-combustion and IGCC with pre-combustion. The third

technology, oxy-combustion, is currently still in the early stages of development and does not

have enough commercial data from which cost/benefit conclusions can be drawn.

These technologies have been proven to work and have shown decreasing trends of costs of

electricity (COE) However, in order for these to ever become a reality in reducing the burden of

coal generated CO2 emissions on climate change and the environment, policy measures will have

to be implemented to address the challenging economic situation – one by which the positive

externalities of reducing emissions will not be internalized by firms or consumers. The free

market will not voluntarily add CC unless power plants are forced to account for their carbon

externalities through policy measures. However, , more R&D is needed to continue reducing the

costs of adding carbon capture technology to PC or IGCC plant.

This paper will look at the current and expected costs of adding CC to coal power plants and what

the US government would need to do to make CC a real solution to America’s clean energy goals.

 

2. Explanation of terms and formulas

CBO Congressional Budget Office CC carbon capture

CCS carbon capture and sequestration

COE levelized cost of electricity DOE Department of Energy

EOR enhanced oil recovery

IGCC integrated gasification combined cycle

IGCC-CC integrated gasification combined cycle with carbon capture (pre-combustion)

KW Kilowatt

KWh kilowatt hour

MW Megawatt

MWh megawatt hour

PC pulverized coal (most coal plants in U.S. today)

PC-CC pulverized coal with carbon capture (post-combustion)

 

The Levelized Cost of Electricity (COE):

COE is a measurement calculated in order to estimate the overall cost of the electricity generated by a plant, taking into account initial capital, fuel costs and operating costs.

 

with

 

COE = levelized cost of electricity ($/MWh) CF = capacity factor

TCR = total capital requirement ($/kW) η = net plant efficiency

α = capital recovery factor r = discount rate (fraction)

FOC = Fixed O&M cost ($/kW per year) L = plant life time (years) [1].

COF = cost of fuel ($/GJ) VOC = variable O&M cost ($/MWh)

The following definitions are given by Carnegie Mellon University’s IGEC:

Total Capital Requirement (TCR): “This is the money that is placed (capitalized) on the books of the utility on the service date. The total cost includes the total plant investment plus capitalized plant startup. Escalation and allowance for funds used during construction (AFUDC) are also included. The capital cost is given on both a total and an annualized basis” [2].

Fixed O&M (FOC): “The operating and maintenance fixed costs are given as an annual total. This number includes all maintenance materials and all labor costs for each technology” [2].

Cost of Fuel (COF): The cost of fuel is given in dollars per gigajoule, which can be found depending on the amount of energy extractable from each fuel source.

Variable O&M (VOC): “The operating and maintenance variables costs are given as an annual total. This includes all reagent, chemical, steam, and power costs associated with a technology” [2].

Capacity Factor (CF): “This is an annual average value, representing the percent of equivalent full load operation during a year. The capacity factor is used to calculate annual average emissions and materials flows”[2].

Net Plant Efficiency (η): The net plant efficiency is given by the net amount of electricity produced per unit of time in MWh divided by the total energy input per unit of time in MWh.

Discount Rate (before taxes) (r): “This is also known as the cost of money. Discount rate (before taxes) is equal to the sum of return on debt plus return on equity, and is the time value of money used in before-tax present worth arithmetic (i.e., levelization)” [2].

CO2 Mitigation Cost:

The CO2 mitigation cost is a measurement of the cost that it takes to remove a metric tonne of CO2 from the power plant through carbon capture.

MC = CO2 mitigation cost ($/t CO2)

COEcap = COE of capture plant ($/KWh)

COEref = COE of reference plant ($/KWh)

Eref = CO2 emissions references plant (t CO2/KWh)

Ecap = CO2 emissions capture plant (t CO2/KWh) [3].

3. Overview of carbon capture technologies

The term “carbon capture” refers to the removal of CO2 from various mixtures of substances.

Industrial processes (i.e. power generation) that produce massive amounts of such substances are

the main players in the carbon capture arena. There are a variety of technologies available today

that achieve that goal, and the choice of which technology is used is dependent on what industrial

process is being used, along with other factors that include, but are not limited to, pressure

conditions, temperature conditions, purity requirements, types of impurities, amount of

impurities, and concentration of CO2 [4]. Some common processes that utilize carbon capture

systems are the manufacture of hydrogen, nitrogen, and other chemicals [4]. It is also utilized in

capturing and purifying CO2 from streams of flue gases during the combustion of coal or natural

gas. Sometimes, the captured CO2 can be used in other industrial processes, such as the

carbonation of soft drinks, but more often than not, the CO2 is eventually released into the

atmosphere [4]. Essentially, the main goal of the carbon capture systems is to create a stream of

CO2 that is pure enough to then be stored, sequestered, or used for alternative purposes [4].

There are three main types of carbon capture. The first two, post-combustion and pre-combustion,

are more developed and have been used in large scale and pilot programs globally. The third type,

oxy-combustion, is still in the beginning stages of research and development, and there is limited

data available on its efficiency and costs. For that reason, this paper address oxy-combustion

briefly, but limits the scope of the economic and policy sections to an evaluation of post and pre-

combustion.

3.1.1 Post-combustion process

Post-Combustion carbon capture involves the removal of CO2 from the flue gases produced from

the burning of fossil fuels, natural gases, biomass, or other carbonaceous material [4]. Today,

most of the world’s electricity is generated in combustion-based power plants [4].

Generally, the fuel is mixed with air and burned in a chamber. Combustion is the chemical

transformation of a carbonaceous material and oxygen into heat, CO2, and H2O, which takes the

form of steam because of the heat. The steam then drives a turbine which in turn, generates

electricity.

The most common method of post-combustion carbon capture involves several steps. The first is

the aforementioned process of combustion. The second is called “scrubbing” during which the

mixture of substances is “scrubbed,” and the CO2 is removed from the mixture by chemical

absorption into a different substrate [4]. he third, is called “stripping” or regeneration [4]. The

CO2-laden substrate itself must be stripped of the CO2, meaning forced to release CO2 [4]. In

doing so, the substrate regenerates its carbon capturing capacity. Once the CO2 is released, it must

be concentrated and super-condensed to be transported elsewhere, and the regenerated substrate is

recycled back to the scrubbing stage [4].

Fig1. General schematic of the post-combustion carbon capture process. [28]

Due to impurities in the fuel source and the use of air, which consists primarily of nitrogen as

opposed to pure oxygen, a number of byproducts are created during combustion. These may

include nitrogen oxides, sulfur dioxides, and particulate matter known as fly ash [4]. These must

be separated from the CO2 if it is to be stored and used. In some cases, the impurities must be

removed from the mixtures first in order to have streams that are clean enough to have the CO2

removed from them [4].

3.1.2 Post-combustion capture technologies

There are three main types of post-combustion capture technologies. The first is solvent based, in

which the substrate that chemically absorbs the CO2 out of the gas mixture is a solvent. The

second type is similar except for that the substrate is a solid instead of a solvent. The third type is

membrane based, in which the gaseous mixture is forced through either a permeable or semi-

permeable membrane designed such that only CO2 may pass through [4].

Solvent-based capture is the most common method used. High reactivity between the solvent and

CO2 allows high percentages of CO2 out of the flue gases even at low pressures [4]. The most

widely used solvent is an organic solvent called monomethlyamine (MEA), capturing about 85-

90-percent of the CO2 in the gaseous mixture [4]. This high reactivity, however, has downsides.

The driving force behind the grand majority of chemical reactions is the transition from a state of

higher energy to a state of lower energy. The reaction between and acid and base is one such type

of reaction. In order to regenerate, or reactivate, the solvent and release the CO2, this acid/base

reaction must be reversed. This reversal requires energy, usually in the form of heat, to drive the

solution to a higher energy state [4].

Solid-based capture utilizes many small pellets to achieve an even greater surface area for

absorption than can be achieved by solvent methods [4]. Although less heat is needed for

regeneration of the solid than for the solvent, heat management is more difficult when working

with solids.1 Also, high attrition of solid sorbents presents another cost barrier [4].

With membrane systems there is a trade-off between product purity and -percent captured [4].

This means that in order to achieve higher CO2 purity, multiple stages of membrane filtration

must be used and therefore less CO2 is able to be captured.

3.1.3 Commercialized Post-Combustion techniques

Amine-based Capture

Amine-based capture is the most commercialized form of solvent-based post-combustion carbon.

It uses a class of organic solvent known as alkanolamines [4]. The reactive “amino” group (NH2)

present in the alkanolamine is basic [4]. Therefore certain amines such as MEA react strongly

with acid gases such as CO2 [4]. As a result the percentage of CO2 is rather high, but

subsequently, regeneration of the solvent provides a significant energy barrier.

Ammonia-based Capture

Early estimates claimed that ammonia-based capture could potentially cost significantly less than

amine-based capture [4]. These claims were in part founded upon the fact that ammonia is

relatively cheap and could possibly remove other impurities such as sulfur dioxide and various

nitrous oxides, as well as CO2 [4].

It operates much like other post-combustion processes. However, ammonia (NH3) is a gas at

room temperature, which leads to various engineering barriers, primarily a phenomenon termed

“ammonia slip” [5]. Ammonia slip occurs when ammonia escapes from the solution it is in into

the stream of flue gases during scrubbing or into the clean CO2 stream during regeneration [4].

This happens due to the volatility of ammonia in solution. A significant cleaning of the flue gases

and CO2 streams is required as a result [4].

One method of reducing ammonia slip is called the chilled ammonia process in which the flue

gases and CO2 absorber are cooled to temperatures around 20 degrees Celsius [4,5]. This prevents

the hot gases from bumping the ammonia out of solution.

3.2 Pre-combustion processes

In order to remove carbon from fuel before it is burned, it must first be transformed into a form in

which this removal is possible. [4]. The Integrated Gasification Combined Cycle (IGCC) is one

such method to achieve this. In IGCC, coal is reacted with steam and oxygen at high pressures

and temperatures to result in a gaseous fuel consisting of mainly carbon monoxide and hydrogen

called synthesis gas, or syn-gas [4]. This process is called partial oxidation or gasification [4].

Particulate matter is then removed, and a two stage shift reactor reacts the carbon monoxide and

hydrogen with steam to produce carbon dioxide and hydrogen [4]. A solvent is then used to

capture the CO2, leaving a stream of hydrogen that is subsequently burned to generate electricity

[4].

Fig 2. Generalized schematic of the IGCC carbon capture process. [28]

Although the fuel conversion steps required of pre-combustion processes are much more costly

that those of traditional post-combustion processes, the actual capture steps are much more

efficient and therefore less costly [4]. This is because, whereas the post-combustion process uses

chemical reactions to separate CO2 from its mixture, pre-combustion uses physical absorption of

the CO2 into the solvent, allowing for much easier subsequent release of the CO2 [4]. Physical

absorption refers to the amount of gas that can be held in a liquid without requiring a chemical

reaction. The solvent used in pre-combustion processes utilizes changes in pressure to effectively

manage the amount of CO2 in the solution. Pressure drops are used to release the CO2 [4]. The

post-combustion must use heat to reverse the chemical absorption of the CO2 into the solvent and

is more energy intensive in that respect.

3.3 Oxy-combustion processes

The essential difference between post-combustion and oxy-combustion process is that oxy-

combustion uses pure oxygen to burn coal as opposed to air [4]. This eliminates the large amount

of nitrogen by-products that have to be removed [4]. Only the fly ash, which is relatively easy to

filter out, remains. No expensive carbon extraction technologies are needed, and theoretically, all

of the CO2 can be “captured” [4]. However, acquiring oxygen pure enough to use in this process

presents itself as the main cost barrier of this method. An Air Separation Unit (ASU) is required,

and because oxy-combustion requires approximately three times as much oxygen than during

regular combustion, generating the oxygen becomes expensive [4]. Also, the additional gas

treatment used to remove impurities decreases carbon capture to about 90-percent [4].

Fig 3. Generalized schematic of oxy-combustion carbon capture process. [28]

 

4.1 Economics – Costs

Costs of IGCC vs Cost of PC

IGCC capital and operating costs tend to be higher than PC costs on average, as well as higher

than Natural Gas plants. IGCC plants are on average 20-percent more expensive to build than

standard coal plants in the short run [6]. However, if IGCC is used to sell off the carbon that is

captured, estimates place the savings from IGCC plants at 20-percent over the long run [6]. In

addition, studies find that carbon needs to sell at $50-75 per ton to validate the increased IGCC

cost [7].

Fixed Costs and Total Plant Costs

The fixed costs associated with an IGCC or PC power plant include land, equipment, and

transportation, and construction costs. A plant must include process and support facilities, a

structure for water intake, a wastewater treatment plant, a transformer and back-up energy

supplies [8]. In addition, construction of a plan includes direct field material costs, design and

implementation costs, labor costs, cost of financing, contractor’s profit, construction

management, legal costs and subcontractor costs. The cost of implementation for an IGCC plant

is higher due to higher inherent risk in a less commonly built power plant, and the engineering,

design and procurement costs are far higher since so few IGCC plants exist in the world. The

initial capital cost to implement both IGCC and PC plants remains high, and the Department of

Energy continues to contribute sizeable grants, often as much as half of the plant cost, in order to

facilitate construction of the projects.

Variable Costs

Variable costs include coal and gas prices, the cost of energy, cost of labor to continue operations

at the power plant, and waste disposal cost. Both PC and IGCC produce waste from the carbon

capture process that needs to be disposed of. In addition, the sequestered carbon poses an

additional cost if another corporation does not use it for different purposes (such as extracting oil

or carbonating beverages). The cost of natural gas and coal has a large effect on the long-term

profitability of PC and IGCC plants.

Coal Industry and Efficiency losses  

The electricity industry earns approximately $368.9 billion in annual sales and busbar electricity

prices are expected to raise 1 cent over the next two years [9]. Coal is a relatively cheap way of

producing electricity and sources approximately 46-percent of the nation’s electricity [10]. The

coal industry makes approximately $43.1 billion by selling a significant portion of its production

to coal-fired power plants [29] . In 2010, the Energy Information Administration (EIA) recorded

that a total of 954.5 million short tons of coal was sold to plants that use either pulverized coal

process or coal gasification cyclone process at an average price of $44.64/ton [9] The efficiency

rates of plants that use either PC or IGCC are the same.

 

According to the Department of Energy, implementing carbon capture technology will result in a

30-percent net loss in efficiency and an increase of 1.5-3 cent/kwh to the busbar price of

electricity [3].  

External Costs of Not Implementing Carbon Capture

The Clean Air Task Force has quantified the annual deaths and health problems caused by carbon

emissions from factories that do not implement carbon capture. PM2.5 is an air particle that is 2.5

microns in diameter and small enough to enter the bloodstream, as well as a direct cause of power

plant pollutants [11]. PM2.5 is linked to bronchitis, asthma and several cardiac problems including

congestive heart failure. The Clean Air Task Force estimates that PM2.5 causes 53 deaths a year

and 997 other health related problems [11]. These external costs are not factored into current

financial projections, and the industry is unlikely to internalize them unless carbon emissions

become a commodity with value (i.e. through taxation or cap-and-trade program

4.1.1. Sample Plants

A handful of PC and IGCC plants with carbon capture technology have been implemented in the

United States, and there are several test projects that are currently under development. Figure 1

lists several of these plants as well as their total output and initial costs. In some of the power

plants, the CO2 is used to make dry ice and carbonated beverages or to extract oil from nearby

mines. The size of the projects varies widely, but most of the projects are not within the optimal

functional power plant level. The median size of U.S. coal-burning fired plants is approximately

650 MW, and a full scale implementation of a carbon capture project is defined as having a

capacity of 250 MW and CO2 capture rate of 1-2 million tons per year for a coal fired plant [4].

Several of the plants have been shut down due to the economic climate and ambiguity of climate

regulation. A few of the listed plants are discussed in greater depth to illustrate the political and

economic barriers carbon capture plants face.

Current PC Plants

R.E. Burger Plant is a coal-fired plant operated by FirstEnergy near Shadyside, Ohio. After a

decree from the U.S. Justice Department and the U.S. EPA to reduce emissions, Ohio Edison

planned to install scrubbers on all of their coal-fired units in Ohio by 2011. This project was

estimated to cost $1.5 billion. They planned on retrofitting two units to burn biomass instead of

coal, which would have cost $200 million [12]. In 2010, FirstEnergy decided to close the two

plants rather than convert due to cost. FirstEnergy planned on retrofitting at its other Ohio

location, Sammis Plant in a $1.8 billion retrofitting project, but announced that it would be

reducing operations indefinitely at the plans due to reduced demand for electricity and a stagnant

economy [13].

American Electric Power Mountaineer Plant is a coal fired plant in West Virginia that was

going to undergo a two-stage, ten year project with the Department of Energy worth $668 million

that would use post combustion to capture carbon and sequester it in Mount Simon Sandstone

[14]. AEP Mountaineer project uses a pulverized coal boiler to combust high-sulphur, bituminous

coal. The post-combustion with capture method used is the chilled ammonia process. The project

began in 2009 and operated in an initial test phase of 30MW. Between 2009 and 2010, 15,000

tons of CO2 were stored at a 90-percent capture rate. Phase 2, which was supposed to begin in

2012, has been postponed indefinitely due to the “continued weak economy” and “uncertainty of

US climate policy” [14].

Future PC Plants

Tenaska Trailblazer Energy Center is a project in Sweetwater, TX undertaken by Tenaska

energy that is planned to begin operation in 2014. Tenaska TrailerBlazer will also use pulverized

coal boilers, except with low-sulphur, bituminous coal. The carbon capture will be amine based,

run by Fluor Corporation’s Economine FG Plussm-technology. The Energy Center plans to

operate on pulverized coal and capture 90-percent of carbon emissions. The project is expected to

cost $3 billion with a net output of 600MW, which would produce enough energy to support

600,000 Texas homes [15]. The sequestered CO2 would be used in Permian Basin oilfields,

recovering 10 million barrels of oil per year. The use of the excess carbon would not only offset

energy costs, it would foster local economic activity through construction jobs and increased

property prices.

NRG Energy WA Parish Plant is a power plant in Houston, TX that is expected to retrofit its

existing power plant with post combustion technologies to capture CO2 and use it to increase oil

production at nearby plants. . Amine capture will be used. It is estimated to capture nearly 1.4

billion tons of CO2 per year. The plant is expected to operate at 240 MW and capture 90-percent

of carbon emissions. The project was raised from its 60 MW estimation to 240 MW due to the

desire for increased production at nearby oil fields [16].

Current IGCC Plants

Polk Power Station in Tampa, Florida is one of only two IGCC plants that have been

successfully carried out in the United States. The cost of the IGCC plant was $303 million for a

250 MW power plant. The total cost averages out to $1,213/kW, and this includes the cost of

operating the unit and experimental work on cleanup [17]. Polk Power Station has been in

operation for over 29,000 hours to produce over 8.6 million MWh of electricity. Plants to

implement another 630 MW IGCC plant on the facility were canceled due to political constraints

[18].

Wabash River Power Station in West Terre Haute, Indiana is one of only two completed IGCC

plants in the United States, and the plant currently sits idle due to unpaid electric bills. The

installation cost was $1,590/kW on the Based on a design capacity of 262 MWh plant [19]. In

addition to that $416 million cost, the owners of the plant invested $14 million in the first two

years to improve performance. Due to a corporate acquisition and splitting of assets, the plant was

placed under new ownership and left to sit idle after 1999 [19].

Table 1 above is a compilation of PC and IGCC plants in the United States that have started operations or have slated operations to begin as late as 2015. The listed cost was determined from Department of Energy reports, but the expected cost could rise as projects near completion. Although the cost of projects vary widely, the statistics give a clearer image of the cost relative to capacity than projected estimates.

The two graphs below plot the cost of a plant relative to its capacity, and although there is a small sample size and a variety of

variables that impact each plant, it generally shows that higher plant costs correspond with higher plant capacity.

Fig 4 Fig 5

Figures 4 and 5 plot the cost of a plant relative to its capacity, and although there is a small

sample size and a variety of variables that impact each plant, it generally shows that higher plant

costs correspond with higher plant capacity. This finding is not surprising, as cost increases with

the scale of the plant.

As a corollary to figures 2 and 3, the average dollar per megawatt cost for PC plants was roughly

$8.92 million dollars per megawatt, but that was highly skewed by the American Electric Power

Mountaineer plant. When removing that data point, the average cost was $4.47 million per

megawatt for PC plants. For IGCC plants, the average cost was $2.30 million per megawatt in a

plant. The capital costs are normally much higher to construct an IGCC plant as opposed to a PC

plant, due to the amount of research and recent innovation of the project. A potential variable that

could have skewed the data was that some of the PC plants may have been retrofits of existing

plants rather than the complete building of a new power plant. In addition, many of the PC plants

have already been constructed versus the slated plans for IGCC plants. Estimated costs are often

lower than the additional costs that add up during the construction period.

0  

200  

400  

600  

800  

$0   $1,500,000,000   $3,000,000,000  

Cost  vs  Capacity  for  IGCC  

0  

200  

400  

600  

800  

$0   $2,000,000,000   $4,000,000,000  

Cost  vs  Capacity  for  PC  

4.2 Overall costs and project financing

Carbon capture is a relatively new technology, and it has not yet been widely implemented in commercial

coal power plants. For the most part this is due to the costs of carbon capture, which are decreasing as

technology increases efficiency and reduces costs. It is important for implementation to see what the

expected COE will be as the technology develops over time and how much more the technology will cost

compared to the same power plant without carbon capture. In 2009 these projections were made by a team

from Utrecht University and Carnegie Mellon University, but with data from only as recent as 2001. In

this paper, actual data from 2005 and 2012 were found and compared to see if the technology was

progressing according to these projections.

First Projection: Cost of Electricity

Based on the actual data from 2012, we can say with greater than 95-percent certainty that the cost of

electricity is statistically significant from the projections made by Utrecht and Carnegie Melon

Universities. The COE for both IGCC and PC with carbon capture was significantly lower than the

projections made in the earlier report (see Fig. 6 and 7), which suggests that the technology costs are

decreasing faster than projected. Instead of 6.9 cents/KWh for PC-CC and 6.1 cents/KWh for IGCC-CC

in 2012, the actual numbers were 6.3 cents/KWh for PC-CC and 5.1 cents/KWh for IGCC-CC; far

cheaper than the projections.

One possible reason for this would be a marked decrease in fuel costs, an important variable in the COE

calculation. However, looking at Graph C, fuel prices have actually greatly increased since both 2009

when the projections were published and the early 2000s when the most recent data for the projections

occurred. In 2001 the price/ton of coal was around $50/ton whereas in 2012 it was more than three times

that amount.

Fig 6 Fig 7

Fig. 8 Fig. 9

Fig 8 Source: Commodity Price Index. Commodity Price Index Monthly Price - December 2012.

Second Projection: Technology Costs with and without Carbon Capture

It is beneficial if the COE is decreasing for carbon capture technologies, but if it is decreasing at

comparable rates then the same technology without carbon capture, the cost to remove carbon will stay

the same. In our findings, the Utrecht/Carnegie projections found that the difference between both IGCC

and PC with and without carbon capture would decrease; the actual data in 2005 and 2012 showed it

decreasing at an even faster rate (see Fig. 8). The IGCC difference is only 1 cent/KWh in 2012 and the PC

difference is only 2.1 cents/KWh; in other words, it takes an extra penny for every KWh when you add

carbon capture onto an IGCC power plant and an extra 2.1 cents for every KWh when carbon capture is

added onto a PC plant.

.03

.04

.05

.06

.07

.08

$ / K

Wh

2000 2010 2020 2030 2040 2050Year

PC with CC Cost of Electricity (Predicted)

PC with CC Cost of Electricity (Actual)

PC without CC Cost of Electricity (Predicted)

PC without CC Cost of Electricity (Actual)

With and Without CC TechnologyCost of Electricity for PC

.03

.04

.05

.06

.07

.08

$ / K

Wh

2000 2010 2020 2030 2040 2050Year

IGCC with CC Cost of Electricity (Predicted)

IGCC with CC Cost of Electricity (Actual)

IGCC without CC Cost of Electricity (Predicted)

IGCC without CC Cost of Electricity (Actual)

With and Without CC TechnologyCost of Electricity for IGCC

Third Projection: CO2 Mitigation Cost

The purpose of carbon capture is to remove CO2 from the atmosphere, so a key metric to look at when

deciding whether carbon capture is worth implementing is the added cost to remove CO2, called the CO2

Mitigation Cost and measured in $/metric tonne. The formula looks simple but takes into account the

various costs associated with adding carbon capture beyond the increase in $/KWh. Capturing carbon

takes energy, and that energy reduces the plant’s capacity to anywhere from 78-90-percent of the non-

capture plant. This requires more coal to produce the same amount of KWh, but not all of that coal will be

carbon-free as only 90-percent of the carbon is removed during the capture process.

When comparing real results (see Fig. 10) for 2005 and 2012 with the 2009 predictions, the mitigation

cost for IGCC-CC follows expectations at $18/tonne of CO2 removed in 2012, in line for $12/tonne in

2050. For PC-CC, actual numbers are also within expectations with $32/tonne in 2012 which is in line for

$22/tonne in 2050. IGCC-CC is, and will remain, the cheaper method to remove CO2 from coal electricity

production despite its higher initial capital costs than PC-CC.

Fig 10

5 Carbon capture policy

Despite the potential of carbon capture to mitigate climate change effects, there are significant policy and

economic issues that will have to be addressed if widespread adoption of the technology is to be achieved.

Unlike investment renewable energy, which ultimately produces electricity that can be sold to consumers,

money spent on carbon capture research does not create financial gain – meaning that with carbon

capture, the positive externalities are almost entirely unaccounted for in the financial model.

As such, the policy architecture and selection of policy instruments will play a crucial role in deciding

whether carbon capture is to play a significant role in global climate mitigation strategies.

Carbon Capture in America

Carbon capture programs in America are, to a large degree, still in their infancy. As such, the current

policy approach is one of diversified R&D exploration. Multiple technologies are currently being piloted

on several different types of power generation facilities with the goal of driving down costs and

identifying the most efficient approaches.

Few are large programs, and their overall impact on reducing the amount of CO2 in the atmosphere is

insignificant. Plants where carbon capture technology is being implemented are generally small – some

only have a half a MW capacity (though newer projects are beginning trials on plants that are upward of

600 MW).

This cautious and exploratory approach is a necessary initial step according to the International Energy

Agency (IEA):

Initially, incentive policy will focus on trials of CCS at a commercial scale, seeking information and cost

reductions to make it possible to deploy CCS at reasonable scale and cost. The policy goal at this point is

not to make emissions reductions for their own sake, but rather to advance CCS technology and establish

commercial arrangements between capture, networks and storage. Practical examples of such policies

are the various demonstration programmes launched in the European Union (EU), North America and

Australia [20].

The report goes on to say that this early stage of carbon capture technology policy will necessarily be

followed by two additional stages, wherein the policy aims (and the instruments that will use to achieve

them) will shift to encourage increasingly widespread adoption.

The appropriate policy for CCS evolves as the technology matures. The policy moves from technology

specific support, which explicitly targets the development of CCS as a commercial activity, to technology

neutral support, which allows deployment of CCS when it is most cost effective among other abatement

opportunities [20].

However, to move through the stages, two primary hurdles must be cleared. There must there be an

unwavering, firm commitment to investing in the technology on the part of both governments and

investors. And, perhaps even more importantly, the “price” the international community and individual

governments place on carbon must increase dramatically.

Fig 11

Fig  11  Source:  International Energy Agency. A Policy Strategy for Carbon Capture and Storage; January

2012.

Failing to clear either hurdle will hamstring efforts to achieve the kind of widespread adoption that would

have a discernable effect on the amount of CO2 released into the atmosphere.

The Facts on the Ground

Investment in energy R&D represents the smallest portion of all major technology-dependent sectors in

the United States. According to American Energy Innovation Council’s “A Business Plan for America’s

Energy Future”, only 0.3-percent of R&D spending as a share of sales is dedicated to energy related

research -- lagging far behind the 18.7-percent devoted to pharmaceuticals and the 11.5-percent to

aerospace and defense [21].

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Only a fraction of this fractional percent is currently devoted to R&D in carbon capture. The IEA and

other carbon capture policy experts insist that more will be necessary if capture is to move beyond the

current pilot stage.

The Climate Bill of 2009-10 would have paved the way for additional investment (by some estimates, up

to $200 billion) and study of carbon capture, but Republican opposition led to the death of the bill when

Democrats couldn’t muster the 60 votes they needed in the Senate to avoid a filibuster.

“With the demise of these bills, the prospects of wide-scale deployment also went away,” said a dejected

George Peridas, a scientist with the Natural Resources Defense Council’s Climate Center [22].

The news from the Congressional Budget Office is not good either. In a report issued in June of 2012 they

stated that:

CBO’s analysis suggests that unless the federal government adopts policies that encourage or require

utilities to generate electricity with fewer greenhouse gas emissions, the projected high cost of using CCS

technology means that DOE’s current program is unlikely to do much to support widespread use of the

technology [23].

It continues:

Since 2005, lawmakers have provided the Department of Energy (DOE) with about $6.9 billion to further

develop CCS technology, demonstrate its commercial feasibility, and reduce the cost of electricity

generated by CCS-equipped plants. But unless DOE’s funding is substantially increased or other policies

are adopted to encourage utilities to invest in CCS, federal support is likely to play only a minor role in

deployment of the technology [23].

In short, the CBO’s current position is that the money that has been spent so far on carbon capture has

been ineffective at driving down the cost of the technology, and that to see real gains, the DOE would

have to “double-down” at a time when funds are scarce and the political climate is charged.

Further confounding the issue is the obvious lack of appetite lawmakers – Republican and Democrat alike

– have for placing a price on carbon. This creates significant problems for policy makers who advocate

continued carbon capture R&D.

Moving Forward with Limited Government Funding

Peridas, and others who want to see wider scale adoption of carbon capture, are now turning their hopes

to the financial benefits of enhanced oil recovery (EOR) to bridge some of the gap in funding.

If governments want to incentivize the capture of the CO2 at industrial facilities, there’s a cost gap that

still remains to be bridged. EOR will provide for some of that. Our calculations are showing that for a

modest amount of incentives from the federal government, it can more than get its money back over a 10-

year time period. This is because of the tax revenues from the additional oil that gets produced, even

under conservative assumptions. So for a pretty modest incentive over that time period and they will more

than recover the costs—it’s actually a revenue earner for the government.

The trouble is that Congressional Budget Office and the Joint Committee on Taxation don't score

legislation that way because that's how their scoring rules are set up [24].

The cost modeling presented in this paper (Fig. 6 and 7) also provides some hope that, contrary to the

CBO’s report, the cost producing electricity when carbon capture technologies are factored in may be

falling faster than anticipated. It may be too early to determine if the findings are a more than an outlier,

but if it does continue to trend downward at a similar rate, carbon capture technology will be both cheaper

than anticipated in financial terms and relative to similar plants without carbon capture technology. Such

results should encourage both greater attention and funding at a critical moment.

Policy Tools

Should the financial hurdles be cleared, policy makers in the US will have a number of possible policy

tools at their disposal.

A cap-and-trade initiative could be instituted to cap the allowable CO2 emissions from specific sectors.

Firms producing more than the permitted amount would be allowed to purchase credits from firms who

produced less. Carbon capture would be a permitted form of CO2 reduction in those sectors, allowing

firms to use it as a strategy to obtain credits that could be sold.

More aggressively, a tax on carbon that requires firms to pay for their emissions could also be used to

encourage firms to pursue capture as a way to mitigate tax liability.

Ultimately, either approach is likely to result in higher energy prices for consumers, however. Though

painful, the real question is whether such increased costs will be greater than other climate mitigation

technologies. In America, an abundance of coal (Fig 12) will always be a tempting source of energy

production (particularly if natural gas prices increase). A commitment to climate change mitigation will

mean that the CO2 emissions of coal will need to be addressed.

Fig.  12  

 Fig 12 Source: International Energy Agency. A Policy Strategy for Carbon Capture and Storage;

January 2012.

To do so in the most cost effective manner, over time, the focus of the US carbon capture policy should

be on IGCC technology – put simply, as old plants are decommissioned and new plants are constructed,

CCS technology should be built in. Post combustion, while attractive from the perspective of lower

capital costs, will not yield the same long term financial benefit of IGCC (see figure 12). The upfront

capital costs will be high, but positive signs in the actual data point to a more rapid decrease in costs than

originally anticipated. Seizing on the opportunity now will yield benefit for decades to come.

Fig 13

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As difficult as it may be to enact policy change that would drive widespread adoption of IGCC capture

technology in America, it is currently the clearest path to addressing how the US can utilize its coal

resources with minimal climate impact. To get there, though, legislators and policy makers must dig

deeper into the limited R&D funds to provide carbon capture a real chance to get off the ground.

Ultimately, cap and trade or a carbon tax will need to play a role, but if the technology languishes from a

shortage of R&D funding, costs will not continue to fall and the prospect of carbon capture and

sequestration will never get off the ground.

Conclusion

Carbon capture and sequestration has demonstrated scientifically that it has enormous potential to play a

role in mitigating the effects of climate change. The critical barriers to widespread enactment and

adoption are not technological; they are economic and political.

Today in America, it is difficult to envision members of Congress, the various public sector agencies, and

the White House coming together on a plan that would set a cost of carbon (through a tax or cap-and-

trade) and increase funding for carbon capture R&D. However, creative thinking about the actual cost of

such funding, once the benefits of enhanced oil recovery have been factored in, and the rapidly falling

price of COE generation in plants with CC technology could conceivably make such an agreement

possible.

America has a vast supply of coal; a tempting source of cheap energy that will last for generations to

come. However, to offset the damage to the environment and prevent the need for expensive climate

change mitigation efforts later, action should be taken now to promote IGCC carbon capture technology

and adoption.

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