The Case for Carbon Capture
- Jul 7, 2018 9:21 pm GMT
Carbon Capture and Sequestration (CCS) has been identified as crucial in the efforts to reign in CO2 emissions that are causing climate change by leading agencies such as the UN IPCC, the International Energy Agency and the World Bank.
But CCS, the process of physically capturing CO2 emissions from industrial systems like power plants, pressurizing the CO2 into liquid form, and transporting it via pipeline to locations where it can safely be stored underground is the black sheep of carbon reduction strategies. We need it, but no one seems to want it. The environmental left is hesitant to support CCS because the process is viewed as a means to keep the fossil fuel industries operating well into the future. Industry and conservatives often treat CCS as an expensive and unproven albatross that will strangle business.
There is an element of truth to both of these positions. CCS is expensive and has never been built to the scale required, though all of the individual technical components have long been proven. CCS is also critical to the long-term viability of fossil fuels, particularly coal, in a carbon constrained future. Industry needs to do their part in driving down costs, and the left needs to recognize that fossil fuels are not going away (in our lifetimes) no matter how much renewables or nuclear power get built out.
The opposition to CCS on both sides fail to recognize the value proposition that carbon capture offers. Utilizing captured carbon offers the promise of a new industry and the potential for a massive energy security prize. It is well known that the largest potential demand for industrial CO2 comes from the oil industry who injects CO2 into mature oil fields to maintain productivity in a process called Enhanced Oil Recovery (EOR). What is less understood is just how large that demand can potentially be.
There are enormous quantities of oil available to be produced using CO2-EOR, if enormous quantities of CO2 can be supplied to the oil fields at the right price. Conventional oil drilling only produces about 1/3 of the original oil in place, CO2-EOR can potentially liberate another 1/3 of the original oil while leaving the CO2 behind in the ground.
Numerous studies from the Department of Energy and industry have found that there are tens of billions of barrels of oil available to be produced using CO2-EOR which would result in billions of tons of CO2 being permanently sequestered. It has also become clear that the revenues earned from selling CO2 are absolutely critical to financing carbon capture projects and infrastructure. Almost every successful commercial carbon capture project has sold the CO2 for use in EOR, while projects like FutureGen that proposed to bypass those revenues by focusing on CO2 disposal have mostly failed.
The EOR industry has demand for billions of tons of CO2, but only at the right price, and today the cost of capture from coal power plants is too high, there is a price gap. The coal industry is producing many billions of tons of CO2, but cannot afford to capture it. The EOR industry will pay around 2.5% of the price of a barrel of oil for one ton of CO2, the CO2 price is linked to the oil price. The price gap currently is $30-$50 per ton of CO2.
Federal policies should work to bridge the price gap and market failure that is preventing CO2 from being utilized in the market. There is enormous potential demand for CO2. The DOE studies indicate that 20 gigatons of CO2 (giga = 1 billion) would be needed to produce 85 billion barrels of oil from US oil fields, this is equivalent to all of the CO2 from roughly half of the current US coal power fleet for the next forty years. But to make this ambition a reality, carbon capture costs need to be cut in half. This domestic oil from established fields can offset the need to explore for oil in sensitive environments such as the arctic or imports from hostile regions.
Even though carbon capture is expensive, the technology works and is improving. And the best way to bring down costs in any industry is to ramp up production. This has been demonstrated in the last decade with wind and solar power where costs have fallen dramatically as factories have ramped up. The same will be true for CCS, more projects are needed.
There is a list of historical policy measures that can be applied to carbon capture that are not in effect today. Tax credits such as investment tax credits for capture equipment or sequestration tax credits are the most broadly applicable, and if structured properly can be revenue positive for the Treasury over time. Additionally, there are opportunities for tax free bonds to be leveraged.
There are needs for regularity clarity around the injection of CO2 and proper accounting for CO2-EOR as a bona fide carbon emissions reduction strategy. There is much that can be done to improve the permitting for CO2 pipelines and establishing pipeline corridors, particularly on federal lands out west where most of the EOR opportunities exist. And more funds are needed for demonstration projects that can help the industry move beyond expensive first-of-a-kind facilities.
The recent retrofit of the Boundary Dam coal power plant in Saskatchewan, Canada has been a huge success. The facility now captures 90% of its CO2 and markets all of its sulfur and coal ash, it is the cleanest coal power plant in the world. This success should be repeated.
The framework is clear, CCS is a requirement for meeting carbon emissions targets, CCS needs the revenues from CO2-EOR to be financially viable, and there is an enormous energy prize available if CO2-EOR is widely employed. By following this path the US will make great strides on both energy security and environmental goals. The challenge now is to put forward effective policies that will help bridge the price gap on carbon capture.
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