DESPITE LARGE NEED, TOP IEA ECONOMIST SEES GLOOMY FUTURE FOR CCS

Tamar Hallerman
GHG Monitor
11/30/12

The International Energy Agency’s top economist said this week that the outlook for carbon capture and storage technology “does not look very bright” given recent trends in the energy industry. During a presentation of IEA’s most recent annual World Energy Outlook this week in Washington, IEA Chief Economist Fatih Birol said that despite what his organization sees as a dire need for the widespread deployment of CCS—IEA says the technology should ideally provide 19 percent of needed global CO2 emissions reductions by 2050—the Paris-based group has not seen the needed level of progress on the technology to date. “We see CCS as very crucial technology, but as crucial as it is we don’t see much happening,” he said in remarks at the Carnegie Endowment for International Peace.

IEA is not the only organization that has reported relatively sluggish levels of development for the CCS industry this year. The Global CCS Institute said in October that the net total of large-scale projects currently under development globally has only increased by one over the last year. While many in the industry have highlighted the potential for enhanced oil recovery to help kick-start the CCS industry in the near-term—particularly in North America, China and northern Europe—Birol said that EOR will do relatively little in terms of catalyzing the industry globally without a price on carbon. “I’m sorry to tell you, but with our numbers, the situation at this moment does not look very bright for CCS even though we need CCS very much,” he said.

Outlook Underscores Influence of China, India

Birol’s gloomy prediction for CCS comes despite IEA’s prediction that coal will remain the backbone of global electricity generation system for at least the next two decades. Released earlier this month, the Outlook estimates that coal will remain the world’s dominant fuel source for electricity generation through 2035 even though renewables and natural gas are beginning to catch up. While most of the world’s developed countries are expected to shed much of their coal capacity over the next 20 years, the fuel source’s continued dominance will be almost completely attributable to rapidly developing giants China and India, the Agency said. Under one of its modeling scenarios, IEA said it expects that the two nations will likely drive three-quarters of coal demand growth coming from developing nations through 2035.

In his remarks this week, Birol emphasized how decisions being made in Beijing and New Delhi will increasingly drive world energy markets as their share of global demands increases. Birol noted that he expects China to add enough capacity over the next two decades that will equal the size of the U.S. and Japan’s current total electricity generation fleets combined. “What this means is that whatever China goes for in terms of technologies, fuels and so on, will affect all of us,” he said. “If China goes for a technology for electricity generation, even if it’s a new technology, since there will be a huge growth in that application of the technology the cost will go down as a result of learning by doing, and this will have major implications for its profitability and other markets. The decisions that will be made in Beijing will be very important for all of us, even though we don’t live in China.”

Birol qualified, though, that even though China has made several major investments in CCS over the last several years—the Global CCS Institute estimates that China has 11 projects currently under development—those investments might not be enough to move the ball forward on the CCS on their own. “In China there are definitely some pilot projects on CCS, and these are very encouraging, but to be honest with you, when you look at the number of power plants China is building without CCS, there is an overwhelming difference there,” he said. “If China was to have an economic incentive to push through CCS and other incentivizes, given the size of the market this would definitely change the picture, but the numbers I know bring us there yet.”