Carbon Capture and Storage Loses another £100m but saves up to £10bn

Last week the National Audit Office published a report Carbon Capture and Storage: the second competition for government support. The main headline was

“The Department has now tried twice to kick start CCS in the UK, but there are still no examples of the technology working. There are undoubtedly challenges in getting CCS established, but the Department faced an uphill battle as a result of the way it ran the latest competition. Not being clear with HM Treasury about what the budget is from the start would hamper any project, and caused particular problems in this case where the upfront costs are likely to be high. The Department must learn lessons from this experience if it is to stand any chance of ensuring the first CCS plants are built in the near future.”

Amyas Morse, head of the National Audit Office, 20 January 2017

Key elements

  • Two Projects in the Competition.
  • When project cancelled £100m had already been spent.
  • The first competition running from 2007 to 2011.
  • Full subsidy from the Treasury (i.e. Taxpayers) would have been £1 Billion
  • Over 15 years, subsidy from consumers would have been £3.9 Billion to £8.9 Billion
  • Would have captured 1Mt to 2 Mt of CO2 a year.
  • Consumer subsidy between £105 and £172 Mwh, on top of the current wholesale price of around £45 Mwh.

The BBC carried the story, correctly citing many of the costs, as did the Express, which stated

At the time it was cancelled, the competition had two preferred bidders: the White Rose consortium in North Yorkshire which planned to build a new coal plant with the technology, and Shell’s scheme in Peterhead, Aberdeenshire, to fit CCS to an existing gas plant operated by SSE.

The NAO report said the department initially estimated it would cost consumers – who would subsidise electricity from the schemes – between £2 billion and £6 billion over 15 years, but by 2015, this estimate had risen to as much as £8.9 billion.

The report found the Treasury was concerned over the costs to consumers, and that the competition was aiming to deliver CCS before it was cost-efficient to do so.

Joanne Nova points to a July 2015 post on the subject of CCS by Anton Lang. He stated

CCS artificially raises the costs of coal fired power in two ways

First, it raises the initial construction cost for any new large scale coal fired plant by around 60%.

Second, the CCS process is hugely energy intensive — consuming up to 40% of the electricity generated by the plant. So  the plant can only sell 60% of the actual power it produces.

As a (slightly manic) beancounter, I like to put the costs in context.

  1. How much would the cost have been if the Treasury had not pulled the plug per tonne of CO2 saved?
  2. What is the value of the subsidy be if China and India adopted the plan?

In the full NAO report (a 389kb pdf) Figure 6 gives details of the two schemes shortlisted in the competition.

It is the Peterhead scheme that would incur the lower subsidy of £105 Mwh. The £3.9 billion works out at an average 290 Mw production, or 76% of capacity over 15 years. It is cheaper due to adapting old plant. The disadvantage is that there is only 30 Mt of CO2 storage capacity in the area, so the area does not have the facility to develop much more unless further infrastructure development is made to pump the CO2 offshore into old oil wells.

The White Rose scheme has higher subsidy of £172 Mwh. The £8.9 billion works out at an average 394 Mw production, or 88% of capacity over 15 years. It is new plant, but has the advantage of 520 Mt of CO2 storage capacity in the area.

If we add in the £1bn subsidy without interest, over 15 years the cost per tonne of CO2 saved is about £264 (US$330, A$435) for the Peterhead project and £300 (US$374, A$490) for the White Rose project.

The NAO report in figure 12 that the subsidy could come down to £94 Mwh with scale.

Let us see what would be the cost if India and China adopted CCS for the current coal-fired power stations, but increasing capacity by 25% to cover the efficiency losses. Assume subsidy is just $100 Mwh.

According to Greenpeace (could be unreliable), China has about 900,000 MW of capacity. Add in 25% and assume 70% capacity, gives around $700bn a year subsidy. This is about 6% of current GDP.

From Wikipedia, India had 310 000 MW of capacity in 2015.  Add in 25% and assume 70% capacity, gives around $240bn a year subsidy. This is about 12% of current GDP.

I am sure that China and India will want to follow the UK’s lead. The only slight issue is finding a hole big enough. Maybe instead they could build some big greenhouses and grow tomatoes very rapidly.

Kevin Marshall

 

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