Substantial new tax credit scheme for CCS in the US could spur development
In highly significant news for the future of carbon capture and storage, US President Donald Trump has signed a bill that will give tax credits to carbon dioxide producing industries per tonne of the gas captured and stored. The credits will apply to any facility that commences construction before 2024, and will last for 12 years of operation. Facilities that capture CO2 for reuse (for example for enhanced oil recovery) will receive a US$30/(metric) tonne (€24.27) tax credit, while those simply storing the gas geologically will receive US$50/(metric) tonne (€40.47). These ‘prices’ are significantly higher than the current carbon price per tonne under the European Emissions Trading System, which is around €9.50, and at first glance should provide a tempting incentive for installing CCS systems in the US. To give an idea, a 750 MW (electrical output) coal-fired plant producing 0.94 kg CO2/kWh, operating at full capacity for 60% of the time over 12 years (and not operating at all otherwise), and with 90% capture efficiency, could claim US$1.2 billion (€969 million) in tax credits if reusing the CO2, and US$2.0 billion (€1.62 billion) if simply storing the gas. As a comparison, the CCS component of the Boundary Dam Unit 3 coal-fired plant, which is just 160 MW, cost around US$900 million, though SaskPower estimates it could do it 20-30% cheaper if it built a new facility. The bill is especially interesting in that it will apply not only to conventional power generation plants, but other CO2 intensive industries such as steelmaking and cement making, too. Moreover, the credit scheme seems likely to maintain broad political support, as it appeals in some way both to Republican and Democratic voter bases, reflected by the bipartisan support the bill received. Overall, the new law has the potential to radically transform CCS in the US, and that would be sure to have knock-on effects across the world.
Worldwide demand for natural gas following increased supply in puzzle for economists
The Financial Times has looked at the somewhat unexpected rise in demand for natural gas following a rise in supply. Last year, US Energy Secretary Rick Perry was widely derided by economists for saying that with a rise in coal output, a rise in demand would follow, because of the relationship between supply and demand. Economists pointed out that it is demand that in theory produces supply, and that Mr Perry had misunderstood how things work. In the case of natural gas, however, Mr Perry’s conception of supply and demand has proven true – the glut of supply of natural gas driven mainly by new production from the US and Australia has been absorbed by new demand. China’s consumption of the gas has risen sharply as it has sought to reduce coal consumption for cleaner air, while countries as diverse as Pakistan, Egypt, Jordan, Lithuania, Mexico, Brazil and Argentina have all been buying more. Even higher production of natural gas is expected over the coming years, and it will be interesting to see if demand follows, though unfortunately for Mr Perry, it may be at the expense of demand for coal.
Spain’s energy regulator rejects government plan to keep coal plants open
Spain’s national energy regulator has rejected the government’s plan to extend the life of three of the country’s aging coal-fired power plants, citing both a lack of need and its contravention of EU and national law. Last November the national government proposed a royal decree to give it the power to keep a power plant operating if the government believed it was necessary for security of power supply. It was believed that the decree was aimed at two of Iberdrola’s coal-fired power plants, which the company wished to close, while it would also have allowed Endesa to extend the life of a plant it wished to keep operating. The Comisión Nacional de Mercados y la Competencia issued a statement in late January which found that Spain, with a capacity margin of 30%, well over the typical ‘safe’ margin of 10-15%, has no issue with security of supply. Part of the statement read: “The Spanish electricity system will not have problems of security of supply in the medium nor the long term. (Even) in the worst scenario with demand peaking at 46,000 MW and low generation, a significant part of the existing coal park could be safely discarded.” This statement goes against the strategic thinking of Endesa, which in its 2018-20 strategic plan published last year wrote “Preserving efficient thermal capacity will ensure security of supply, and avoid additional costs to the system while reducing emissions.” The difference between the government and Endesa’s position on one hand and the CNMC and Iberdrola on the other is an interesting contrast. It may be political pressure from the long-standing coal industry affecting the government/Endesa position, or alternatively there may be some doubt about the reliability of supply with a large proportion of renewables in the energy mix. The CNMC’s statement, however, seems to comprehensively rule that out.
World would struggle to meet climate goals if all currently planned coal-fired plants built
Research published in Environmental Research Letters has found that, if all currently planned, under construction or announced coal-fired power plants were to be built and operated, “the carbon budget for reaching the 2 °C temperature target [under the Paris Agreement] would nearly be depleted”. While in many developed countries coal firing is declining, developing countries have significant numbers of planned and under-construction plants, and though some are also installing large amounts of renewables capacity, the added coal-fired capacity, if built, is likely to lead to extended carbon dioxide-equivalent emissions. The long lifetimes of coal-fired plants is key to the emissions – a plant built today is likely to be able to run until the 2050s or 2060s, a time when it is hoped global emissions will have reduced drastically, and it is assumed in the modelling that if built, the plants will indeed be run so long, to justify the costs of building them in the first place. Most (73%) of the planned and under-construction plants are in five countries – China, India, Vietnam, Indonesia and Turkey. The paper suggests that long-term energy policies should be instituted now to ensure that climate targets can be met. While the research is concerning, it does appear somewhat speculative, as there is no allowance for retrofitting with carbon capture and storage, and an assumption that all planned plants will be built, as well as that they will be operated for their entire design lives. It may be the case in the future, as some have already argued is beginning to be the case now, that it will be cheaper to install new renewable technologies than to pay the operating costs for already-built conventional power generation capacity. Industry commenters have expressed similar ideas, as the Washington Post coverage of the research shows.
Satellite data shows changes in ozone distribution in the atmosphere
Freshly published research using satellite data has shown that levels of ozone in the lower stratosphere (between 10 and 20 km from the Earth’s surface) are dropping, in a trend that is reportedly consistent with climate change model predictions. Atmospheric Chemistry and Physics published the research led by Dr William Ball at the PMOD World Radiation Centre in Switzerland, using data from a range of satellites over a variety of time periods. Concurrently, ozone levels in the troposphere (closest to the Earth’s surface, below the lower stratosphere) are increasing, and this has led to some speculation that there may be more mixing between the two layers, especially as overall concentrations of ozone in the atmosphere as a whole have been relatively even. Scientists are unsure, however, of the mechanism at play, with another idea being that the higher levels of ozone in the troposphere are being created by NOx released from fossil fuel combustion, as NOx is known to promote the formation of ozone. Further ideas are volcanic activity releasing ozone-destroying sulphur compounds into the lower stratosphere, and ‘very short-lived substances’ (mostly bromine compounds produced by seaweed and the ocean’s phytoplankton) finding their way into the lower stratosphere because of the increased mixing between the troposphere and stratosphere, which has come from higher average global temperatures.
Debate surrounds negative emissions technologies as direct air capture is developed
The Guardian newspaper has carried an article on present efforts to spur negative carbon dioxide equivalent emissions around the world. Starting in the US, the article looks at the endeavours of the companies Carbon Engineering and Greyrock to pioneer industrial scale direct air capture, where carbon dioxide is sucked from the atmosphere and then mixed with hydrogen (produced from the electrolysis of water using renewable electricity) to produce a synthetic diesel for use in heavy transport. The process as a whole is known as “air to fuels”, and has been used at a small scale in the past, but the companies see commercial potential in employing the technologies at industrial scale, provided there is a price on carbon. They argue that the process is the “way of the future, because it needs 100 times less land and water than biofuels, and can be scaled up and sited anywhere.” Meanwhile, research at the UK Carbon Capture and Storage Research Centre at Sheffield University is focusing on developing fuels, solvents and operating conditions for carbon capture and storage in the particular context of biomass firing (as the UK is planning to phase out unabated coal firing). The director of the centre, Professor Jon Gibbins, told the Guardian “Direct air capture is no substitute for using conventional CCS. Cutting emissions from existing sources at the scale of millions of tonnes a year, to stop the CO2 getting into the air in the first place, is the first priority.” Others such as climate scientists Professor Kevin Anderson and Dr Glen Peters warn that counting on negative emissions technologies to help mitigate future climate change is a “high risk gamble”. In a recent article in Science magazine, they wrote “By the middle of the century, many of the models assume as much removal of CO2 from the atmosphere by negative emission technologies as is absorbed naturally today by all of the world’s oceans and plants combined.” The point is certainly a good one, yet their characterisation of negative emissions technologies as “Dr Strangelove” ones may be somewhat unfair.
ExxonMobil strategy at odds with those of Statoil and Shell
Following the strategic repositionings of Statoil and Shell covered in the Combustion Industry News so far this year, ExxonMobil has released its annual Outlook For Energy report, a part of which, Positioning for a Lower-Carbon Energy Future, has been released in response to shareholder demand. The company’s positioning appears to be somewhat in contrast to that of Statoil and Shell, with ExxonMobil seeming to focus more on its traditional oil and gas business rather than becoming a broader-ranging “energy company”. It sees in the future an appreciable rise in demand for natural gas, and a shift in demand for oil from light transport to chemicals manufacturing and heavy transport, and it is this new demand the company is targeting. While it expects a 400% increase in electricity production from solar and wind power (and a 45% decline in the carbon intensity of economic activity), renewable energies do not appear to be a focus for ExxonMobil. Instead, it will continue to seek to pioneer carbon capture and storage technology as well as lower-carbon liquid fuels (such as certain types of biofuels). Interestingly, and in stark contrast to Shell’s position, ExxonMobil does not believe it is at much risk of having ‘stranded’ fossil fuel assets, stating in its report “Considering the 2 °C Scenarios Average [its models for meeting the Paris Agreement targets], we believe our reserves face little risk,” though it acknowledges that “it is possible that some higher cost assets, which could be impacted by many factors including future climate policy, may not be developed.” There may well be room for a more traditional oil and gas business in the future, especially if other competitors place less emphasis on it, creating some market space, but the contrasting strategies do give one the feeling that one side will be proven more right than the other. On the other hand, it may partly be a matter of the language used to describe the strategies.
Mississippi Power arrives at settlement with the State of Mississippi over Kemper power plant
The US state of Mississippi has arrived at a settlement with Mississippi Power (the subsidiary of Southern Co) for cost recovery from customers for the Kemper carbon capture and storage-equipped gas-fired power plant. The plant was intended to incorporate coal gasification, but Mississippi Power last year abandoned the development of the gasification units, deciding instead to run the plants on a supply of natural gas. The new settlement allows the company to recover a further US$112.6 million from customers on the development of the plant, down from the US$200 million originally desired. In additional, if Mississippi Power one day completes the gasification part of the plant, it will not be eligible to recover any additional costs. The Kemper plant, although it does capture around 65% of its carbon emissions for use in enhanced oil recovery, is generally seen as a warning for the development of CCS-equipped plants – originally budgeted at US$2.9 billion (€2.3 billion), costs had spiralled to $7.5 billion (€6.0 billion) by the time development was halted.
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