CCS funding failing due to low carbon prices

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22 November 2012, Gas

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In Europe, only one French project qualifies for the available EU funding at present, but the cost of reaching emissions targets is likely to be significantly increased if CCS technology is not widely deployed. However, technological progress has been slow, and has failed to provide economical solutions to date.

A statement was issued on November 15, 2012 by 17 organizations - including Drax, Alstom, National Grid, E.ON, and the CCS Association - calling for a delay in the imminent decision for funding of projects in the EU by several months. The purpose of this is to allow projects with existing bids to secure the necessary co-funding from their governments to qualify for the EU grant. However, in another setback for CCS, the low cost of carbon emissions has resulted in there only being enough funding for two or three projects out of an intended 12.

CCS technology can absorb as much as 95% of emissions from fossil fuel power stations, but as much as 25% more fossil fuel is consumed for the same level of output when running with current CCS technology. The cost of installing the technology and running it can double the cost of power generation, and the low cost of carbon emissions means that CCS is uneconomical at present.

In order to hit emissions targets, as much as 20% reductions in Europe were hoped to be achieved through CCS technology, but that target is looking increasingly unlikely as the technology is failing to progress. Alternative ways of reducing emissions are proving to be more economical, but without large-scale deployment of CCS the costs of meeting a 50% global emissions reduction target by 2050 may be 70% higher than previously forecast according to the International Energy Agency.

Global energy-related CO2 emissions in 2011 were the highest ever up to that point, and atmospheric greenhouse gas concentrations are now more than 40% higher than in the pre-industrial era and continuing to rise. Overall, 44% of emissions are coming from coal combustion, and the volume of emissions is set to increase further.

According to the World Resources Institute, a total of 1,200 new coal-fired power stations are currently in planning to be built worldwide across 59 countries, with three quarters of the new plants in China and India. As a result, 80% of projected emissions in 2020 are already locked in due to emissions intensive plants that are already in place or under construction. Without CCS technology, the roadmap to emissions reductions is looking increasingly untenable.

In the start of a movement to attempt to rectify the imbalance of emissions, an international business statement called the Carbon Price Communique has recently been endorsed by over 100 business leaders from companies such as Shell, BP, and EDF Energy to promote the benefits of a clear, transparent, and unambiguous global emissions price. A well-managed carbon price is needed before CCS can start to fulfill its potential.

Presently, government incentives are clearly not sufficient to get CCS off the ground in the timescale required, and without a sufficiently high price on emissions the construction of large-scale CCS projects will remain minimal. The catch is that large-scale investment is needed to reduce the costs of CCS but costs are presently too high to induce sufficient investment. This fiasco is unlikely to be resolved without an adequate carbon price.

Source: MarketLine

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