Last February, when President Obama asked federal agencies for a plan to commercialize carbon capture and storage (CCS) within a decade, the chessboard looked very different.
An economywide climate bill had emerged from the House. Energy and climate proposals were still circulating in the Senate. Health care reform had yet to pass, and the Gulf of Mexico oil spill had not yet occurred.
Yesterday, the agencies delivered their report to the White House: They said the CCS goal will require a price on carbon and substantial federal incentives (Greenwire, Aug. 12).
But the political currents have changed, making it less clear how Obama can address the money issue, the most serious barrier facing CCS.
The Interagency Task Force, which wrote the report, is a group of 14 executive departments and agencies led by the Energy Department and U.S. EPA. The plain-spoken report describes the gantlet CCS must run to become commercial: for example, explaining the technology to the public and clearing the regulatory thorns.
It doesn't mince words about the most important policy: "The lack of comprehensive climate change legislation is the key barrier to CCS deployment."
CCS analysts agree that financing the first demonstration plants is the biggest issue. As the reasoning goes, if a few plants start generating power and storing carbon dioxide, the rest of the industry can glean enough that the next flight of plants will cost less, making CCS more affordable.
The task force report says there could be up to 10 projects in the United States by 2016, but long-term deployment will likely take more policy support.
Building the next flight of plants will take money, and this has to come from either the public sector or the private sector.
An expensive proposition
Analysts say the private sector won't put real muscle into CCS until it has an economic reason to do it -- namely, a hefty price on carbon.
"Without a carbon tax, none of this goes anywhere," said Lester Lave, who co-directs the Electricity Industry Center at Carnegie Mellon University. (He said he meant "carbon tax" to refer to any carbon-pricing scheme.)
"There's no way that you would spend money on capturing carbon and sequestering it, unless there's some penalty for emitting it into the air," he said.
The challenge becomes steeper still when one recognizes that this carbon price needs to be high and stable.
Leading climate bills on Capitol Hill had carbon prices starting at about $15 a ton. According to Geir Vollsaeter, a consultant and former manager of CO2 programs at Royal Dutch Shell PLC, at that price "the finance industry wouldn't move a muscle because it wouldn't potentially be sufficient to give a return on investment."
He said investors expect a 7 to 12 percent return on top of the cost of sequestering the carbon, as well as the amortized cost of the equipment that captures it.
In Europe, the current $20 price per ton has been both too low and too unsteady; Vollsaeter said it has not catalyzed much CCS development. "We need a price three to four times that, easy," he said. "Fifteen dollars will never reach that goal."
The public sector is the other possible source of CCS funding, but government funding may currently be the touchiest issue in Washington.
'An orphan among climate solutions'
The absence of specific funding in yesterday's report disappointed John Thompson, who directs the Coal Transition Project for the Clean Air Task Force, a pro-CCS environmental group.
"The fact is, CCS remains an orphan among climate solutions," he said. "It receives less money than renewables."
Even in the absence of a carbon price, he said, "I think the report should have announced a plan for where to go in the new Congress."
Thompson said there needs to be a "pioneer" program that scales up the country's first flight of coal plants -- to about 30 projects by 2018. He said this would cost about $20 billion; this price tag roughly matches that in the "CCS Deployment Act," proposed by Sens. Jay Rockefeller (D-W.Va.) and George Voinovich (R-Ohio). The bill would raise the money through a wire charge.
He also called for EPA to require, over time, CCS controls on all coal and natural gas plants -- old and new -- and for a bill requiring 50 gigawatts of CCS by 2040.
Bob Hilton, vice president of power technologies for government affairs at Alstom, said the task force identified all the major issues, but it is not to blame for not proposing vast new CCS programs.
Alstom, which sells technology that can grab carbon after it is retrofitted to a coal plant's smokestack, has long called for a long-term price on carbon.
"I don't think there's anywhere else the task force can go ... it doesn't lie in the administration's hands," Hilton said. "They're being realistic; just within the purview of the agencies, there's a limit to what they can do. And I think that's fair."