Carbon capture needs more than startup boost

Leach: Alberta should ask itself how far it is prepared to go to commit to CCS

BY GARY PARK AND KAY CASHMAN FOR GREENING OF OIL

For those pinning their hopes on carbon capture and storage technology to clean up some of the petroleum industry’s dirtiest corners, there is no shortage of skeptics eager to point out the possible pitfalls.

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Industry executives meeting in Calgary in late January got the message from Andrew Leach, an assistant professor at the University of Alberta’s School of Business, who said government incentives and subsidies to kick-start projects can’t end there, a message that echoes the roadmap recently outlined by the world’s foremost energy research group, the International Energy Agency.

Alberta’s C$2 billion CCS investment just a start

Leach said the Alberta government’s allocation of C$2 billion to advance the infant carbon capture and storage, or CCS, technology will not be anything like enough for the province to attain its greenhouse gas, or GHG, emission reduction targets of 200 million metric tons by 2050, or 14 percent below actual emissions in 2005.

Leach said the mechanism does not exist to reach the government’s goal of using CCS to cover 70 percent of its project cuts by 2050.

Instead of the 139 million metric tons of reductions, the best current government policies would achieve would in the 4 million- to 5 million-metric-ton range a year.

If the government were to consider opting out after providing an initial financial injection, the business case for CCS would collapse, Leach said.

CCS is not like the oil sands

He said CCS is not like the startup of oil sands development when the government provided startup money, stepped back and collected royalties.

For CCS to work, the government will be “in this for the long haul, for big dollars and there is no exit strategy,” he said.

For the government to meet its GHG targets, Leach suggested it might face costs of C$5 billion a year and would have to apply stiffer carbon “charges” that would force the industry to store its carbon dioxide underground to avoid the higher penalty costs of air emissions.

Alberta’s largest industrial emitters currently pay C$15 per metric ton if they exceed specified limits. That, Leach estimated, would have to increase to C$30 by 2020, C$60 by 2030 and C$100 by 2050.

Leach’s numbers no surprise

The International Energy Agency, or IEA, which contends CCS technology is absolutely key to achieving GHG emission reduction targets, has been developing a set of international technology roadmaps for widespread deployment to reduce greenhouse gas emissions to 2005 levels by 2050.The roadmaps provide solid analytical footing that would enable the international community to move forward on specific technologies.

The first of these roadmaps, “Technology Roadmap, carbon capture and storage,” released Dec. 14, calls for trillions of dollars to be spent by governments and industry to make commercial applications of CCS possible.

IEA said 100 large-scale CCS plants must be built around the world in the next decade, and 3,400 will be necessary by 2050.

Luc de Marliave, climate change coordinator for France’s Total, told the conference that any future, full-scale CCS projects in France would, “of course,” need government support—subsidies that would decrease after a transition period to make CCS technology “competitive.”

Head of IEA says CCS a must to substantially reduce CO2

Nobuno Tanaka, head of IEA, said without CCS, CO2 emissions cannot be substantially reduced.

Leach suggested Alberta should ask itself how far it is prepared to go to commit to CCS.

Once all of the costs are added up, there is not enough in the system currently to pay for carbon capture, pipeline and operating costs and not enough “coming back into your pocket to make it worthwhile,” he said.

Leach not keen on combining CCS with EOR

Leach also has qualms about IEA’s view that combining CCS with enhanced oil recovery, or EOR, schemes makes the most business sense.

Although some EOR operations might be able to generate their own cash flow, others would need pay-for-sequestration schemes, revenues from the sale of emissions permits or offsets and the value of avoiding carbon emissions charges, he said.

EOR working in Canada

Although worldwide there is a long list of planned CCS projects, there are in practice only four CCS applications in commercial operation today, the rest are pilot or demonstration plants, IEA said. Interestingly enough, the only application in Canada has been using carbon dioxide for 10 years that is piped 200 miles from North Dakota for an enhanced oil recovery program in EnCana’s Weyburn, Saskatchewan oil field.

Links of interest

Lowest-cost CO2 technology still too pricey, but IEA says CSS is essential technology in reducing greenhouse gas emissions

IEA’s Dec. 14, 2009 press release

IEA’s “Technology Roadmap, Carbon capture and storage”

Contact Kay Cashman and Gary Park at publisher@greeningofoil.com