Developing a Business Case Essential, Report Says
Tamar Hallerman
GHG Monitor
7/3/13
The next seven years are “critical” to the development of carbon capture and storage, and developing a business case for the technology is essential for government and industry to focus on through 2020, the International Energy Agency said in a new report issued this week. The IEA’s revamped CCS roadmap, its first since 2009, says the public and private sectors need to make a “strong commitment” to reduce greenhouse gas emissions and “create an environment conducive to the actions required for CCS deployment,” and makes a string of recommendations for what decisionmakers should do to get there. “While international discussions on a global, long-term climate regime are not finalized, governments need to create business cases for CCS through supportive policies and regulations,” says the roadmap, which argues that the period through 2020 will be particularly critical for action if governments want to limit global temperature increases to 2 degrees Celsius above preindustrial levels (2DS).
Most critical for governments and industry, IEA argues, is the need to create a long-term business case for CCS, a move that requires “decisive action from governments” and continued engagement with industry between now and 2020 to drive private financing of projects. “This decade is critical for moving deployment of CCS beyond the demonstration phase in accordance with the 2DS. Mobilizing the large amounts of financial resources necessary will depend on the development of strong business models for CCS, which are so far lacking,” the report says, envisioning CCS accounting for one-sixth of the CO2 emissions reductions required globally to meet the 2DS goal by mid-century. “Urgent action is required from industry and governments to develop such models and to implement incentive frameworks that can help them to drive cost-effective CCS deployment.”
The blueprint acknowledges that current carbon pricing mechanisms have done little to drive initial CCS uptakes in places like the European Union, and says that other government incentives are needed through at least 2020 to drive short- and medium-term investment. To help provide longer-term operational support over the life of potential projects, IEA says incentives like feed-in tariffs, production tax credits or portfolio standards could help drive investment. It says policies like capital grants, investment tax credits and public-private partnerships could help drive capital investment in the nearer term.
More Int’l Coordination Needed, IEA Says
IEA estimates that to adhere to the 2 degree Celsius goal, CCS technology must be “successfully demonstrated” via at least 30 large-scale projects across several sectors by 2020 to gain enough knowledge to begin the wider deployment necessary in the following decade. To reach that goal, the roadmap says that governments need to ensure that all of the large-scale CCS projects currently at an advanced stage of planning are built and eventually begin storing about 50 million tonnes of CO2 annually. The report calls for wider deployment by 2030, especially in the industrial sectors like iron production, cement manufacturing and steelmaking, with a yearly storage rate of 2,000 MtCO2 per year, with a full decarbonization of the power and industrial sectors by mid-century.
To get there, the report says that international cooperation could help ease the burden. Coordinating CCS activities could help ensure that there is a wide portfolio of demonstration projects that covers all CO2 sources, capture technologies and storage geologies, according to IEA. The report says governments need to also create some sort of mechanism to share that knowledge from those early demonstration projects. The roadmap also says governments should do more within their own borders to boost public understanding via outreach and education efforts. “Governments need to take responsibility for explaining the role of CCS in national energy and climate strategies, also discussing its risks and the ways of addressing them. National, regional and local government, where political, social and cultural traditions allow, should also work with important stakeholders at both national and CCS project levels to facilitate information exchange and fair dialogue,” the report says, adding that NGOs and academia should also play a role.
Domestically, the report says governments should do more to encourage CO2 storage exploration, characterization and development, as well as leverage existing CO2 utilization markets. It also underscores the need for continued CCS RD&D, particularly for industrial applications like steel and cement manufacturing where CCS has not yet been demonstrated. It says governments should do more to encourage the cost of electricity from power plants equipped with capture, through the continued technology development and use of high-efficiency power generation cycles and put in place laws and regulations that require new-build fossil capacity to be CCS-ready. For carbon transportation, it calls on governments to encourage the development of a CO2 transport infrastructure that anticipates future needs in terms of point sources and demand centers, and is also ready for the transboundary transport of CO2.
Goals v. Realities
The roadmap is notable in that it acknowledges that while there has been some progress on CCS over the last several years, deployment has happened at a far slower pace than initially expected. “After many years of research, development and valuable but rather limited practical experience, we now need to shift to a higher gear in developing CCS into a true energy option, to be deployed in large scale. It is not enough to only see CCS in long-term energy scenarios as a solution that happens some time in a distant future,” IEA Executive Director Maria van der Hoeven said in the report’s foreword. “Instead, we must get to its true development right here and now.”
The 2009 version of the roadmap called on more than 100 commercial-scale industrial and power-generation projects to come online by 2020, storing about 300 million tonnes of CO2 per year, compared to the 50 million tonnes per year figure quoted in the current version by the end of the decade. Juho Lipponen, head of IEA’s CCS Unit, said the change, though, does not mean that IEA has reduced its ambitions for CCS since 2009. “Its role continues to be very significant during the first half of this century and beyond. But we have to face the reality in the short term. If the IEA comes out with a target of over 100 large-scale installations needed by 2020, people will say we are hallucinating. That is simply not possible,” he told GHG Monitor. “Therefore we have tied the short-term goals to current realities. … Bringing all projects currently in construction and advanced stages of planning on line by 2020 is still a very ambitious target. We will simply have to make up for lost time afterwards. But the essential thing is to get some positive movement during this decade.” Lipponen said it is time to shift CCS RD&D into “higher gear.” “We need to stop considering CCS only as a long-term solution that would happen sometime in the distant future,” he said. “We need to act now to have CCS as a solution in the early 2020s.”
IEA has long been a vocal advocate for the deployment of CCS technology, initially saying that CCS needs to account for one-fifth of emissions reductions efforts worldwide by mid-century. It kicked off 2013 with a renewed call for CCS development and promised to make the issue a priority in the upcoming year. But the organization has constantly warned that nations are falling behind in the development of large-scale CCS projects and that efforts needed to be doubled down. A report released last year by the organization highlights “painfully slow” progress on CCS R&D and large-scale projects, concluding that development is “woefully off pace.” IEA Chief Economist Fatih Birol said last fall that the outlook for CCS in the coming years “does not look very bright” given recent trends in the energy industry. “We see CCS as very crucial technology, but as crucial as it is we don’t see much happening,” he said in a November speech.
