The International Energy Agency has released a New Year statement pointing to the insufficient policy environments around the world for developing carbon capture and storage technology. Declaring that “Fossil-fuel CCS is particularly important in a world that currently shows absolutely no sign of scaling down its fossil fuel consumption,” and that “there is only one way to burn fossil fuels without adding more CO2 to the atmosphere: carbon capture and storage”, the statement urges governments to set more encouraging environments for research, development and deployment of CCS. Interestingly, while highlighting the fact that today, fossil fuels were the source of 81% of total energy demand in 2009, it mentioned that in the last ten years, 85% of new power generation was from fossil fuels, meaning that the share of non-fossil fuel energy supply worldwide has actually been declining. The statement claimed that without CCS, a two degree global average temperature rise could not be achieved. Underlining this, the head of the IEA’s CCS Technology Unit, Juho Lipponen, was quoted as saying: “For the IEA, carbon capture and storage is not a substitute, but a necessary addition to other low-carbon energy technologies and energy efficiency improvements.”
The largest power plant in the western United States is under threat of closure due to proposed Environmental Protection Agency pollution rules. The 2,250 MW, coal-fired Navajo Generating Station, which is built in a Native American reservation close to the Grand Canyon, supplies power to three states, and along with the associated coal mine employs over 1000 people, many of them Native Americans. Built in the 1970s, the plant might be forced to conform to the EPA’s proposed Best Available Retrofit Technology rules, which has the potential to make the plant uneconomic. The prospect fits a wider trend in the US, with 9,000 MW of installed coal-fired capacity retired in 2012, due to stricter environmental regulation and cheap natural gas prices, and 36,000 MW planned for retirement over the next few years, according to Reuters. It is estimated that in total, somewhere between 60,000 and 100,000 MW of coal-fired capacity might be retired in the transition to natural gas. Coal, which produced 50% of US power in 2003, is expected to produce 40% in 2013.
Legislation and Regulation
Last month, after close to a decade of debate, the US EPA released its new rules concerning emissions from boilers. The substances regulated include soot, acid gases and mercury, and the rules cover both ‘major source’ and ‘area source’ boilers firing coal, oil, biomass and non-waste materials, but not gas or solid waste. Major boiler operators have until 2016 to comply with the new rules, and the overall cost of compliance for these is estimated by the EPA as being $US 1.3 – 1.5 billion/€1 – 1.15 billion, affecting 2,300 major boilers across the country. The industry reaction was generally positive, according to The Wall Street Journal.
Both the Canadian province of Quebec and the US state of California commenced their compulsory cap-and-trade regulations to reduce greenhouse gas emissions on 1 January, becoming the first areas in North America to have such schemes. Quebec aims to cut its GHG emissions to 75% of 1990 levels by 2020, while California’s target is to return to 1990 levels by 2020. Both come with markets for carbon permits, with initial prices of around $10.70/€8.23 per tonne of equivalent CO2.
Research, Development and Technology
Back in December, ScienceDaily published an article on carbon capture and storage research developments in Norway, being sponsored through the government-funded Research Programme for Accelerating the Commercialisation of Carbon Capture and Storage by Financial Stimulation of Research Development and Demonstration (CLIMIT). All aim to reduce the energy intensiveness of the process and reduce capital costs. Zero Emission Gas (ZEG) produces hydrogen and electricity from natural gas while capturing CO2, making energy generation an integrated process, rather than capture pre- or post-combustion. Chemical Looping Combustion (CLC) is a technology consisting of two reactors; in the first, combustion of coal or natural gas occurs in the presence of a metal oxide, which loses its oxygen in the process of combustion; in the second, it is re-oxidised. The arrangement allows almost pure CO2 to be produced. A palladium membrane project aims to separate hydrogen from CO2 before combustion, both gases being produced from natural gas. The DualCO2 project aims to develop a dual-phase membrane which is selective in separating out CO2, which in principle could be used both pre- and post-combustion, while the NanoCO2 project aims to attach amine particles to nanoparticles to speed up the process of CO2 capture from flue gases and reduce the energy required to release the captured CO2.
Two South African companies have become part of the European Commission’s OCTAVIUS project, which aims to demonstrate pilot-scale industrial plants which use energy efficient post-combustion CO2 capture technology. They are the state-owned utility ESKOM and consultancy firm EcoMetrix Africa, and more details are expected to be released during the upcoming February conference organised by the EC and to be held in Midrand, South Africa. In 2012, the South African Centre for Carbon Capture and Storage outlined a program to achieve commercial deployment of CCS in South Africa by 2025.
Duke Energy has been one company retiring old coal-fired power generation capacity in line with the trend described above. It is replacing the retired capacity with three new/replacement plants – the six-unit 825 MW coal-fired Cliffside plant, and two natural gas-fired plants, the 920 MW H.F Lee plant and the 620 MW Dan River plant. The three plants entered service in December, and represent a total of $US 3.65 billion//€2.80 billion of investment, all projects completed within budget. Four older units at Cliffside were retired, and the plant now produces more than twice the electricity, 80% less sulphur dioxide, and half the nitrogen oxide and mercury as it did previously. In total, the capacity retirements, either completed or planned, at Cliffside, Dan River, H.F Lee and at other sites in North Carolina, total 2,325 MW, meaning the three plants increase Duke Energy’s capacity by 40 MW in the area.
Meanwhile, Duke Energy bought a subsidiary of CGE Group, a Chilean energy conglomerate, in December, paying $US 415 million/€319 million. It forms part of the company’s effort to expand its market share in Chile and in South America more widely, a strategy being employed by numerous other non-South American firms.
In late December of last year, ArcelorMittal announced a $US 4.3 billion/€3.29 billion write down of its European steelmaking business, which it acquired in 2006 when it bought steelmaker Arcelor. Steel demand had decreased by 8% in Europe over 2012 (making it a 29% fall since 2007), and the company expects little upswing in the short term, with demand for cars and construction not expected to increase markedly. The write-down was accompanied by the credit rating agency Fitch’s downgrading of the company to be at BB+, considered ‘junk’ status. The write-down was largely due to a decrease in the ‘goodwill’ of the company – its brand and other intangible assets – rather than being due to a decline in its physical infrastructure.
Austrian steelmaker Voestalpine is planning to build a €500 million/$US 659 million plant in the US to take advantage of cheap natural gas prices. According to The Wall Street Journal, it has calculated that it is cheaper to manufacture steel in the US and ship it to Austria rather than produce it domestically, as natural gas prices are around one third the price in the US. With many energy-intensive companies thinking along the same lines, Russian gas companies, in particular Gazprom, will be feeling pressure, just as US coalminers are.
In what seems to be a tactic to kick the Indian government into action, Hong Kong-based company CLP Holdings, one of the largest investors in India’s power generation sector, has threatened to reconsider its projects in the country due to fuel shortages, infrastructure bottlenecks and inadequate policy. It has written to the Indian Prime Minister, Manmohan Singh, to outline its concerns, which include a claim that Coal India, the state run mining company, is not meeting a contractual agreement to deliver a certain amount of coal to a 1.3 GW project in the northern state of Haryana. In the letter, CLP CEO Andrew Brandler said, after originally being optimistic about investing in India, “today, 10 years on, the reality is grim and disappointing”.