The death throes of the Australian coal industry’s CCS dream

When Australian Treasurer Joe Hockey announced in the budget that the government was axing funding for any new carbon capture and storage (CCS) projects he was effectively confirming that the coal industry’s dream of open-ended taxpayer funding of an expensive techno-fix for emissions from burning coal is over.

In the budget Hockey announced that the government would cut $459.3 million over three years from 201718 from the Carbon Capture and Storage Flagships Programme. While the figure sounds big, the reality is that CCS projects are prohibitively expensive and $460 million would in reality fund little. For example, a flagship CCS demonstration plant in the US state of Mississippi, the 582 megawatt Kemper project, is now slated to cost $5.9 billion (US$5.5 bn) with the costs rising.

But Hockey’s expenditure cutting zeal went only so far. While numerous renewable energy programs and entire agencies were abolished in the budget, $192 million was left in the CCS kitty to spend on existing projects over the next seven years.

Even so, CCS in Australia is in a nosedive. In the absence of any plans for further new coal power stations in Australia, CCS has no prospect in the domestic market. If CCS is expensive for new plants, it is even more prohibitive retrofitting it to existing ones approaching the end of their working lives. Without a high carbon price, CCS is going nowhere fast in a domestic electricity market dominated by falling demand, growing renewables and low wholesale market prices.

As existing taxpayer funded CCS projects have now been cut off from substantial new funding Hockey has effectively inked them with a use-by date. The history of CCS suggests that some of the existing projects will keel over well before the seven years funding window closes. As the enthusiasm of private utilities for CCS withers, Hockey or his successors may well return with the scissors for another round of cuts.

The Australian government is not the only one cutting CCS funding. Last week the European power utility Vattenfall announced that it will axe its CCS R&D program because it needed to set priorities to match “whatever is most needed.” The company’s decision means the end of the 30 megawatt CCS pilot plant at Schwarze Pumpe lignite-fired power plant in Germany and another at the Ferrybridge power station in the UK.

In Australia, CCS has long featured as a key defensive plank in its PR campaign. However, the coal industry’s enthusiasm for CCS has hinged on the technology largely being funded by governments. Even the coal industry acknowledged that CCS was going nowhere when in December 2012 it amended the purpose of its Coal21 fund – which was established to fund CCS projects – to include as an objective promoting the use of coal.

If the costs of CCS are too prohibitive in countries such as the US, Germany  and Australia, there are few prospects that countries such as India will embrace what is the most expensive and unproven coal plant technology. The rapidly falling cost of renewables further undermines the case for CCS in those countries which are planning on building new coal plants.

Without the figleaf of CCS, the coal industry stands exposed and isolated as a key driver of climate change. Which is why the Minerals Council of Australia – which represents major coal industry exporters such as BHP Billiton, Rio Tinto, Peabody Energy and Anglo American – expressed concern that Hockey had axed funding for new CCS projects.

Bob Burton is a Contributing Editor of CoalSwarm and a Director of the Sunrise Project, a non-profit group promoting a shift away from fossil fuels. With Guy Pearse and David McKnight he co-authored Big Coal: Australia’s Dirtiest Habit. Bob Burton’s Twitter feed is here.