Facing China's Coal Future - IEA

© OECD/IEA 2012 Facing China’s Coal Future
Prospects and Challenges for Carbon Capture and Storage
M. ENN Group’s Micro algae biofuel project
Description: The project aims to use microalgae to absorb 320 000 t/yr CO 2
emitted from the flue gas of coal-derived methanol and coal-derived
dimethylether production equipment and to produce bio-diesel and feeds.
Source: ACCA21, 2011; IEA Research.
Project Objective: ENN is planning to
construct a facility that absorbs
320 000 t/yr of CO 2
Location: Dalate, Inner Mongolia
Status: Under construction
Technology: Third-generation bio-fuel
technology
Capture specifications: Capture from
coal-derived methanol and
dimethylether production
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Options for Financing CCS in China
Financial rationale and needs
While CCS still faces considerable technological, regulatory and public acceptance hurdles, a
central barrier to deployment is the ability of project developers to overcome project risks and
secure adequate financing to address the additional or incremental cost of projects with CCS,
often referred to as the commercial gap. Based on several reports and IEA estimates, a typical
coal‐fired power plant in OECD member countries will likely incur additional costs of around
USD 1.5 billion (for capture technologies without storage costs, with 90% capture efficiency).
In China those figures for capture costs are likely to be lower, roughly USD 1 billion, based on
2009 cost analysis by the UK‐China Near Zero Coal initiative (NZEC). Operating costs for power
plants with CCS are also higher, largely because of the energy penalty or extra energy required to
run the capture and compression system (15% to 30%). With today’s technology, coal‐fired
power plants with CCS could see an increase in the cost of electricity of as much as 80% or would
need carbon prices at levels as high as USD 70/ton (USD 40/ton in China) to become financially
viable. More specific cost analysis for China can be referenced from the 2009 NZEC studies and
other domestic cost analysis. However more in‐depth analysis of costs related to the whole chain
of CCS and site‐specific costs would help further clarify costs for specific technology pathways
that are likely to differ in China from those of other countries engaging in CCS demonstration.
According to IEA CCS cost analysis, considering uncertainties of current cost performance data,
from a global perspective, no single technology for carbon capture from coal‐fired power
generation clearly outperforms the available alternative capture routes. In particular, this applies
to average overnight costs and levelised cost of electricity, but also includes cost of CO 2 emissions
avoided, provided the same plant without capture is chosen as a reference (Finkenrath, 2011).
China’s position towards funding CCS on a wide scale is similar to that of most developing
countries. Some concerns reflect the belief that CCS is too expensive, reluctance to accept
responsibility for funding it solely themselves, considering China’s stated CO2 emissions per
capita compared with OECD figures. However, given China’s rising energy consumption and
correlated carbon emissions per capita, further consideration for rapid mitigations efforts even at
higher costs may be needed, for China’s efforts to achieve a balance between enhancing and
sustaining energy security – while providing affordable energy – also limit progress in this area.