Tuesday, 3 November 2009

Clean coal strategy not viable for 20 years

Thursday 29/10/2009 Page: 1

Clean coal power stations are not viable until the carbon price reaches a minimum of $60 a tonne a level the Australian government does not anticipate until almost 2030 according to an audit by the Rudd government's own global carbon capture and storage institute. The new, $100 million-a-year institute found the business case for clean coal technology could only work if governments helped build the first commercial-size CCS power plants on a "field of dreams", or "build it and they will come", basis.

"A viable business case for commercial-scale, integrated projects has not been established at this time for coal-fired power generation and other large CO2 emitting industries," the report states. "Without policies and legislation to assign a value to CO2... industry has limited incentive to install CCS facilities... What could make the business case work.., is the 'field of dreams' or the 'build it and they will come' option. This involves governments working in partnership with industry and the community to develop, finance and build common user transport and storage infrastructure."

Global CCS Institute chief executive Nick Otter said government subsidised demonstration projects could bring costs of future CCS power stations down "substantially'". "The CO2, price now is not capable of taking the technology forward," Mr Otter said. "That's why you need these government incentives."

The Rudd government has promised $2.4 billion to build CCS demonstration projects over the next nine years and, when he re-launched the global institute be side US President Barack Obama at the G8 meeting in Italy in July, Kevin Rudd said if the world was serious about climate change it had to face the "practical challenge" of what to do about coal. According to the audit only seven carbon capture and storage projects are operating around the world all on gas processing plants. Coal power plants are among the other 55 planned commercial scale projects.

But the report finds that the cheapest CCS technology oxyfuel combustion only becomes viable at a carbon price of about $60 a tonne. Another technology, integrated gasification combined cycle, becomes viable at about $80 a tonne and a third natural gas combined cycle at about $112 a tonne. It cites international research that found the cost of plants could fall by between 10 and 18% once the first demonstration operations had been installed. It says that "arguably" the ambitious goal set by the G8 last year to have 20 large-scale demonstration plants built by next year could be met.

But to meet the goal governments would need to provide direct funding, introduce a carbon price and take on the liability for the possibility that underground stores could leak, as the Australian government has done. Governments also need to help identify potential storage sites. Treasury modelling of the Rudd government's emissions trading scheme assumed carbon capture and storage would be deployed by 2033, at a price of $80 a tonne. The technology is central to the government's plans to meet its emission reduction targets.

In a recent speech, Resources Minister Martin Ferguson said it was "becoming increasingly clear that no serious response to climate change can ignore the need to accept fossil fuels as part of our shared future". "As the world's largest exporter of coal and a nation which derives around 80% of its electricity from coal, it is vital that we make technological progress on carbon capture and storage and soon," Mr Ferguson said.