Perspectives on Various Issues of Interest

There Goes The Queen

Carbon Capture and Storage (CCS) – Carbon sequestration

1. Statoil, Norway’s state owned oil company, is doing two remarkable things about Sleipner T, a gas rig in the middle of North Sea. One is the integration of social democracy and oil wealth. Technicians are paid around NKr600,000 ($100,000) a year, private rooms with television and ensuite bathrooms, and work two weeks out of every six. Second, the interaction of an innovative company and carbon tax, has resulted in limiting the contribution of CO2 to global warming. Instead of being pumped into the atmosphere, it is reinjected into the ground, 1,000 meters below the seabed.
2. CCS, as explained in the second initiative above, is widely seen as the possible quick fix for global warming. Currently, coal produces 50% of America’s electricity, 70% of India’s and 80% of China’s. Its attraction at a time of concern about energy security is enhanced owing to the possibility of wide distribution around the globe. Burning coal is the cheapest way of generating electricity. Coal produces around 40% of the CO2 emissions from energy use.
3. Coal has enjoyed a revival in recent years due to high gas prices. In America some 150 new coal-fired power stations are on the drawing board. In China, two 500 MW coal-fired power plants are starting up every week, and each year the country’s coal-fired power-generating capacity increases by the equivalent of the entire British grid.
4. Standard pulverized-coal (PC) generation can be made a bit cleaner by burning the fuel at higher temperatures. “Ultrasupercritical” generation can cut CO2 emissions by a fifth, however, it is not enough if demand goes on increasing. CCS thus offers an attractive option.
5. CCS is being done in three places – at Sleipner; at In Salah in Algeria, where the CO2 removed from gas produced by a joint venture between BP, Statoil and Sonatrach, Algeria’s state-owned energy company, is stored in the desert; and at the Weyburn oil field in Saskatchewan, Canada, where the CO2 produced by a coal gasification plant in North Dakota is piped across the border and used to increase the pressure in a partly depleted oil field. This process, known as enhanced oil recovery (EOR), is in use in 70 oil fields, around the world, but at Weyburn, unusually, some of the CO2 remains underground.
6. CCS is done in four stages. First, CO2 is separated from other gases. Second, CO2 is moved along in pipelines. Third, CO2 is injected into the ground. Fourth, CO2 is stored underground, probably in depleted oil and gas fields or in porous briny rock.
7. The constraint is in terms of the cost of deploying technologies that cover the four stages at a reasonable cost and at a scale that make some impact on the emissions. It is estimated that if 60% of the 1.5 billion tons of CO2 that America produces every year from coal-fired power stations were liquefied for storage, it would take up the same amount of space as all the oil the country consumes.
8. Integrated gasification combined-cycle (IGCC) plants have been built to foster CSS, where cost is turned into gas before using it to generate electricity. The resulting CO2 and hydrogen are then separated, the hydrogen used to generate electricity and the CO2 stored.
9. GE has bought Chevron’s IGCC technology. According to GE’s Steve Bolze, cost of generating electricity from IGCC technology is 20-25% higher than a pulverized coal plant. It is expected that once the cost of separating carbon in taken into account, IGCC may be cheaper. Philips Joubert, president of power systems at Alstom, however, believes that IGCC is not cheaper, even with CCS. A study by MIT published in March finds that generating electricity from an IGCC plant with carbon capture is 35% more expensive than pulverized coal without CCS; but pulverized coal plant with CCS is 60% more expensive than pulverized coal plant without.

Source: The Economist, June 2^nd 2007. (“Dirty King Coal” pp. 22-24)

Subsidies and Booming Wind and Solar Power Businesses

1. Renewable sources currently provide 13% of the world’s energy needs. The main sources of renewable energy at present are geothermal and hydro-electric power and biomass.
   1. Scope for increasing the contribution of geothermal and hydro-electric is limited by geology. Scope for private-sector involvement is limited because building dams means turfing people out of their homes, so large scale hydro-electric projects are undertaken only by governments.
   2. Biomass provides 10% of the world’s primary energy needs, mostly in developing countries, where villagers burn cow dung on basic stoves. There are few niches in developed markets: in Britain, for instance, local councils increasingly require new developments to get a 10-20% of their energy needs from renewable sources. Putting a biomass water-heater in the basement tends to be easier than sticking a windmill on the roof.
   3. The technology for producing electricity from biomass has not changed much in recent years, and shipping manure and woodchips over long distances is expensive.
2. That leaves wind and solar power as the main sources of growth. According to the US Department of Energy, America could supply its entire energy needs by covering a mere 1.6% of its land area with solar cells.
3. Wind and solar energy already play an important part in a few countries. Around 20% of Denmark’s electricity comes from wind and about 80% of China’s hot water from solar energy. But worldwide those two energy sourced barely register. Currently, however, the two are enjoying their bigger boom ever. Solar photovoltaic power has grown by an average 41% a year over the past three years; wind has grown by 18% a year.
4. During the wind boom of the 1970s turbine blades were around 5-10 meters long, and turbines produced no more than 200-300 kW of energy each. The energy they produced cost around $3 per kWh. Now the blades are up to 40 meters long and turbines produce up to 2.5 MW each at a cost of 5-8 cents per kWh (Note: Coal-fired electricity, depending on the plant, costs 2-4 cents per kWh). There are even 5MW prototypes in existence with 62 meters blades.
5. The efficiency with which solar photovoltaic cells convert sunlight to electricity has increased from 6% when they were first developed to 15% now. The costs have dropped from around $20 per watt of production capacity in the 1970s to $2.70 in 2004 (Note: A silicon shortage has pushed the price up since then).
6. There are three different ways in which governments have set up subsidies systems for the proportion of their country’s energy that should come from renewable sources:
   1. Germany and France’s feed-in tariffs give generators a fixed payment for the electricity they provide. This system is expensive but effective. Wind and solar energy has both grown fast in Germany. The guaranteed price of solar energy at 54-57 cents per kWh is especially generous against 8.4 cents for wind. Germany’s feed-in tariff means that, as a generator of solar power you sell power to utility at 50 cents and buy at 20 cents, a net profit of 30 cents. The payback period for a solar panel in Germany is eight or nine years but the price for the electricity it generates is guaranteed for 20 years. Approx. 90% of output from Suntech, a leading company in generation of solar energy, goes to Germany thus making Germany the principal source of Mr. Shi’s wealth. The adverse consequence of this system is (i) silicon shortage which push up price of solar panels for use in countries that are sunnier than Germany and (ii) a big bill for taxpayers and electricity consumers (The feed-in system may cost consumers an extra 2 billion – 2.9 billion euros a year in high energy prices.
   2. Under Britain’s Renewables obligations, a set proportion of the electricity that power distributors buy must come from renewable sources; if they fail to do so they need to put money into a pot to be shared among the renewable providers. The system is complex and the resulting price is uncertain. This explains the discrepancy between planned and built capacity. Two adverse consequence of this system are: (i) The pot of money is divided between few developments, which are therefore highly profitable; (ii) Britain will not meet its target of producing 10% of its electricity from renewable by 2010.
   3. America’s production tax credit gives renewable-energy producers 1.9 cents per kWh, enough to encourage plenty of investments in wind. The system is unpredictable. The government has failed to renew the system in some years thus resulting in a slump in the business.

Source: The Economist, June 2^nd 2007. (“Sunlit Uplands” pp. 16-20)