Carbon Capture: Possible Solutions, Pt. II

How do you combat a necessary evil on a budget? That's the dilemma with carbon capture. Scientists, policy makers and energy companies all agree that carbon dioxide from coal burning plants needs to be kept out of the atmosphere. The problem is how to do it without running up expenses that will make China, India, the United States and even Europe retreat behind years of prototype trials.

Thus far, carbon capture and sequestration (CCS) has been concerned with research and very little about actually putting the technology to real use. In Part I: Carbon Storage, the Money and the Market, we examined the history of carbon capture. Below we'll look at some of the forces driving the carbon market.

Part II: Carbon Economics

The Market
Carbon capture and sequestration has the potential to account for 220 to 2,200 gigatons of CO2 over the next century, says the Intergovernmental Panel on Global Change (IPCC). It's a nice vague number. In a single year, Europe generates about 4 gigatons. About half of the CO2 generated worldwide comes from stationary sources like power plants that could potentially be equipped with CCS.

The total cost for CCS depends on when it is built and the volumes and technological breakthroughs of the future. Experimental CCS plants will be able to sequester and store CO2 at a cost of $80 to $120 per ton (€60 to €9), according to a McKinsey report on CCS. That includes capture, transport and storage. Capture accounts for about two-thirds of the cost.

Early commercial-scale projects – those that might be built in the 2015 to 2025 time frame – might do the whole job for $67 to $47 per ton, which could drop to $40 to $60 per ton by 2030, which is comparable with expected carbon cap fees at the time. Thus, CCS could pay for itself. Further reductions of $7 to $10 per ton are possible at that time.

The least expensive storage would be in onshore, shallow and highly permeable reservoirs. Places with an existing infrastructure like Germany's Ruhr Valley are a key example. McKinsey, in fact, estimates that only around 3.5 gigatons a year could be abated through CCS. At $45 a ton, that's $157 billion of CCS a year.

The Business Case
The investments needed to make CCS become a commercially competitive alternative are obviously massive. But who's going to foot the bill? And why? Big oil companies are already familiar with much of the technology used for CCS. But the utility companies are also players in the game since they are choosing where to buy the power used in the grid. Until now the utility industry has been focused on reliability and low cost. But that might need to change if the initially much more expensive power from CCS power plants will get a chance to get on the grid.