What does CCS really cost?

  Ståle Aakenes, Chief Economist, Gassnova SF
23.08.2011

Gassnova's general assessment of the bases for published cost estimates for CCS is as follows:

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Gassnova's general assessment of the bases for published cost estimates for CCS is as follows:

  • CSS plants have never been built before, and the real costs are therefore unknown. It is symptomatic for cost estimates for projects involving completely new technology that they tend to rise as the project matures. Uncertainties in relation to the cost estimate will remain considerable until the project is realised.
  • There will never be one generic cost estimate for CCS, as such projects are customised in relation to the source they are meant to capture CO2 from. Our experience indicates that the investment costs for the capture plant largely depend on site-specific factors such as the connection to the source and access to auxiliary systems, and that the costs in this area vary widely.
  • The assumptions for published cost estimates are not always stated, realistic or complete. Furthermore, estimates are based on very different sources and framework conditions, making it hard to compare estimates and draw clear-cut conclusions.
  • The commercial framework for the individual project, to what extent win-win strategies can be realised and the number of owners are also of significance for the costs and time it takes to establish a solution. If the CCS project does not have the opportunity to realise synergy effects or share risk with cooperating players, then the costs will increase.


Different types of estimates



There are typically two very different approaches that have been used to estimate the costs as a basis for published figures. One is generic studies in connection with comparison of alternative technologies and the other is preparing specific estimates for specific projects. The first type of estimates normally aims to point out the relative differences in the cost levels for different alternatives. Commercial conditions and project and site-specific conditions are normally not included. The latter type of estimates normally contains all relevant costs, but due to commercial concerns these are rarely published. One must therefore know the background for the published figures to be able to interpret these correctly. In Norway, the CLIMATE CURE study (Norwegian Pollution Control Authority (SFT), 2010) calculated costs of between NOK 1000 and NOK 2250 per tonne avoided (of which the capture part alone amounts to NOK 900-2100 per tonne).

The study referred to specific, existing sources with various exhaust gas compositions and volumes. Some of the estimates are based on detailed information from real projects where a "first plant of this type" had been planned, while others were based on a series of assumptions relating to cost development in the coming years without any site-specific studies. On the other hand, the IEA published a report in 2011 which summarised cost figures from several international studies relating to carbon capture (without transport and storage) in recent years.

The study is based on engineering studies of new (non-existent) and generic (not planned) sources, without project-specific costs and where it is assumed that several similar plants have been built earlier, leading to significant learning and cost reductions. The conclusion here was that carbon capture from coal-fired power plants would cost NOK 300 per tonne avoided (USD 55, NOK/USD: 5.5), and NOK 440 per tonne avoided from gas-fired power plants (USD 80). This is up to one-fifth of the costs presented in CLIMATE CURE.


Reasons for the differences



It is obvious that the assumptions relating to building a plant number "n" and the fact that one only considers a hypothetical case (and not a specific plant) simplifies the issue and contributes to a considerably lower cost level. Experiences from desulphuring in the coal power industry in the 1970s and 1980s may serve as an illustration in this connection: Following decades of limited R&D into various technologies for desulphuring, the market did not take off until national legislation and regulations came into place in the early 1970s. Before the first full-scale plant was built, studies were published that estimated the construction costs for a desulphuring plant at USD 50-100 per kW of installed capacity for a full-scale coal power plant.

The uncertainty of the estimates was substantial due to lack of experience, and the estimates increased over time as more experiments were conducted and experience gained. The first plants built in the late 1970s cost about USD 250 per kW of installed capacity. In years that followed, the costs fell by about 11% for each doubling of the international installed capacity. In the mid-1990s, new desulphuring plants were built at half the cost of the first plant. The operating costs saw a similar development. This illustrates an important challenge we are facing in the estimation of CCS costs: We have not done this before, and are not familiar with the uncertainties and complications that await us.


Concerning CCS costs in Norway


In Norway, Gassnova is responsible for the work on specific project alternatives in connection with Kårstø and Mongstad. Our experience is, in other words, related to specific projects with definite, site-specific challenges, related to sources in 24/7 operation and where the CCS plant is a first of its kind. Gas terminals (such as Kårstø) and refineries (such as Mongstad) are furthermore atypical locations to build carbon capture plants compared with what most other projects or studies have been based on. This has a significant effect on the cost situation.

Although Gassnova, like other players, cannot go public with specific cost figures for the individual projects it is working on for commercial reasons, Gassnova's experience is so broad that it is possible to estimate a cost range for the type of sources that Gassnova has worked with until now. The estimates are rough and contain various location-specific factors that it is reasonable to expect to have to include in the basis. The range has been given as a "low" and a "high" estimate, and therefore gives a robust indication of what CCS might cost in Norway.

The assumptions that form the basis for Gassnova's cost estimates are as follows

The carbon source is an existing gas-fired power plant in Western Norway with offshore storage in a geological aquifer

The capacity of the installation is about 1 million tonnes of CO2 captured per year

Realisation is assumed to take place before 2020 – and the plant is the first of its kind

Construction at or near a major industrial plant

P50 estimate. This means that there is a 50% probability of the costs being within budget

Tax effects and potential income effects for the source have not been included

This is considered a public environmental measure and has a correspondingly low discount rate – 4%


Gassnova's cost element distribution for the plant is as follows:

  • Planning costs: Work and studies before investment decision
  • Investments (construction)
    • The capture plant (including compression
    • Connections, auxiliary systems, etc.
    • Transport of CO2 (pipeline
    • Storage
  • Operating expenses: Energy costs and other running operating expenses


Planning costs (1) are largely characterised by the complexity of the source and the storage. The capture plant (2 a), is the most generic part of the chain, but can vary in design details with the various capture suppliers and licence authorities. Auxiliary systems and connections to the capture facility (2 b), are to a greater extent customized for each project where local adjustments will have great significance for the scope and cost level. Transport and storage (2c and d) are characterised by high investment cost with major potential benefits from economies of scale. Our cost estimates contain major opportunities for synergy effects if more CO2 sources are connected later.

Based on this, Gassnova estimates costs in the range of NOK 1100 to NOK 1900 per tonne captured (NOK 1300 to NOK 2300 per tonne avoided) under the assumption that only a 1 million tonne plant is realised (based on NOK value in 2009). The large range reflects the fact that the costs are influenced by considerable uncertainty, depending on various source-specific factors. The operating expenses that lie in the range NOK 400 to NOK 700 per tonne, are characterised by high energy costs and uncertainties in connection with fuel prices and other factors. Transport and storage costs amount to about NOK 300 per tonne.

Gassnova's estimates are therefore not significantly different from what CLIMATE CURE indicated in 2010.


What contributes to lower costs in the future


Lessons learned from building and operating the first plants and the synergy effects of a common infrastructure will make a significant contribution to lowering costs. What the first plant will cost therefore does not really give an indication of what CCS will cost in the future. Additional effects from future application of this knowledge in planning and building CCS plants integrated with construction of new power plants or other industry will also contribute to lower costs. It is at this time the market is expected to take off - and where we hopefully see the significantly reduced cost estimates.

In a commercial context, it will always be the board of a company that decides whether the shareholders' money should be used to capture and store CO2. This is unlikely to happen unless the company saves money overall by avoiding the emission of CO2 to the atmosphere or the company is ordered by the authorities to capture and store CO2 (and it not being more profitable to discontinue the company). In such a context, the cost situation for CSS may be significantly differently from what we see today as lessons have been learned from previously realised plants and cooperation and creativity have resulted in discovery and exploitation of new cost reduction opportunities.
 

 


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