International Conference on Carbon Capture and Storage

Financing CCS in Developing Countries

Ashok Bhargava
Asian Development Bank
Beijing, 28 July 2011

Why CCS is needed in developing countries?

High growth trajectory for fossil fuel, especially carbon intensive coal
y Large capacity addition, especially in next 10

15 years, with high proportion of coalbased plants

y Rapidly rising coal consumption has wider

Without CCS, the CO2 emissions are unlikely to peak out

implications for the global climate change mitigation efforts

y CCS is the only near commercial technology

to decouple CO2 emissions from fossil fuel consumption

But CCS is not a priority in developing countries

wait and see approach on CCS
y Reliance on energy efficiency and renewable

to lower carbon intensity; CCS is not included in the low-carbon technology portfolio
y No targets, programs or incentives for CCS,

No incentives or supporting policies for CCS

which is delaying its demonstration and deployment

y Slower uptake of CCS in developed countries

is also raising countries

concerns

in

developing

Challenges in CCS Financing

High upfront project development cost Complex multisectoral set up Regulatory risks and liabilities
y Expensive

and characterization

time

intensive

storage

y The whole CCS chain will involve multiple

agencies to collaborate over a long period

y Evolving

regulatory framework with uncertainties; potential long-term liabilities

Perceived risks

y High perceived risks due to unfamiliarity

Impact of High Capital Cost and Energy Penalty

CCS is expensive and energy penalty is high Using captured CO2 for EOR can marginally lower the cost impact

But ..

with CCS coal-fired power plants are financially unviable with the existing tariff.

What if .
y Additional

capital cost and energy penalty are compensated

y Concessionalities

provided to bring with CCS tariff to within 20% of the existing level

CCS demonstration will require international support in developing countries

Cost of electricity comparisons

with CCS power is competitive with other low-carbon technologies
Cost ($million/MW)

Electricity Tariff and Capital Cost Comparison in PRC

3 3 $/ Wh 9 $/ Wh $/ Wh Tariff ($/kWh) Solar tariff (ct $/ Wh) St Coal 9 $/ Wh

Win

GCC + CCS Cost ($M/MW)

SC+CCS St Coal

Comparing a coal-fire with CCS plants to a without CCS plant is unfair

Why Renewable and CCS . not Renewable or CCS

Renewable and CCS both are needed

Large renewable capacity addition and energy efficiency improvements alone are not sufficient
Each W of coal fired power plant without CCS emit more CO2 than avoided by a W each of solar and wind combined

Financing CCS Demonstration in Developed Countries - Role of Public Financing

CCS demonstration is being rolled out in developed countries Multibillion dollar public funding needed to kick start CCS demonstration No such funding mechanism available in developing countries
.

Source: IEA CSLF Report to the Muskoka 2010 G8 summit

ADB approach to support CCS in Developing Countries

Established a CCS dedicated fund Formed partnerships
y .The CCS Fund with 21.5 million contribution

from

lobal CCS Institute is operational

y CCS partnership with the CCI, stakeholder in

the CSLF,

ember -

lobal CCS Institute,

Prioritized the People s Republic of China

1.25 million studies with NDRC Department of Climate Change and reengen Company completed on the CCS roadmap; a pilot CCS project is being assessed, a natural gas project for possible CCS ready application is in program.

Financing CCS in Developing Countries ADB Report

ADB submitted a report to CSLF on financing CCS in emerging economies Key recommendation -set up $5 billion CCS dedicated fund for developing countries
It will - support storage characterization, FEED studies and nearly offset incremental CapEx and OpEx. .

Looking ahead ..
Preferred financing y .ADB will continue to work with partners in the mechanism for CCS in CCUS action group to identify and establish a developing countries CCS financing mechanism
y Seek more near-term contributions to support

Strengthen ADB s CCS Fund

project development activities FEED studies, storage characterization

y Submit a CCS road map for the PRC; provide

Support capacity development and policy formulation

need based support to NDRC companies

and energy

Conclusions
CCS technologies face unique challenges Compelling reasons to fast track CCS demonstration in developing countries International financing will be crucial for early CCS demonstration in developing countries
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

Without a targeted CCS Fund to substantially mitigate higher CapEx and OpEx, the CCS demonstration at-scale will be difficult in developing countries. Some work is underway but it requires support and funding from developed countries.

For further information abhargava@adb.org