‘Carbon capture and storage’ or CCS is a game-changer for the coal industry, says a recent report of Citi group. (CCS refers to technologies that capture carbon emissions from coal-fired power plants and stores the carbon underground, typically in exhausted oil and gas fields.)
In its reported titled ‘Energy Darwinism II’, part of its ‘global perspectives and solutions’ series, Citi has warned that if CCS is not adopted it would weaken the prospects of thermal coal as a commodity.
Calling CCS a “game changer for energy markets”, the report estimates that at the current rate of coal usage, some 3,000 years worth of coal resources could be used.
However, CCS is still at an early stage. According to the Global CCS institute, as of February 2014 there were only 21 active large-scale CCS projects in operation or under construction globally, with a combined capture capacity of almost 40 mt of CO2 every year. The first commercial CCS project was the Boundary Dam project in Canada, which went on stream in October 2014.
Citi group is not optimistic about large-scale deployment of CCS, mainly because of the costs. “We harbour reservations regarding the large-scale investment required and long payback periods, which potentially make projects vulnerable if alternative solutions such as renewables, storage of algae, become cheaper in the meantime,” the report says.
The report, which discusses energy options in the context of the upcoming climate negotiations at Paris this December, notes that coal use might be under pressure. If carbon pricing (penalising carbon-emitting activities by instruments such as carbon tax) comes, coal would be the worst affected.
It estimates that coal power could go up by 4 US dollar cents (Rs 2.60) a kWhr. However, carbon pricing could make CCS viable as they avoid emissions.
“While the fossil fuel industry, particularly coal, has tended to resist carbon pricing developments, ironically, the lack of carbon pricing means there has been no business case for large-scale CCS deployment,” says Citi.