Spinning carbon capture and storage as cheaper than renewables

Supporters of carbon capture and storage (CCS) plants on coal power stations are audaciously seeking to sell the story they are cheaper than renewables – despite overwhelming evidence to the contrary.

An example of this genre of CCS spin was published early last week in the Australian Financial Review (AFR) which reported (paywall) that, according Julio Friedmann from the US Department of Energy, coal plants fitted with carbon capture and storage are one-third the cost of rooftop solar.

According to the AFR, Friedmann “cited findings from Lazard that put the levelised cost of energy … at US8¢-US12¢ [per kilowatt hour] for a new coal-fired plant fitted with CCS.”

“That easily beat rooftop solar at US18¢-30¢/kWh, offshore wind at US15¢ and nuclear at US10¢-18¢, although it fell short of utility-scale solar at US5¢,” wrote the AFR’s Angela MacDonald-Smith.

(Lazard, a global financial advisory firm, calculates the Levelised Coat of Energy (LCOE) as a way of comparing the costs of energy from different generation sources.)

In tune with the lead paragraph the article was headlined “Carbon capture far undercuts rooftop solar: expert”.

Coal wins hands down – or does it?

So, ignoring the fact that according to Friedmann utility scale solar is already cheaper than new coal, Lazard’s data suggests coal with CCS is the way to go for carbon dioxide abatement, right?

Not so fast.

Firstly, Lazard’s data refers only to costs in the US so, while of interest, has limited direct relevance to decisions elsewhere in the world.

Via Twitter Friedmann confirmed the data he was referring to was from Lazard’s Levelized Cost of Energy Analysis 10.0, which was published in December 2016, plus additional data from the US Department of Energy and his own analysis.

So what exactly were Lazard’s estimates for unsubsidised new power generation?

For an Integrated Gasification Combined Cycle (IGCC) plant with 90 per carbon and capture Lazard estimated (p. 13) it came in at US21¢ kWh. Importantly, the cost of transport and storage is not included in this cost estimate. (An IGCC plant, such as the almost-commissioned Kemper plant with CCS in Mississippi, gasifies coal which is then burnt in a gas-fired turbine.)

For a conventional coal plant with 90% carbon capture, Lazard estimated it would cost 14.3¢/kWh excluding the costs of transport and storage.

So Lazard’s range for CCS plants was at least US14.3¢/kWh to US21¢ kWh plus the cost of transport and storage.

So what about those solar estimates? For the utility scale projects Lazard estimated the range between US4.6¢ kWh to 6.1¢ kWh, with only marginal differences between the panel types. So what about onshore wind, which is growing rapidly in the US but strangely went without mention in the AFR article? Lazard put the cost at between just US3.2¢ kWh and 6.2¢ kWh. So there it is: according to Lazard’s analysis onshore wind and utility solar come in at over a half to one-third the cost of an coal plant with CCS. Compared to coal plants with CCS, wind and utility scale solar wins hands down. Even rooftop solar at the bottom of the cost range came in slightly cheaper than conventional coal with CCS. The most expensive rooftop solar came in only marginally more expensive than an IGCC plant with CCS. To its credit, the AFR story did note Bloomberg New Energy Finance (BNEF) estimated the cost in Australia for electricity from a coal plant with CCS would cost about 35.2c/kWh (US25c/kWh). In comparison, BNEF estimated new wind at 6.1¢-11.8¢ cents per kWh (US5c-9c/kWh) and utility scale solar at 7.8¢-14¢ (US6c-11c/kWh) Lazard and BNEF’s data both indicate wind and utility scale solar are far cheaper than coal with CCS, though the margins differ. While Lazard’s LCOE estimates don’t allow for any integration costs with renewables it is equally important to note they do not include any transportation and storage costs for the carbon dioxide from the CCS plant. Where exactly Friedmann’s low cost estimate for CCS came from is not clear but it certainly is not the most recent edition of Lazard’s annual cost estimates. An attempt to contact Friedmann to clarify the discrepancy between the figures quoted in the AFR article and Lazard’s 2016 analysis and the specific source of his data has so far been unsuccessful. Do CCS costs matter? Speaking to the AFR Friedmann opined that “the issue [with CCS] is not costs, it's finance.” Really? There are three operational CCS plants attached to coal-fired power stations in the world: the SaskPower’s Boundary Dam plant in Saskatchewan, Canada, NRG Energy’s Terra Nova project at the Parish power station in Texas and Mississippi Power’s almost commissioned Kemper plant in Mississippi. Citing his costs comment, I asked Friedmann via Twitter what his view of the Kemper CCS plant is – which is nudging up to US$7.1 billion for a 582 megawatt (MW) lignite-fired plant which will capture only 65% of its carbon dioxide emissions. The Kemper project has been plagued by technical problems, massive cost overruns, legal challenges and is under investigation by the US Securities and Exchange Commission. The Kemper project could fairly be described as a financial basket case. Friedmann did not comment on Kemper but wrote that NRG Energy’s recently commissioned Petra Nova project in Texas and SaskPower’s Boundary Dam project in Saskatchewan “show that costs are competitive” and that both projects were completed “on time and on budget.” A follow up question via Twitter seeking a response on what he thought of the Kemper project drew no response. NRG Energy’s Petra Nova plant was recently commissioned but the cost was a staggering of US$1 billion to capture just 40 per cent of the flue gas from a 610 MW unit at the WA Parish power station in Texas. SaskPower’s Boundary Dam project is another sorry story. The Canadian Parliamentary Budget Officer estimated (see p 40) just the CCS unit at the Boundary Dam plant cost C$917 (US$698) million when it was originally budgeted to cost C$800 (US$609) million.  The plant has also been plagued by major start-up problems causing numerous shut-downs since it was first commissioned with much fanfare. With all the existing coal plant CCS units coming with big price tags and two out of the three suffering significant problems, the technology is fast becoming the orphan child of 1990’s coal utility thinking. Lazard note the rapid fall over the last seven years in the unsubsidised costs of the dominant renewables technologies: 66 per cent for solar and 85 per cent for utility solar. In contrast, Lazard’s data indicates the cost of energy from IGCC plants with CCS has climbed rapidly while the cost of conventional coal plants with CCS has plateaued. Based on the trends in costs, renewables are once again winning hands down. As for the lowest cost options for the abatement of carbon dioxide emissions, Lazarad is clear. “An analysis” of carbon abatement options, the firm wrote, “suggests that policies designed to promote wind and utility-scale solar development could be a particularly cost-effective way of limiting carbon emissions.” While Lazard described rooftop solar as expensive in comparison to wind and utility scale solar, CCS didn’t even get a look in. In the eyes of analysts, the staggering costs of CCS are the issue.