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Causes for optimism for nascent CCS

Progress with CCS is slow, but it's still progress, say Gardiner Hill, director of CCS technology at BP, and Lewis Gillies, head of Hydrogen Energy

CARBON capture and storage (CCS) is a technology that will – probably – be indispensible to attempts to prevent climate change. According to the International Energy Agency (IEA), it could provide a fifth of the carbon dioxide (CO2) emissions cuts the world needs to make by 2050. But unlike many other low-carbon technologies – renewables, nuclear and energy efficiency – the idea remains untested.

The most frequent criticism of the sector's development is that the demonstration projects needed to prove that CCS can operate safely and economically at scale aren't sufficiently advanced. "There's a gap in our strategy that needs to be plugged immediately," says Gardiner Hill, director of CCS technology at BP.

There are causes for optimism, however, say Hill and Lewis Gillies, head of Hydrogen Energy, a low-carbon energy firm. The US government's last bailout package, for example, included provisions for CCS and clean coal. Alberta has allocated $2bn for CCS projects. Australia is considering doing the same.

Then there was the statement by US president-elect Barack Obama in his address to Arnold Schwarzenegger's November global-warming conference that there are no longer any doubts about the science of climate change. It was, says Gillies, a "significant moment" – blowing away the obstructive rhetoric of the George Bush government, which continually queried the science. Such is Obama's determination to create the conditions for a low-carbon energy future that FutureGen, the proposed US clean-coal demonstration project abandoned by the Bush administration, may well yet have a future, says Gillies.

Last month, EU governments decided to adopt the goal – until then just a European Commission proposal – of deriving 20% of its energy needs from renewable energy sources by 2020. And the EU parliament voted to include CCS in the EU Emissions Trading Scheme, which should provide a badly needed stream of financing for CCS projects. Individual governments will need to take measures to supplement that funding – probably by developing mechanisms for developers to pass costs through to the market. But, says Hill, there is still hope that some CCS demonstration projects could be operating as early as 2015. And, as soon as projects are under way, operating experience will generate efficiency gains and technology improvements, accelerating the industry's wider development.

Some progress on the ground is being made. The Feed study for a 400 megawatt (MW) hydrogen power plant in Abu Dhabi, being developed by Hydrogen Energy, is more than 50% complete. The company, 50% owned by BP and 50% by Rio Tinto, says it would be able to supply more than 5% of Abu Dhabi's power at a cost equivalent to conventional electricity. Reinjecting captured CO2 into oilfields could boost Abu Dhabi's oil production by 1bn-3bn barrels, it claims. And the project isn't being thrown off course by the financial crisis: Gillies says a final investment decision could be taken at the end of 2009.

Having filed a planning application last year with the California Energy Commission, it is making headway with the Hydrogen Energy California project, which will produce low-carbon power for over 150,000 homes and provide Occidental Petroleum with CO2 for enhanced oil recovery. Hydrogen Energy also says it will produce a proposal for a CCS project for the Alberta government in the first quarter of the year.

But the company has had its setbacks. Last year, it abandoned its Western Australian Kwinana project, because it couldn't find a suitable aquifer to stash the 4m tonnes a year of CO2 that it was proposing to capture from an associated coal-fired power plant.

Capital costs associated with demonstration projects have risen too, from around $1bn two years ago to $1.5bn-2bn, says Lewis. Encouragingly, though, he says, a "significant softening in the contracting and equipment market" has become apparent in the last three months. "It's become a buyer's market."

As the final pieces of the regulatory puzzle are put in place, the industry needs to be given a more coherent structure, says Hill. "There need to be partnerships along the value chain in which companies can play to their strengths." Utilities, for example, shouldn't be asked to deal with CO2 transportation and storage – an area that is tailor-made for oil companies, because of their knowledge of areas such as reservoir and pipeline management.

And companies should be left to pursue the technologies they think can do the job of lowering emissions best, not be constrained by rigid, prescriptive standards set by governments. Says Lewis: "The countries that will be most successful will be the ones that don't predetermine the technologies they want to employ, but allow investors to select them."

BP itself abandoned plans for a zero-emissions power plant in Peterhead, Scotland, in mid-2007, partly because the government wasn't prepared to provide the financial support BP felt it needed. But also, as a pre-combustion capture project based on natural gas, the Peterhead concept wouldn't have fitted with the government's preference – defined by the competition it launched in late 2007 for a CCS demonstration project – for post-combustion technology based on coal. (Despite those differing preferences, BP entered and pre-qualified to bid in the competition, but pulled out in November, having, it says, failed to put together the right partnership).

Governments must also make it easier to fast-track projects. The EU's Zero Emission Fossil Fuel Power Plants (Zep) programme – which is still targeting 10-12 demonstration projects by 2020 – says it could take up to 10 years to construct a project under the existing system, but that the EU could reduce that time-scale by accelerating the process for obtaining building permits and public funding.

Another problem for high-cost CCS projects – like other expensive, climate-oriented technologies – is that they may become lesser priorities for governments grappling with the more immediate problem of stopping the economic rot. But Lewis and Hill – like many involved in the green-energy business – say CCS could help move economies out of trouble, generating jobs and economic growth. "There's talk of countries coming out of this recession as low-carbon economies," says Gillies.

Adds Hill: "The financial crisis might last one, two or three years and is minuscule compared with the long-term challenges of climate change. CO2 stays in the atmosphere for 200-300 years."

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