Monday, April 30, 2007

Timely Sequestration

Carbon Capture and Sequestration (CCS) technology has come from literally nowhere a decade ago to the position of being widely regarded as the key enabling technology for making our continued use of coal compatible with the need to respond to climate change. Coal power plants are among the largest global sources of greenhouse gas emissions, and sequestration has the potential to bottle up these gases for decades or centuries, making it possible to keep using our cheapest, most carbon-intensive energy source. But what if sequestration arrives too late to help? That's not a reflection of pessimism about the technology itself, but a recognition of the way a number of different trends and time lags could affect its deployment.

Last week the Wall Street Journal published an overview of progress on sequestration, including pilot and demonstration-scale projects around the world. I'm encouraged that developers are combining CCS with a variety of coal-power technologies, rather than just the integrated gasification combined cycle (IGCC) technology that has looked like the best match. But when you allow enough time for all these tests to be built, run and evaluated, and the results factored into the next generation of the technology, it could take another full decade for CCS to be ready for wide-scale implementation with new coal power plants. That could be too late for two reasons.

First, we are in the midst of a global wave of new coal power plant construction, precipitated by the rapid growth of China and India, combined with the relatively sudden increase in the price of oil and natural gas over the last four years. As the recent MIT study on the future of coal makes clear, retrofitting CCS to an existing facility--rather than integrating it into the plant design from inception--could be more than just expensive. It might not be practical at all. So if the bulk of the world's coal power plant fleet will have already been built by the time CCS is ready for prime time, the game could already be over.

It requires a bit of imagination to suppose that the expansion in coal-based power generation might slow or even stop. After all, if China keeps growing as it has been, it could presumably keep adding coal power plants indefinitely. But the world in which these plants are queued up into the future doesn't stand still. The cost of competing alternative energy technologies will continue to fall, driven partly by the same Chinese expertise in low-cost manufacturing that is fueling the expansion of coal. Cheap wind and solar power could erode coal's share of new generation, even in developing countries. At the same time, these countries might come around to the idea of mandatory controls on carbon emissions. They are certainly no farther away from this than we were a decade ago. Together, these factors could dry up the market for new coal plants, just as CCS is coming on stream. That's not good news for the companies investing in this technology, nor for owners of coal resources.

I can think of two ways to prevent CCS from becoming irrelevant. The most obvious one is to increase the pace of technology development and especially demonstration-scale activity. If CCS were ready in five years, rather than ten, that would make a big difference. The other solution is riskier and a lot more expensive. We could impose new regulations requiring all new coal-fired power plants to be constructed "sequestration ready", that is, with a design that explicitly allows for CCS to be bolted on as soon as it is available. In addition, we could require plant operators to set aside enough money up front to build the necessary infrastructure for shipping compressed CO2 to an appropriate underground disposal site, which might be a long distance away. This cost could be at least partially offset by giving these plants a temporary waiver from inclusion in the carbon tax or cap-and-trade mechanism that the US eventually implements.

I can hear all the objections this would raise, including that it would make coal power plants immediately uncompetitive and put more strain on natural gas supplies. But unless we do something fairly soon, CCS may end up as the silver bullet that never gets fired, and that could make it much harder to reduce global greenhouse gas emissions in the long run.

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