3.1 Overview of the economic assessment methodology

This cost analysis of CCS projects is an update of the 2009 Foundation Report Two. Building upon the 2009 report, the methodology essentially assesses the capital and operating costs over the life of an investment necessary to meet CO2 emission reduction goals. The goal of private sector developers is to select the CCS technology that maximises profits over the long run in a sustainable way.

The methodology selected to define the economics of CCS investments is based on using capital costs and operating characteristics from published sources; WorleyParsons's and Schlumberger's in-house database of actual cost data gained from undertaking numerous designs, installations and analyses of CCS projects; and other data from corporate, government and research stakeholders. These were updated to 2010 dollars.

The methodology applied in this study combines these parameters to determine the appropriate metrics to be used in the economic analysis of CCS. This was conducted through:

  • calculations of capital costs for the reference location;
  • transposing the project to the selected location; and
  • performing the subsequent economic analysis.

Figure 3-1 provides a flow chart showing, at a high level, the approach undertaken in the analysis.

Figure 3-1 Flowchart of methodology for CCS economic assessments

The CO2 capture options considered for power generation include:

  • post-combustion capture;
    • supercritical pulverised coal (PC) boiler
    • ultra-supercritical PC boiler
    • natural gas-fired combined cycle (NGCC).
  • pre-combustion capture using IGCC; and
  • oxy-combustion.

The application of CCS was considered on four industrial processes:

  • blast furnace production of steel;
  • cement kiln/furnaces;
  • natural gas processing; and
  • fertiliser production (ammonia).

While there are several methods of transporting CO2 to a storage site including trucking and shipping, this study consider only the costs involved in pipelining as a means of CO2 transport. To meet the G8 timeframes it is more than likely that transportation by pipeline will be the preferred approach, given the large volumes of CO2 that will need to be transferred.

The 2009 study found that while the largest cost component in the CCS value chain was with the capture component, the CO2 storage component of the value chain represents the greatest uncertainty. To model this uncertainty, the 2010 study provides a range of scenarios for ‘good’ and ‘poorer’ storage characteristics across a range of 3Mtpa and 12Mtpa reservoir capacities. This is discussed further in section 3.8.

As there have been no extensive changes in the economic and assessment methodology, refer to Foundation Report Two for the comprehensive description of the methodology. The metrics used to compare the costs of CCS projects have remained unchanged, with costs being presented in the form of:

  • levelised cost of production;
  • cost per tonne of CO2 captured and injected; and
  • cost per tonne of CO2 avoided.