Clean Coal, Not.

By Tony Kitchener

Last week President Obama’s Interagency Task Force on carbon capture and storage, co-chaired by the US Environmental Protection Agency and the Department of Energy, delivered a series of recommendations to the President on overcoming barriers to the widespread, cost-effective deployment of carbon capture and storage within 10 years.

The report concludes that while carbon capture and storage can play an important role in the reduction of domestic greenhouse gas emissions reductions, thereby preserving the option of using coal and other abundant fossil energy resources, it faces a key barrier in the lack of a price on carbon.

What is cheering in the report is that utterly huge amounts of CO2 can be sequestered. The report concludes in the US that there is no big cost, or danger, or difficulty, in sequestering all the CO2 they produce for centuries. The problem is the technical challenge of capturing it from the smokestacks of the power stations.

More confronting still, is how high are the task force's estimated costs for the ’capture’ in carbon capture and storage. See the graph from the task force below.

Whilst all the numbers are $US they will be comparable or even conservative for Australia where brown coal produced CO2 is even harder to capture.

They estimate the cost of plain vanilla black coal electricity with no capture is around $27/MW hr (2.7c/kw hr). This is roughly in line with Australian experience.

To retrofit an exiting power station to capture 90% of the CO2 costs a staggering extra $89/MW hr (8.9 cents / kw hr). This means the CO2 tax would have to be in the order of $103 / ton to make it viable for the power station owners to invest in carbon capture and storage equipment.

The great white hope of the coal industry (and Victoria's HRC for clean brown coal) is the Integrated Gasification Combined Cycle IGCC. But this costs like sin and although the extra cost to capture the CO2 emissions is lowest ($60/ton), the base plant is the most expensive, and so makes the most pricey power ($150/MW hr). A good news, bad news, story if there ever was one.

As we all know there isn't going to be any substantial carbon tax any time soon in OZ or most probably the US. And it will be a long long time till it gets to $60 / ton let alone $100 / ton.

Consequently we are left with 2 possibilities. One, the government will subsidise the cost of CO2 emissions so owners will install carbon capture and storage or secondly, do nothing.

As the US emissions of CO2 from power generation are around 2.5 billion tons per year an enabling subsidy of $100/ ton would cost $250 billion/year. No need to be too accurate here in the calculations as this is not anything a broke US can afford.

Going Nuclear (Remote or Local)
What is amazing about these carbon capture and storage figures is it appears that the costs are such, if they don't improve, then large-scale solar thermal plants (concentrated solar thermal) will be viable before carbon capture and storage becomes economic. Concentrated solar thermal promoters are claiming they can make power for 7-10 cents / kw hr. On this basis it is cheaper to build a new concentrated solar thermal plant than retrofit an existing power station with carbon capture and storage.

As has been observed by better minds than mine, solar energy comes from a very big nuclear reactor in space called… the sun.

If you are prepared to tolerate a nuclear reactor closer than the sun (the French don't seem to mind, and the Chinese are building 22 to be running by the end of this year and have 132 planned) the costs are extraordinarily lower than carbon capture and storage.

The Chinese are claiming they can build new reactors for around $1300 to $1500/ kw. When you think about it for 5 minutes it is not so surprising. Reactors in the west have cost $3000 to $5000 / kw. As with other products, Chinese nuclear reactors are very likely to be a third of the western price. Why wouldn't Chinese reactors be cheaper, just like Chinese refrigerators?

Most of the cost of nuclear power is capital. The fuel is cheap. If you can build nuclear reactors for $1500 / kw in 3 or 4 years, the power costs around $22 to $25/MW hr (2.2 to 2.5c/kw hr). Yes, that is not a typo. Nuclear power in China costs less than plain vanilla coal plants in the US and OZ, and it do not have coal’s huge CO2 emissions.

The simple fact is near zero carbon Chinese nuclear electricity will be much cheaper than US power, even without carbon capture and storage. With the costs of carbon capture and storage, the comparisons become ludicrous. This will further cement China's comparative advantage over the US (and OZ).

Which leads me to one last question.

If you were Chinese why would you be buying US treasury bonds (that yield only 3.5% and are subject to massive currency risk) when you could invest in your own domestic nuclear power plants that will produce zero carbon electricity for 40 years whilst giving a much better return?