The coal industry wants your cash to save them
|
A recently-released report by the World Coal Institute (WCI) on how to finance the experimental Carbon Capture and Storage (CCS) technology for power stations, reminded me of a cartoon from years ago by the Australian cartoonist, Patrick Cook. In the cartoon, a huge bloated budgie (parakeet) with the letters “BHP” emblazoned on its chest, was holding a gun to its own head while proclaiming to a cowering politician, “Hand over the loot or the budgie gets it.” (At the time, BHP — which owned iron ore mines and steel mills — was haggling for government support for its ailing steel operations). BHP-Billiton ditched its steel interests long ago and is now one of the world’s biggest miners and exporters of coal for power stations. It is also a member of the WCI. In its report, titled Securing the Future: Financing Carbon Capture and Storage in a Post-2012 World, the WCI argue that there is an urgent need for massive funding of CCS trials by governments and with a generous slice of revenues from emissions trading schemes. Current funding, the WCI claims, is “too slow to allow necessary global GHG [greenhouse gas] emissions reductions goals to be achieved.” Not surprisingly, they identify that “the appetite for this will largely hinge on public acceptance.” What the coal industry realises is that without massive public funding, CCS is dead. Without CCS, the coal industry and power companies locked into coal-fired power stations will, at best, be on life support. The WCI report, just a few weeks ahead of the COP15 talks in Copenhagen, reflects the increasing desperation of a coal industry trying to get someone else to pay for the mess it has created. Everyone knows that if the global community agreed to make deep cuts to greenhouse gas emissions, the biggest loser will be the coal industry. Years ago, the industry could have invested its own money in researching CCS, but didn’t. Instead, from the late 1980’s on, they poured money into the pockets of lobbyists and conservative think tanks wanting to derail any move aimed at limiting greenhouse gas emissions. Even today, the coal industry invests pitiful amounts of its own money in CCS research. Instead, the budgie is back. Having largely succeeded in stalling changes which would have cut coal consumption, the coal industry now hopes that it can harness the public sense of urgency over global warming to have politicians allocate tens of billions of dollars in research funds largely for their benefit. In its report, the WCI floated a number of ways that everyone other than themselves could be compelled to fund CCS research. Electricity consumers, they suggested, could be subject to a levy on consumption or even a percentage of revenues of emissions trading schemes be earmarked. They also flagged that power generation companies could be issued free or even bonus emission allowances if they had plants with CCS technology attached, or even that a levy be imposed on coal-fired power stations that don’t have CCS plants attached. They also suggested that other direct government subsidies could be considered too, including tax credits, loan guarantees and direct payments. Perhaps most audaciously, they have suggested that perhaps CCS-fitted plants could be explicitly included in Emissions Performance Standards (such as the “Schwarzenegger clause”), which mandates carbon performance standards for sources of electricity. At the heart of the coal industry’s current panic is the recognition that few believe CCS will deliver any substantial greenhouse gas emissions anytime soon. The most optimistic think CCS may be deployed at commercial scale by 2020. Others think 2030 is perhaps more realistic. Others think that even if the technology can be made to work at commercial scale, it won’t be economically competitive with other emissions-reduction strategies or technologies for a long, long time. The pessimism about CCS is breaking out everywhere. Last June, Jim Rogers, CEO of the huge power company, Duke Energy, said that “CCS as a magical technology that solves the carbon problem for coal plants is oversold … I think there is a lot to learn, and it is going to take us a lot longer for us to figure it out than a lot of us think.” Just last week, former Australian government minister Ian Macfarlane, who had until recently been an enthusiastic promoter of CCS, said that “what happened was nothing happened … The clean coal option has passed us by. Twenty years to wait before the technology is available. Thirty years before it is commercial. We will need to move on to other options by then.” (Macfarlane is now a booster for gas-fired power stations and nuclear plants.) As pessimism about CCS increases, the WCI sees public funding as crucial in creating the illusion that CCS is a viable option. In its report, the WCI argues that “an effective programme to accelerate the widespread deployment of CCS should build public confidence in and acceptance of CCS as a mitigation option.” Maybe. An alternative scenario is that once the scale of public funding becomes obvious and more than a handful of CCS projects go belly up, the public will object to throwing good money after bad. And that is what has the coal industry worried. Of immediate concern to the WCI is the prospect that the COP15 meeting won’t agree to include CCS as an option in the Clean Development Mechanism (CDM), a market-based scheme designed to allow private developers to gain credits for emission reductions from projects in developing countries. A recently-released report (large pdf) commissioned by the Global Carbon Capture and Storage Institute, a pro-CCS agency, stated that “in the absence of a mechanism such as the CDM it seems unlikely that investment in CCS will be achieved in many developing countries within the timeframe proposed by the G8.” (At its June 2008 meeting in Japan, the G8 agreed that “20 large-scale CCS demonstration projects need to be launched globally by 2010, taking into account varying national circumstances with a view to supporting technology development and cost reduction for the beginning of broad deployment of CCS by 2020.”) There are numerous governments — including the United States, Norway, Australia, Canada and Saudi Arabia — enthusiastically supporting including CCS in the CDM. There are also the business lobby groups such as the International Chamber of Commerce, the Carbon Capture and Storage Association and the International Emissions Trading Association, all cheering for the inclusion of CCS in the mechanism as well. Other countries are less enthusiastic. Brazil and India oppose its inclusion, as do the Alliance of Small Island States. The Executive Board of the CDM was also equivocal, noting (pdf) that there are a host of complex technical, legal and economic issues that still need to be addressed. One thing that both supporters and opponents of including CCS in the Clean Development Mechanism agree on, is that the main beneficiaries would be countries that are major producers and/or consumers of fossil fuels for power generation. That being the case, the risk is that new CCS projects approved under the Clean Development Mechanism would generate so many emission credits they could undermine the price of carbon and end up perversely deterring the development of renewable energy and energy efficiency technologies. Worse still, this could undermine the prospects of increasing energy efficiency and expanding renewable energy in the very countries that are least reliant on coal power generation. The likelihood is that COP15 will struggle to reach agreement on anything beyond a broad outline of what could be included in a successor agreement to the Kyoto Protocol. It is also likely that the debate over whether to include CCS in the Clean Development Mechanism will not be resolved at the Copenhagen conference. But the coal industry, like Patrick Cook’s big bloated budgie, will be back demanding more public money. And the odds are that the coal-lobby funded think tanks will be conspicuously silent about the big government handouts their sponsors want for their pet CCS projects. |
|
|
|
16 Comments
What to do? The situation is:
1) Big Coal stand to lose their competitive advantage in a future non-mineral energy industry. That future will belong to technology companies and landowners of especially good energy-collection sites.
2) CCS is widely considered an inefficient means to sequester carbon at best, an expensive pipe dream at worst.
3) CCS is nevertheless the only carbon-sequestration program that allows Big Coal to retain its future competitive advantage in the energy industry.
4) Government support for CCS in Australia and UK, in the face of of widespread skepticism, and the laughable compensation regime in Kevin Rudd’s CPRS, demonstrate that when push comes to shove, overruling Big Coal is not as easy as we might wish it to be. One way or another, we will end up looking after Big Coal whether we wish to or not.
5) What if there is a way of looking after Big Coal without mortgaging the climate to underwrite the inefficient/ineffective CCS?
6) Find a way of giving Big Coal a competitive advantage in the future energy market, which will be dominated by technology not resources.
7) For example, for every dollar of cost incurred due to carbon penalty mechanisms, provide two dollars worth of subsidy vouchers for developing sustainable energy technology. Instead of mere compensation. The difference to be met by the taxpayer.
9) Review patent laws to close gaps in intellectual property protection.
10) Review policies that disqualify nuclear power as possible options.
Sadly, (10) above is the only option that is even close to rational.
Doubly sad, actually, because the nuclear option is off the table due to Federal legislation from 40 years ago, which will prove to be very difficult to repeal due to the entrenched negative publicity nuclear fission has endured through the years.
Now, don’t get me wrong - I am no friend of nuclear power, but it is quickly becoming the only viable show left in town.
By all means, build gas turbine stations, wind turbines along every ridge in Australia, cover millions of roofs with photovoltaic panels (where they come from I can’t guess) and bedeck hundreds of square miles of countryside with solar thermal mirrors, but the maximum capabilities of these technologies will be exhausted long before the energy generated satisfies society’s demands.
The other so-called renewable technologies haven’t been demonstrated to be worth more than a couple of light globes. Putting hope in them is akin to thinking that banning plastic bags at supermarkets will save diminishing oil supplies or save the whale.
I take it that from their lack of investment in CCS that the coal industry does not regard it as competitive with renewable energy.
They should get no special treatment from taxpayers. They get far too much in public subsidies already, which must be wound back.
They’ve made their own bed. They can lie in it.
John, do you know of a source that backs up your assertion that all of the options (gas, wind, solar, geo, ocean etc) can’t satisfy our demands?
I’m interested in looking at the nuclear questions from the perspective of ‘what are the criteria by which we would accept nuclear into the mix?’. I think this approach will more more constructive than the current almost-religious approach both sides of the debate are taking.
If They won’t build it (CCS), it’s because They know it’s a non-starter. For a fraction of Their rent-seeking we could give every home in the country 10kW of PhV, solar hot water and enough pink bats to refloat the Titanic, aka the coal industry. Funnily enough, one of the by-products of coal could be insulation fibre.
“When will they/we ever learn…?”
My cynical view is that coal industry knows it’s a dud and hence won’t put their own money in. The real “value” of the government input is to starve research into possible competing technologies.
There’s another factor - CCS would greatly increase the cost of coal generated electricit (If it worked.) Coal would go from being about the cheapest to more or less the most expensive.
Ben A:
The projected cost of CCS is far less than the difference between wind power, solar PV or many other technologies, proven or not. I will leave you to Google the relevant searches, but it is essentially a no-brainer.
The answer to our question about future energy needs must include questions such as:
How much power can be available by, say, 2040?
When will it come on line?
What is the capital cost?
What is the operating and maintenance cost?
How relaible will it be - availability and reliability figures are at the centre of current power pricing and marketing systems and will remain firmly in their place.
Essentially, there is not a lot at present which can compete with coal (brown or black). The next tier includes such as solar thermal, natural gas CCGT and so forth.
The last, and most expensive tier, includes Solar PV and all of the unproven technologies such as hot rocks, tidal (Want to choke your own favourite estuary?) and developmental stuff such as CCS, butterfly wings in Brazil and so forth.
Nuclear is in a class of its own, for political reasons, national strategical reasons, insurance and because the capital fundraising and the ongoing business must be supported by the national government. No nuclear power industry in the world at present is standing on its own legs, because the insurers insist that the end-of-life demolition and site cleanup costs be accepted by the national governments and because certain radiation risks must also be accepted by the national government. This is serious. No business can exist without insurance to cover their risks.
JB
@John B
Harvard’s Belfer Center for Science and International Affairs has published study that concludes that, “[initially, costs] are expected to be approximately $150/tCO2 avoided (with a range $120-180/tCO2 avoided), excluding transport and storage costs….” http://belfercenter.ksg.harvard.edu/publication/19185/realistic_costs_of_carbon_capture.html?breadcrumb=%2Fproject%2F43%2Fenvironment_and_natural_resources
As I said, CCS changes coal from cheap to expensive. Why would coal companies want to bring it forwards?
And remember, the other technologies actually exist. CCS is still future-tech.
John Bennetts: “Sadly, (10) above is the only option that is even close to rational.”
So the rest is not just impractical, inadequate, impossible, or even useless … but irrational?
Thanks, John.
Ben, it’s because coal will become expensive anyway. They hope the premium paid for CCS will be less than the premium paid for carbon certificates. That’s because the ETS in current form does not give them any competitive advantage in gaining carbon offsets externally (eg they can plant trees or make solar dishes, but so can anyone else). Give them another way of retaining competitive advantage in the energy industry, and CCS will no longer be necessary to them.
Ben,
Your quoted figures amount to a couple of cents per billable unit (kWH), ie say 20% additional for CCS - IF it could be made to work, which is a bigger question.
Coal plus CCS is thus much cheaper than solar PV, solar voltaic, or wind (for example), each of which is many times more expensive than coal powered electricity and less reliable and available.
For example, during the recent/current hesat wave in SA, I read that the wind turbines were only available at 1%. This is vastly less than the Victorian government’s estimate that, during summer afternoon peaks, air conditioning could draw on 70% capacity from wind power. It has been oversold and is very much too expensive to supply commercially without at least a ten-fold price increase.
James MacD. Yes, correct. Irrational or useless or both.
Ben again: Keep an eye on responsible sites such as realclimate for updates on cost and availability. There are many sources, but keep your snake oil detector turned on.
Once again, thanks John. Always a pleasure being insulted by you.
John Bennetts. You make a practice of calling people you don’t know “uneducated” and “irrational”. You are also a scientist, engineer, and manager. Interesting.
You have also mentioned solar thermal arrays you are capable of implementing, without mentioning any billion dollar backing so far.
If you have a look at this thread, I’ve posted another uneducated, irrational idea at 9:56am NSW time today, which might just possibly represent a way to get investment in your technology. It’s a bit of a hit-and-miss affair, coming up with innovative solutions, but of course as a manager you’d know that. Then again who cares what a non-scientist thinks, eh?
@John Bennetts
From the above source:
A random web search suggests that the current price of 1kwh varies from 0.04 Euros to 0.16 Euros. [www.howmuchatyourplace.com/how_much_does/1%20kWh%20of%20electricity_cost.php]
Split the difference and we’re talking perhaps 15¢/kWh?
If so, we’re talking more than 60%. (If CCS worked.)
It’s not clear to me why the cost should halve, given that the a large part of the cost of CCS is the energy required to drive the CCS process, and that’s determined by physics, not technology. But lets suppose that it does get down to the level of 20-30%. That is still $35-70/tCO2 avoided.
Which is to say that unless and until the carbon price is at least $35-70/t, even if your plant was CCS equipped, you’d leave the CCS turned off and just buy the credits - especially if the government will subsidise the cost of your credits.
And remember, this all assumes that the power plant is built in a location that is suitable for CCS - which many population centres are not. Transporting large quantities of CO2 is not going to be cheap any time soon.
PS. Figures are USD, not AUD