Amid Economic Concerns, Carbon Capture Faces a Hazy Future

For a world dependent on fossil fuels, carbon capture and storage (CCS) could be a key to controlling greenhouse gas emissions. But the technology meant to scrub carbon dioxide pollution from the air is experiencing stiff headwinds that have stalled many projects at the bottom line.t

Many companies have determined that expensive CCS operations simply aren't worth the investment without government mandates or revenue from carbon prices set far higher than those currently found at the main operational market, the European Trading System, or other fledgling markets. According to a recent Worldwatch Institute report, only eight large-scale, fully integrated CCS projects are actually operational, and that number has not increased in three years.

"In fact, from 2010 to 2011, the number of large-scale CCS plants operating, under construction, or being planned declined," said Matt Lucky, the report's author. Numerous projects in Europe and North America are being scrapped altogether, Lucky added. Last month, TransAlta, the Canadian electricity giant, abandoned plans for a CCS facility at an Alberta coal-burning plant because financial incentives were too weak to justify costly investment in CCS.

"For a very small industry that's still in the developmental state, it's not a good sign when the number of planned projects is declining," Lucky said. "This is a period when it should be exploding, so this doesn't signal significant growth of the CCS industry in the near future."

Low-Cost Carbon Killing Investment

Carbon capture and storage could reduce greenhouse gas emissions by capturing CO2 where it's produced and storing it permanently in various types of underground geological reservoirs. The International Energy Agency (IEA) believes CCS technology can dramatically reduce greenhouse gas emissions when implemented at dirty fossil fuel power plants and other industrial facilities that enlarge the world's CO2 footprint. The IEA would like to see more than 3,000 CCS-equipped plants come online by mid-century to achieve 20 percent of planned reductions in CO2 emissions. But no large-scale projects currently operate at power plants, and Howard Herzog, a CCS expert at Massachusetts Institute of Technology (MIT), said efforts to scale up the industry are largely on hold.

"I'd say the biggest problem we have right now is that there is not a market for CCS because there is no climate policy," Herzog said. "This technology can effectively help lower CO2 emissions in the atmosphere but that will always cost more than letting business as usual go on. So as long as there is no policy to stop business as usual, it will go on."

The United States has failed to enact a climate policy. And other nations, in turn, have not reached a strong international agreement on mandatory carbon emissions reductions without the largest historic polluter at the negotiating table. As a result, the envisioned market-based solution, where companies could gain valuable "credits" for steps they would take to reduce emissions while others would face new costs for failure to act, has never gained traction. CCS is so costly that such an incentive system is necessary for its development.

Herzog pointed to the American Electric Power Mountaineer coal power plant project in New Haven, West Virginia, where carbon produced at a coal plant was to be sequestered deep in Mount Simon sandstone. The U.S. Department of Energy was slated to fund half of the project's costs, up to $334 million, but after a successful pilot project, AEP canceled Phase 2 CCS at the site last summer. The decision was attributed to a weak economy and an uncertain U.S. policy on climate and carbon.

"They got half of the money from government stimulus and the other half had to come from somewhere," Herzog explained. In Virginia, which receives power generated by Mountaineer, the State Corporation Commission declined requests to pass costs on to consumers through rate hikes. "The utility said, 'Why should our rate payers pay for a technology that we may not even use?' There's no climate policy. If there was going to be a (carbon) market in the future you could make the case that you pay more now so that it's cheaper in the future. But with no clear indication of a future market, people don't want to pay more."

The story is similar in Europe, which launched its own carbon market in 2005 under the international agreement known as the Kyoto Protocol. That effort has been hampered because the United States never signed on to the protocol, and today's largest carbon emitter, China, like other developing nations, faces no mandatory reductions. The EU system isn't succeeding in spurring CCS projects because the permits, which have fallen to prices around $8 (6 euros) a ton, simply don't have enough value to cover the high cost of CCS. China is initiating several pilot carbon trading schemes next year, and the outcome of that trial will have a large impact on other carbon markets worldwide.

MIT's Herzog still believes the technology could someday compete with low-cost alternatives. "It can have a reasonable market share and bring down the overall cost of meeting carbon reduction targets," he said. "But when there are no carbon reduction targets, there is nothing to bring down the cost of."

(Related Story: "Out of Thin Air: The Quest to Capture Carbon Dioxide")

International Cooperation Elusive

The current woes of CCS are tied to the world economic crisis, which has made funding tighter. Another problem is the failure of international governments to achieve a global climate treaty to take the place of the expiring Kyoto Protocol.

"Up to two-and-a-half years ago industry believed that, after the Kyoto Protocol, national governments would agree on a new international agreement that (would) commit both developed and developing countries to reducing their greenhouse gas emissions, and that, as a result, they would force the industry to proceed with CCS," said Stefan Bachu of Alberta's provincially funded research organization, Alberta Innovates Technology Futures (AITF).

But international compromise has proven elusive, and no agreement requiring cuts in carbon emissions has been achieved.

"You cannot make money out of CCS, it's going to be a cost," said Bachu, who shared in the 2007 Nobel Prize as a member of the Intergovernmental Panel on Climate Change. "And, in the present economic climate and in the absence of an international agreement, no government is really asking industry to do anything through mandatory emission reductions, cap and trade, or the dreaded carbon tax. The industry knows that this is coming, if not today, then tomorrow, or in 2020. But why spend money today if you don't have to? That's why lots of projects that have been announced are being delayed or falling by the wayside."

(Related Story: "Carbon Recycling: Mining the Air for Fuel")

High Costs, Uncertain Results

Matt Lucky points out that while people view CCS as a way to produce greener power while prolonging the supply of fossil fuels like coal, that's not the current reality anywhere in the world. "Of the eight large CCS projects operating today, none of them are predominately power generation sites," Lucky said. For example, the largest CCS project in North America, ExxonMobil's LaBarge facility, exists because natural gas from the large Wyoming field must be stripped of excess CO2 before it can be sold on the energy market.

"CSS hasn't been proven on the scale that it needs to be proven on for the sector where it would be used if it's to make a large impact in the future," Lucky said.

But Jared Ciferno, Director of the Office of Coal & Power R&D at the Department of Energy's National Energy Technology Laboratory, said much work is under way to make such proofs a reality, ready for implementation when economic factors fall into place.

"There are still eight very strong demo scale projects going forward," he said, noting that the United States is home to more than half of the 15 major CCS plants operating or under construction around the world. The U.S. economics can work, Ciferno said, because most projects sell their CO2 for use in enhanced oil recovery. Pumping the gas underground helps force valuable crude out of emptying reservoirs—and makes the CCS projects economically feasible.

While that's not exactly the type of power plant emission-scrubbing CCS use that advocates hope can make a significant dent in greenhouse gas emissions, Ciferno says the technologies being developed are much the same: "Don't underestimate what we'll learn from these. CO2 separation technologies, transporting, storing, and monitoring CO2 at scale are all lessons that will be very applicable if CO2 regulations come down the road and they stick."

In fact, these and other research and development efforts by universities and organizations continue around the world in hopes of making scaled-up CCS cheaper and reducing its "energy penalty." (Norway just opened what it is calling the world's largest test lab for CCS technology.) In operating the technology that captures carbon, the power plant gobbles up about 20 to 30 percent more energy, so efficiency is typically lost. "We've proved under small-scale conditions that you can cut that energy penalty in half," Ciferno said. "That has improved greatly in ten years, though it's not yet ready for prime time."

Some larger projects are still going forward, like Shell's Quest* project in Alberta, which is supported with $865 million of Canadian provincial and federal funds. Shell CEO Peter Voser, at a briefing with news media May 16 at a business forum in Rotterdam, the Netherlands, said government support in Canada had made his company's investment in the Quest CCS project feasible, but it would be difficult to advance the technology without global commitment to cut carbon emissions.

"I think if you want as a world to achieve climate goals, then CCS, like energy efficiency, needs to be part of the solution," Voser said. "In order to actually drive to CCS, we need pilot projects. We have the technology components, we know they work, and we need to pilot projects to scale up the technology.

"I'm of the very strong opinion that we need a global CO2 price, because this will allow us to invest in these things. As long as the uncertainty is there, it's going to be difficult." Shell internally sets a hypothetical price of $40 a ton on carbon in making its business decisions, Voser said.

(Related Story: "A Quest to Clean Up Canada's Oil Sands Carbon")

In April, the United Kingdom revived its investment in CCS with the announcement of a new competition allotting £1 billion ($1.6 billion) in funding for commercial-scale projects. An attempt at a similar competition in 2011 collapsed with the failure of its flagship project at Longannet power station in Fife. But this month, the government said it was seeing a "high level of interest" in the competition from companies including Shell (which was a partner in Longannet), Progressive Energy, and Portland Gas Storage.

But that kind of government investment may also flag, due to the recession and competition from other energy technologies now gaining steam.

"Lots of people view CCS as a rival to technologies like solar and wind because it can prolong the life of coal and natural gas," Matt Lucky said.

But even as investments in renewables grow, the IEA projects that fossil fuels will still supply 75 percent of our energy needs a quarter-century from now. CCS may be able to play a serious role in cutting greenhouse gas emissions in half by mid-century, but doing so will take an IEA-estimated $5 trillion of investment. In the near term, at least, such numbers seem unlikely.

"Where we are today is very largely where we were a few years ago," Matt Lucky said. "What is operating today is very insignificant on a global scale. It really is just projects and studies (demonstrating) a lot of potential—but there has been little on the ground development to achieve that potential."

* Shell is sponsor of the Great Energy Challenge initiative. National Geographic retains autonomy over content.