Clean up coal or abandon it?

A new university study suggests that we may be wasting time and money trying to clean up fossil fuels through carbon capture and storage because renewables will be cheaper and as reliable.

CORRECTED 2:05pm 5/9/2013. Details of correction at bottom.

Ben Elliston of the University of NSW has authored another paper assessing the feasibility and cost of a 100 per cent renewable energy powered National Electricity Market in the period 2030.

The paper, jointly authored with professors Iain MacGill and Mark Diesendorf, suggests that, contrary to the commonly held belief among energy policy officials, commercialising carbon capture and storage may not be all that essential.

Elliston’s modelling utilises real-world weather data to design a mix of renewable energy power generation that ensures existing reliability standards are met. So even though the wind varies and the sun disappears behind clouds and overnight, the mixture of technologies make sure our power needs are met.

Then using construction cost data projections for the year 2030 from the Bureau of Resource and Energy Economics (attached to the Australian government’s Department of Resources and Energy – so hardly hippies intent on killing coal), he then assesses the cost of a 100 per cent renewable power system, relative to one involving coal or gas where the CO2 emissions are captured and stored underground.

Now, the thing is that the costs of deploying carbon capture and storage are not fixed in stone, nor is the cost of gas.

Suitable underground reservoirs for storing large quantities of CO2 can be quite distant from good quality coal deposits near existing transmission lines. This means the pumping and pipeline costs for getting CO2 from the power station to storage site can vary quite substantially. The table below outlines how transport and storage costs vary across four regions within the NEM.

CO2 transport/storage costs by region

Graph for Clean up coal or abandon it?

Source: Allinson, G., Cinar, Y., Hou, W., Neal, P., 2009. The Costs of CO2 Transport and Injection in Australia. CO2TECH Report Number RPT09-1536.

In addition, with the construction of several natural gas liquefaction plants, the price of gas in Australia is now linked to prices in Asia. This is already is leading to considerable rises in gas contract prices.

The chart below looks at the cost of a 100 per cent renewable energy system – the dotted horizontal straight line marked RE100 – and compares it to coal and gas power systems with CCS taking into account different costs that might be involved for transporting the CO2 to a suitable large and secure storage reservoir underground.

Sensitivity of annual costs to transport/storage costs for different scenario and carbon price combinations

Graph for Clean up coal or abandon it?

Note: CCGT means Combined Cycle Gas Turbine. CCS means Carbon Capture and Storage

What the researchers found is that is that the 100 per cent renewable energy system is lower cost than the coal CCS scenario, independent of carbon price, once transport/storage costs exceed about $35/t. This would appear to rule out coal plants in NSW and North Queensland.

In terms of varying the gas price the chart below outlines their results taking into account no carbon price, a $20/tCO2 carbon price and then the extreme of a $140/tCO2 carbon price assuming a fixed CO2 transport and storage cost of $27 per tonne of CO2.

Sensitivity of annual cost to gas price

Graph for Clean up coal or abandon it?

Even if there is no carbon price, a gas price of $12 per GJ would mean 100 per cent renewables was competitive with a CCGT scenario. With no emissions being captured, the cost of the CCGT scenario rises sharply with an escalating carbon price. The CCGT-CCS scenarios are much more costly than the 100 per cent renewables scenario unless the gas price is lower than $9 per GJ. At a carbon price of $60 per tonne none of the fossil fuel scenarios has a lower annual cost than the 100 per cent renewables scenario. 

Gas contracts on the eastern seaboard are already reportedly being struck at $9/GJ and Santos has moved to value its eastern seaboard gas resources assuming this price. If oil prices were to rise further (LNG contracts are linked to oil prices) and the exchange rate was to depreciate further then $12/GJ is not beyond the realm of possibility, certainly by 2030.

CORRECTION: An earlier version of this article used charts and estimates from an earlier version of the paper written by Elliston, Diesendorf and MacGill. These were revised in the final paper and the revised charts and results have been included in the corrected version of this article.

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