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Annika Seiler

Asian Development Bank
Manila, 7 June 2012
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Content
 Why CCS is needed in emerging countries?
 Unique challenges for CCS demonstration  Financing CCS Demonstration – Need and role

of various support mechanisms  ADB’s support in PRC to enhance CCS demonstration  Levers enable CCS demonstration projects in pipeline in emerging economies  Conclusions

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Need for CCS in emerging economies
Global Coal Consumption, Mtce

 Large capacity addition, especially in

next 10 – 15 years, with high proportion of coal-based plants
 Rapidly rising coal consumption has

wider implications for the global climate change mitigation efforts
 CCS is the only near commercial
Shift of coal consumption towards Asia-Pacific Region

technology to decouple CO2 emissions into the atmosphere from large single-point sources of fossil fuel combustion
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RE is not sufficient – CCS is needed
IEA (2012): 72% of 1Gt of incremental CO2 emissions globally in 2011 originated from the PRC. Without strong support for investments in energy efficiency and renewable energy over 11th FYP, 2006–2010, PRC’s CO2 emissions would have exceeded 1.5Gt from coal combustion in power sector and industries.
6200 GWh 6000 2200 GWh

5000
Electricity generated GWh

4000 3000 GWh

1GW Solar

3000

1 GW Coalfired power plant

2000 1 GW Wind 1000

Each GW of coal fired power generation “with CCS” avoids more CO2 than avoided by 1GW each of solar and wind plants combined.

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Key Issues and Barriers
ADB (2011): “… key barriers to CCS are amplified in developing countries ….” Limited public awareness

CCS is not a strategic choice of policy makers

Lack of experiences in planning, constructing and operating power plants with CCS

Insufficient public and concessional financing, no fiscal or financial support mechanism

Limited technical readiness of asset base Higher additional CAPEX, OPEX & auxiliary consumptions

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Impact of Higher Capital Cost and Energy Penalty
Coal-fired power plant projects with CCS have higher CAPEX + OPEX
800 112 53%
Cost - $ million

Without CCS With CCS
Electricity Tariff $ /MWh

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Using captured CO2 for EOR could allow for additional revenue and enhance viability of projects

90 65% 80%

90

600

24%

73

60 400 Base Cost Base Cost 51 30

200

400 MW IGCC
01/10/2010

600 MW SC
01/10/2010

But ……………..

Benchmark tariff for coal-fired power plants without CCS are applied to those with CCS which make them financially unviable at the existing tariff.

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Importance of Concessional Financing and Fiscal and Financial Support Measures
Additional capital cost and energy penalty could be compensated
Cost - $ million

Without CCS With CCS
Electricity Tariff $ /MWh

120 800 75 73 65% 67 60 400 Base Cost $226 M Base Cost $226 M 51 30 90

600

24%

Concessional financing could bring “with CCS” down so that it would require only a tariff mark-up of 20%.

200

400 MW IGCC
07/10/2010

600 MW SC
07/10/2010

CCS demonstration will require international support in developing countries
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Comparison of levelized cost of electricity
“with CCS” power is competitive with other low-carbon technologies The tariff should be benchmarked against the levelized cost of electricity of a clean kWh
Electricity Tariff and Capital Cost Comparison in PRC
3.5 3
Cost ($million/MW)

0.19 $/kWh

0.2

0.11 $/kWh 0.09 $/kWh 0.1

2 1.5 0.08 $/kWh 1 0.5 0 Wind IGCC + CCS Cost ($M/MW)

0.05

0.05

0 SC+CCS Std Coal Solar tariff (ct $/kWh) Std Coal

Comparing a coal-fired “with CCS” to a “without CCS” plant neglects environmental impacts of coal-fired power plants without CCS

Tariff ($/kWh)

2.5

0.15

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Financing CCS Demonstration - Role of various support mechanisms
Operation oriented

Concessional financing is essential to facilitate early stage demonstration projects

.

Feed-in tariff Tax rebates Operation subsidies CDM

Quota obligations Green pricing Consumer subsidies Fiscal measures

Capital investment support measures Supply side need to be complemented with an appropriate mix of supply side operation oriented support as well as demand side stimulus measures

Demand side
Investment grants Concessional financing Sovereign guarantees Exemption on import duties Quota obligations

Capital investment oriented

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Financing CCS in Developing Countries – ADB Report (TA 7278-REG)
ADB submitted a report . to CSLF on financing CCS in emerging economies Key recommendation set up $5 billion CCS dedicated fund for developing countries to support • storage characterization • FEED studies • incremental CapEx and OpEx.
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Levers to enable CCS Demonstration Projects in Pipeline in Emerging Economies
Demonstration projects in identification stage

Government Commitment, incl. policy targets, regulatory, fiscal, and financial support measures
Concessional financing and adequate business models for early stage demonstration projects Higher upfront development costs, capital investment cost, and auxiliary consumption Awareness and support from civil society

Realized demonstration projects

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ADB approach to support CCS in PRC (1/3)
Upstream analysis and pilot testing of available technologies for energy companies and dissemination of lessons learnt: .
• Capacity strengthening of Datang International to assess, pilot-test, and apply postcombustion method in gas-fired power plant and to establish CCSready criteria power plants • Assisting Dongfang Boiler Co. to assess feasibility and establish technical standards for a 100MW demonstration coal-fired power plant

Oxyfuelcombustion technology:

Postcombustion technology: Precombustion technology:

• Financial and technical assistance to China Huaneng Group to study the technology, build and operate an Integrated Gasification Combined Cycle power plant with a carbon capture, utilization and storage plant

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ADB approach to support CCS in PRC (2/3)
Establishing an Enabling Environment for CCS Demonstration: Policy & regulatory framework:

ADB is working with the National Development and Reform Commission to formulate a comprehensive roadmap, policy, and regulations to enable CCS demonstration and deployment

Business Models:

ADB in consultation with major oil, gas, coal mining, and power industries seeks to identify and facilitate joint ventures for early stage demonstration projects

Knowledge transfer:

ADB organizes international conferences or site visits for PRC stakeholders to facilitate knowledge sharing and exchange on good practices in CCS development

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ADB approach to support CCS in PRC (3/3)
Mobilizing funding and financing of demonstration projects : Dedicated fund: • ADB is administering an dedicated multi-donor trust fund established with an initial contribution from the Global CCS Institute of A$21 million for capacity development and financing of demonstration projects Financing of demonstration projects: • Co-financing of Tianjin Integrated Gasification Combined Cycle power plant $135 million loan and $5 million grant • Assessing $10 million grant assistance to carbon capture, utilization and storage small-scale demonstration plant International Networking:

• CCS partnership with the CCI, stakeholder in the CSLF, Member Global CCS Institute • Participation in Action Group to identify and establish a CCS financing mechanism in developing countries
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Conclusions
CCS technologies face unique challenges Compelling reasons to fast track CCS demonstration in developing countries MDBs have a critical role to play in capacity development and creating enabling environment

• Unlike other low-carbon technologies, there is
weak policy support for CCS technologies.

• Surging demand for fossil fuel but
unsatisfactory progress on CCS in developing countries demands early CCS demonstration to benefit from locking-in low carbon development

• Without a targeted CCS Fund to substantially
mitigate higher CAPEX and operational supply-sde support to compensate higher OPEX, the CCS demonstration at-scale will be difficult
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Conclusions
Compelling reasons to fast track CCS demonstration in developing countries

• PRC has a critical role to play in CCS
demonstration and deployment

• China is swing country for determining the
speed of CCS demonstration and deployment

• Pilot CCS activities have laid the groundwork
MDB’s like ADB are ready to support PRC and other developing countries
for near-term CCS demonstrations (by 2015) if right funding and policy supports are available in time

For further information and comments please contact:

Ashok Bhargava, Director East Asia Energy Division (EAEN) abhargava@adb.org Annika Seiler, Finance Specialist (Energy) EAEN aseiler@adb.org

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