"CCS will only happen if the board of a company believes that this is the right way to use the shareholders' money. Public incentives must be in place and the technology must entail an acceptable cost level. From this starting point we must learn and implement smarter solutions to bring the costs down to a level where implementation is possible," says chief economist Ståle Aakenes in Gassnova. He heads the analysis work in Gassnova and for CLIMIT.
The technological challenges posed by capture mainly entail reducing costs while as regards storage, we must be certain that the CO2 remains in the reservoir.
"However, the commercial drivers are weak in both these areas. If you ask the industry about realisation of the first facilities, they will be more concerned with the commercial assumptions for starting than the technical challenges that remain. It is not currently profitable for a company to capture CO2," says Aakenes.
The investments are so substantial that even with significant growth in the quota price, the State will have to contribute to finance the first facilities.
"When a full-scale facility has been built, we will be able to identify the knowledge gaps and where further development must take place," he says and notes that the costs of desulphurisation plants declined significantly after the first costly facilities were built.
Most projects with EOR
According to Global CCS Institute (GCCSI), there are around 40 major CCS projects internationally where facilities are operational, under development or being planned, and where concept decisions have been made.
21 of the projects, most in the US, will use the CO2 to recover more oil from the reservoirs (Enhanced Oil Recovery - EOR). The profitability is quite different for a project where the CO2 has a value for a customer with buying power than when it is an environmental measure where CO2 storage is an additional cost.
In an additional six projects, CO2 will be separated from the natural gas before being sold, such as on the Sleipner field.
Only nine projects are run from a pure environmental perspective, all in Europe. Two of these are financed by national support schemes (in the UK and the Netherlands) while the remainder are applying for support from the EU's financing scheme for demo projects NER300.
"This is how you apply for support for European projects while the majority of the US projects are private investments. The drivers are thus very different on the two sides of the Atlantic," says Aakenes.
First facility will be expensive
Gassnova has calculated the total cost of the first CCS facility in Norway, including capture, transport and storage. Based on specific projects and one million tonnes captured CO2, the costs have been estimated at NOK 1300-2300 per tonne captured CO2. This is in line with Climate Cure's estimate, but much higher than the figures used by IEA and the EU's ZEP.
In its latest report from July this year, ZEP estimates a capture price of around 100 Euros (NOK 800) per tonne avoided CO2 emissions from a gas power plant. According to ZEP, electricity from a new coal power plant with CO2 capture, transport and storage could cost 75 Euros per megawatt hour in a few years. This is 50 per cent more expensive than electricity from a new coal power plant without CCS. With the current quota price of 12 Euros, this will not be profitable. Only with a quota price of 40 Euros will this be profitable for a new coal power plant. The assumptions for the cost estimates are very different. What is similar, however, is the certainty that the first facilities are expensive, but necessary in order to reduce costs over time.
Pull with the industry
Gassnova has been commissioned by the Ministry to look at alternatives for CO2 capture beyond Mongstad. The industry will be invited to enrol alternative investment projects in Norway to capture and store CO2. The project will start this autumn with a timeframe of three years.
"If CCS is to be carried out or developed in Norway in the long term, the industry must be responsible for this. We must therefore map the industry's challenges and what is needed to realise CCS in Norway," says Aakenes.
Also read the article "What does CCS really cost?" by Ståle Aakenes on climit.no.
Fact box 1
Focus areas for analysis in Gassnova:
- Analyse cost scenario for CCS
- Overview of international projects·
- Overview of barriers for CCS and international support schemes and incentive structures
- Analysis of competitive position for CCS
- Evaluate goals and goal achievement for CLIMIT
- Analysis of CLIMIT's project portfolio
Evaluation of CLIMIT:
An external evaluation of the CLIMIT programme is currently ongoing at the request of the programme board. Results from this work will be available this autumn.