UK: April 11, 2008


LONDON - Governments and the private sector are balking at the expense of kick-starting a technology to bury planet-warming gases underground, casting doubts on "clean coal" plans seen vital to help fight climate change.


A handful of nations are developing audacious plans to trap and seal beyond reach the greenhouse gas carbon dioxide (CO2) produced from burning fossil fuels in power plants.

The technology -- carbon capture and storage (CCS) -- may help answer the riddle of how to get more energy for less CO2, given high carbon-emitting coal is the world's most abundant fossil fuel.

But no plant has yet been built anywhere in the world, challenging power company claims in Europe and the United States that they are building "CCS ready" plants, as western companies and governments face growing environmental opposition to coal.

The notion of being CCS ready is that companies build coal-fired power plants, for example, and bolt on CCS technology later when it becomes commercially viable.

But in the short-term being "CCS ready" does not commit them to very much at all.

"The power plant itself is not really very different," said Markus Ewert, head of research at Germany utility giant E.ON, adding the main difference was to set aside extra space for CCS equipment in the future, and to be within about 200 km of a suitable, underground CO2 storage site.

E.ON says all new coal plants will be CCS ready, and aims to fit the technology to all its coal plants by 2020. It has spent over 55 million euros ($87.15 million) on CCS research projects to make it work.

"It's not a gimmick," said Ewert.

Several US states have required that all new coal-fired power plants have the "capability" for CCS.

"The problem is that the carbon capture technology isn't here yet," said a spokesman for the office of fossil fuel energy at the US Department of Energy.

"It is remarkably difficult to define exactly what it is," said a spokeswoman for Britain's department for business enterprise and regulatory reform, referring to the "CCS ready" label.

Industry estimates suggest that the first commercial-scale CCS test plant will be running some time between 2012 and 2015, but the timetable has looked vulnerable after recent project cancellations in the United States, Britain and Canada.


HOPE

Some environmentalists dislike CCS, as well as coal, because they say it is a distraction from a drive to develop non-fossil fuel energy, and leaks may wipe out the point of burying gases.

But industry hopes are high for what it could do for climate change, energy security, and business.

CCS has the capacity to curb global carbon emissions by about a third, analysts say, given that it can remove around 90 percent of all carbon from fossil fuel-fired power plants, which in turn account for about 40 percent of all carbon emissions.

It could then aid energy security by allowing countries concerned about climate change to continue to burn coal, and so for example cut imports of lower carbon-emitting natural gas.

Economically, CCS could also have applications beyond cleaning up coal-fired power plants, for example helping develop low carbon-emitting transport fuels from wood, trap CO2 emissions from oil refining, or produce hydrogen fuel for cars.

A rule of thumb suggests CCS would add half again, or about 500 million euros ($786.8 million), to the capital cost of an average-sized demonstration coal-fired power plant.

Multiplied across dozens or even hundreds of power plants that implies a market in the hundreds of billions of dollars.

"For 2030 we estimated it could be between 76 and 225 billion euros per year," said Societe Generale analyst Sarbjit Nahal. "Some people say as high as one trillion euros."

Beneficiaries could include heavy industrial manufacturers, such as Alstom, GE and Siemens, an oil and gas industry which may own suitable pipelines and CO2 storage sites, and power generators selling the resulting, "low carbon" electricity.

Key uncertainties remain a legal framework which could furnish construction permits, cost inflation on rising steel prices, and a network of pipelines which may need to be twice as large as that of the entire natural gas industry now.


TOO LATE

But the biggest doubt is government backing for a technology which has only been a firm option for three or four years.

Britain and the United States are leading the world in ear-marking finance for commercial-scale pilot plants -- about 500 million pounds ($985.2 million) and $1.3 billion to fund one and up to three projects respectively.

Norway has budgeted this year over 1 billion Norwegian crowns ($197.7 million) for research, and China has a full-scale plant slated for 2015. Norway has long experimented with burying CO2, although not trapped from power plants.

The US, British and Chinese initiatives may be pipped by private sector-led initatives.

"The way Britain has written the rules allows people to drift on to 2019 whereas actually there's two or three we can pretty confidently predict will be operating full-scale by 2012," said University of Edinburgh's Stuart Haszeldine.

Aside from one-off grants no policy exists yet for supporting CCS in the same way as solar and wind now, said Lewis Gillies, chief executive of Hydrogen Energy, a joint venture between mining firm Rio Tinto and oil company BP, which aims to develop three, commercial-scale CCS plants.

Hydrogen Energy wants to split fossil fuels into hydrogen and CO2, bury the latter and sell the hydrogen as a clean fuel to utilities.

Last year it shelved a project in Britain after a lack of government support there, and is now targeting 2012 for a similar plant fuelled by natural gas in Abu Dhabi, although it has no details yet of support there, either.

The joint venture is also in talks with US utilities to sell hydrogen from a proposed CCS plant in California from 2014, arguing it can compete with rival clean fuels such as solar.

Similarly German utility RWE, wants to be allowed to sell for a price premium clean power from two or three major CCS demonstration plants, much like solar power gets in Germany.

"That's what we are looking for, similar to the renewables tariff," said head of Johannes Heithoff, RWE's head of R&D.


CARBON PRICE

A European emissions trading scheme may provide help, both by forcing all power generators to buy permits to emit CO2 from 2013 -- delivering a cost saving from burying the gas -- and possibly yielding government cash from permit sales.

A carbon price of 70 euros per tonne of CO2 now and 35 euros in 2020 may be enough to make CCS competitive, and less for promising post-combustion technnologies which absorb CO2 from a power plant smokestack. EU emissions permits are trading now at about 25 euros and are widely forecast to rise.

Royal Dutch Shell is lobbying the EU for an extra emissions permits per tonne of stored carbon, to help finance the capture of CO2 normally vented from oil refineries.

Norway, Saudi Arabia and other oil-producing states are lobbying for the United Nations to award carbon offsets to CCS plants under a Kyoto Protocol carbon trading scheme, with a decision due at a UN meeting in Poland at the end of the year.


Story by Gerard Wynn


REUTERS NEWS SERVICE