CHRISTIAN DOWNIE. If the US can’t make coal clean, what hope is there for Australia?

May 31, 2017

The Prime Minister’s recent decision to back coal rests on the assumption that it can somehow be made “clean”, or more precisely, that carbon, capture and storage (CCS) technologies can be made to work for coal plants. The problem is that they can’t and the US experience shows why.  

Can carbon capture and storage technology succeed in the US?

 The US has for a long time been the leader in CCS technology development. With the largest research and development base in the world and the most mature coal sector, the US has driven some of the most ambitious CCS projects over the last two decades.

So if any nation can get CCS to work it should be the US.

However, there are three factors that make the commercial large-scale development of CCS technology unlikely in the US.

First is the technology. As the US government has pointed, and the International Energy Agency has confirmed, there remain barriers to the widespread demonstration and deployment of CCS technology at a commercial scale.

Take the most promising demonstration project as an example.

Led by Southern Company, the fourth largest electricity utility in the US, the so-called Kemper County project, a 582 MW integrated gasification combined cycle plant, aims to sequester 50 percent of its CO2.

The project has benefitted from Southern Company’s research and development base, one of the largest of any utility in the US, and support from the US Department of Energy, which has contributed $270 million, on top of an estimated $133 million in investment tax credits.

Despite these favourable funding conditions, the project has experienced numerous delays and cost blow-outs. The Kemper County project is expected to cost almost $6.6 billion, three times the originally estimated cost of $2.2 billion.

The problem with the increasing costs, as people associated with the project point out, is that ‘you need more than one demonstration project’, for CCS to succeed on a commercial scale, but ‘everyone chickens out because the price tag is too high’.

The second problem for CCS is the structural decline of the US coal market. Its share of electricity generation has fallen from more than half in 1990 to just over a third today, in large part due to falling gas prices.

This has negatively affected the investment environment for coal plants and reduced the appetite for investors to fund new plants, which can require up to 30 years to amortise the costs.

In such an environment there is little justification to fund new coal infrastructure, especially risky investments in CCS technology.

Third, the US regulatory environment is limiting the possibility that CCS technology will be demonstrated at a commercial scale. During President Obama’s 8 years in office, the EPA instigated a series of initiatives to address air pollution, which had a direct impact on the US coal industry.

While President Trump has promised to rescind these regulations, and he will likely be successful, the ongoing uncertainty about the regulatory environment is discouraging new investment in coal.

Lessons for Australia

For Australian leaders wishing for CCS technology the US experience is instructive.

Over more than two decades, successive US President’s have supported CCS technology with their words and taxpayer dollars.

As President Obama argued on the campaign trail back almost a decade ago:

“This is America — we figured out how to put a man on the moon in 10 years. You tell me we can’t find a way to burn coal that we mine right here in the United States of America and make it work?”

We now have the answer to that question: they can’t. If the US, which has delivered a track record of successful post-war innovation not matched by any other country cannot make CCS work, what hope is there for Australia.

It’s time to replace the fossil fuel technologies of the last century with the renewable technologies of this one. Coal cannot be made clean, whatever our Prime Minister says.

Dr Christian Downie is a Fellow and the Higher Degree Research Convenor in the School of Regulation and Global Governance (RegNet) at The Australian National University.   This piece was first published in  the ANU Reporter

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