The Economics of Carbon Capture & Storage (CCS) Harry Audus, IEA Greenhouse Gas R&D Programme Workshop on CCS, KEPRI, 19th October 2007 Thank you for this opportunity to give you a brief overview of IEA GHG and its activities. Please feel free to approach me afterwards for further information or with any queries

CAUTION All costs quoted are in US$ and were produced before recent major increases in construction costs. The recent cost increases are mainly due to the increased cost of raw materials. Cost comparisons for figures produced on a similar basis & around the same time can still be made.

The 4 Stages of Technology Development Commercial 3 Deployment 2 Demonstration 1 Research & Development

Stage1: Research & Development Need for R&D funding ? Capture Pre- and post- combustion CO2 capture now ready for full demonstration Oxyfiring is at pilot stage Breakthrough alternatives Transmission CO2 is routinely piped for EOR Some safety R&D may be still necessary Storage Geological: More information needed on saline formations Mineralisation

Stage 2: Demonstration Often needs government or other non-commercial funding. A large-scale CCS demonstration will cost >1 billion $. Several demonstrations needed. Status of CCS: Large-scale capture from power generation not yet demonstrated. Transmission of CO2 demonstrated e.g. Weyburn project. Limited number of large-scale (≈1 million tonnes/year) storage demonstrations. Integrated CCS from power generation not yet demonstrated.

Stage 3: Deployment After successful demonstration, may still need financial instruments to overcome cost barriers. Trading credits Taxes Grant, allowances, etc. With increasing deployment, costs will be reduced. Learning-by-doing Replication IEA GHG work indicates cost-reductions in the region of 50% on present figures are feasible.

Stage 4: Commercial Technology is cost competitive in a significant number of markets. Will require sustained incentives for emission reduction; such as: Taxes Trading Emission limits

CO2 Produced and Avoided CO2 kg/MWh CO2 avoided

Costs of CO2 Capture (from IPCC Special Report) Type of Power Plant CO2 captured (US$/tonne CO2) CO2 avoided Natural Gas Combined Cycle 33-57 37-74 Coal – supercritical pf 23-35 29-51 Coal – Gasification 11-32 13-37

Costs of Electricity (from IPCC Special Report) Type of Power Plant CO2 not captured (US cents/kWh) CO2 captured Natural Gas Combined Cycle 3.1 - 5.0 4.3 – 7.2 Coal – supercritical pf 4.3 – 5.2 6.2 – 8.6 Coal – Gasification 4.1 – 6.1 5.4 – 7.9

Costs of CCS (from IPCC Special Report) Type of Power Plant Increase in cost of electricity (US cents/kWh) Cost of CO2 avoided (US$/tonne CO2) Natural Gas Combined Cycle 1.2 – 2.9 38 – 91 Coal – supercritical pf 1.9 – 4.7 30 – 71 Coal – Gasification 1.0 – 3.2 14 – 53 Includes transport costs of up to 5$/tCO2 and storage costs of up to 8$/tCO2.

Cost of Capture and Storage Electricity cost, US c/kWh GAS COAL Basis: 10% DCF, 25 year life, 85% load factor, $8/t CO2 stored

Cost of Electricity from Renewable Energy (EU Commission 2005) Fossil fuel with CCS

SUMMARY Major funds are required to establish the technology. CCS will always incur a cost. Once established, the cost will decrease significantly. Present costs are estimated to be at the lower end of estimated costs for many of the alternative mitigation options.