2 Introduction

2.1 The importance of CCS

The successful development and widespread deployment of Carbon Capture and Storage (CCS) is considered by many key climate change stakeholders to be fundamental to achieving deep cuts in carbon dioxide (CO2) emissions to atmosphere. Among a portfolio of responses, such as energy efficiency and renewable energy, CCS is required to contribute approximately 19 per cent of CO2 emissions reductions globally by 2050 (International Energy Agency, 2008), if global emissions targets are to be achieved.

The business case to developing and deploying large-scale-integrated CCS projects (LSIPs) is challenging. One of the key challenges is the relatively high cost of CCS technology to capture, transport and safely store CO2, compared to the same facilities without CCS. This is unsurprising, given that it costs more to capture, transport and safely store CO2 as opposed to the current ‘business as usual’ scenario of venting CO2 emissions to the atmosphere.

This report was commissioned by the Global CCS Institute as an update to the 2009 Foundation Report Two.

2.2 Background

The objective of this report is to build upon and update the cost estimates provided in ‘Report 2: Economic Assessment of Carbon Capture and Storage Technologies’ of the 2009 ‘Strategic Analysis on the Global Status of CCS’. As in 2009, the cost estimates are informed by WorleyParsons experience in the design, construction and operation of large infrastructure facilities that are likely candidates to apply CCS and direct engagement in assisting proponents to develop CCS projects. The cost estimates of storage are provided by Schlumberger and are similarly informed by their leading global position in this space.

Readers are encouraged to review the 2009 report if more background information and understanding is required. This can be found on the Global CCS Institute website at: http://www.globalccsinstitute.com/.

2.3 Scope

Building upon the 2009 study, the scope of this update is to consider the economics of CCS, based on 2010 capital, fuel and labour costs, and to assess several issues including:

  • improving the regional localisation estimates;
  • updating and enhancing capital cost estimates for power and a select range of industrial activities that could apply CCS; and
  • updating the economic model (having regard for the two items above) to consider what, if any, material changes had occurred to the economics of CCS since 2009.

The additions to the scope were achieved by enhancing and improving operating cost estimates for capture facilities by improving fuel cost estimates at select locations and other key variables. Project location indices were also enhanced by providing greater specification that, where practicable, considered costs at a typical reference city level rather than a broad regional level.

2.4 Caveats and exclusions

As with the delivery of the Economic Assessment of Carbon Capture and Storage Technologies report (WorleyParsons, 2009), WorleyParsons and Schlumberger used its best endeavours to inform this update. Cost estimates used were observed in the global marketplace for developing large and often complex infrastructure projects and the costs of drilling for hydrocarbon were used as analogues for the cost of storage. US Gulf Coast (USGC) was the reference location.

The authors caution that when comparing costs, it is important to understand the purpose of the presented costs; are they presented to compare the costs between different technologies, or to inform how much a specific project will cost. There are several studies (e.g. the NETL Bituminous Baseline Study) which provide valuable information regarding the comparative costs of CCS technologies and the factors that impact these costs. The Global Carbon Capture Storage (CCS) Institute costing methodology and the studies prepared using it, fall into this group. These studies are typically poor predictors of project costs because they cannot accurately account for the variation in site and owner specifications included in a real project cost. Alternately, reported project costs, for specific projects, are poor sources for comparing technology costs. By the time the costs of a project are reported, only the cost of a single technology is presented which takes into account site specific requirements and owner's preferences.

The authors recognise that the economics of CCS is the subject of much conjecture and debate. Much of the conjecture is founded upon differing studies providing different results. In many cases, different results arise because key variables such as capital and operating costs, location and cost year differ. Additionally, the basis of the costs, that is which costs are included, are often not well defined or overlooked. Indeed, it was largely because of this that the Global CCS Institute commissioned the original 2009 study in an effort to provide cost estimates based on transparent and consistent variables and assumptions. The authors caution readers that care is required when applying the results of the cost estimates provided in this report. The margin of error in this study is +/- 40 per cent and the significant impact that project location and preference for CCS technology type, for example, means that the economics of CCS projects needs to be assessed on a case-by-case basis. It is important to note that all project costs are specific to that project and the figures presented in this report represent ‘ball park’ cost estimates for developing CCS projects as at 2011.

Furthermore, the authors note that some recent studies on the economics of integrated gasification combined cycle (IGCC) capture facilities are documenting costs that are greater than those presented in this study. Analogously, some CCS stakeholders speculate that the cost of IGCC with CCS is prohibitive based on the findings of these studies. Caution needs to be taken in considering this issue. One finding of the work performed by the Global CCS Institute is the costs can vary significantly based on location specific factors such as labor rates, fuel costs, and fuel characteristics. Additionally, with high volatility in plant construction costs and few new coal fired power (without CCS) construction starts in locations, real project costs are difficult to gauge. Therefore, the suggestion of providing a reference plant cost without CO2 capture, using the same basis, along side of the facility with capture is suggested to give a better indication of the costs of CCS.

Additionally, more detailed engineering has been undertaken for large-scale IGCC plants with CCS than for other power generation applications. As a result, lower levels of definition for technical design and cost for oxyfuel combustion and post-combustion CO2 capture technologies can be expected. Given that the cost estimates for IGCC increased as the projects were further defined across the asset lifecycle, it can be expected that cost estimates for the other capture technologies may also increase. In other words, the perception that oxyfuel combustion and postcombustion CO2 capture are economically more viable than IGCC may not be observed when projects applying these technologies undergo more detailed evaluations in the future.

2.5 Following chapters

Chapter Three provides an overview of the methodology. Chapter Four presents the results and Chapter Five presents key conclusions and observations.