NewGen Roundtable

The International Energy Agency (IEA) recently put out the 2010 edition of Projected Costs of Generating Electricity, co-authored with the OECD Nuclear EnergyAgency.

Drawing on data from IEA member countries and some private sector energy associations, the report compares the Levelised Cost of Electricity (LCOE) for the major generating technologies. The technologies given primary consideration were coal, coal with carbon capture (but without storage and transportation), nuclear and on-shore wind. The remaining renewable technologies such as off-shore wind and concentrated solar thermal were considered too immature for reliable comparison.

While the report itself doesn’t come up with any major surprises, it does reaffirm the critical factors of energy policy in selecting appropriate technologies. It will serve as a good resource for energy policy planners but perhaps its most powerful contribution is its essential summary proposition:

No technology triumphs overall for baseload generation – it all depends on the specific circumstances

This highlights the need for a portfolio of solutions to effectively meet climate change concerns while maintaining economic prosperity rather than any single energy panacea or silver bullet.

The report essentially states that, within a local context,which electricity generation technologies are most cost-effective are dependent upon

a) Discount rate
b) Carbon price

That is, the most appropriate solution is dependent on local conditions:

• availability of fossil-fuels
• availability of renewable resources
• transport infrastructure and distances
• local financing costs
• environmental policy and social attitudes

Mr. Tanaka, the executive director of the IEA, stressed that “to bolster competitiveness of low-carbon technologies such as nuclear,renewables and CCS, we need strong government action to lower the cost of financing and a significant CO₂ price signal to be internalised in power markets”.

Each technology has its advantages and disadvantages, the report is quick to point out. A portfolio of solutions provides energy security as well as economic resilience, while providing complementary “wedges” to meet GHG emission reductions required to avert catastrophic climate change.

As the development of carbon capture andstorage (CCS) technology is accelerating and projects are being rolled outacross the world, it’s becoming increasingly important to have the necessarystructures in place to maximize benefit and minimize cost.

The British government has takena big step in this process with its publication of a document intended tooptimize the transition of CCS demonstration projects into commercialdeployment. Clean Coal: an industrialStrategy for the development of carbon capture and storage across the UK [PDF]has been published by the Officeof Carbon Capture and Storage to stimulate discussion and debate as to the most effective widespread implementation of CCS in the UK.

The UK is very well situated tobenefit from CCS with the North Sea possessing some of the best storage geologyin the EU. Studieshave forecast this contributing £3 – 6.5 billionannually to the economy in 2030, creating 70,000 – 100,000 jobs.

The UK sees itself as well-suitedto take advantage of these natural endowments. Significant experience inoff-shore oil and natural gas project management, as well as experience incomplex legal and financial models essential to deliver big projects makes theforecast economic benefits credible. The publication of this strategic documentaims to ensure all experience is fully utilized to maximize these massiveopportunities.

The strategy aims to make CCSviable not only in the UK but to make the UK attractive as a potential storagelocation for the rest of Europe, owing to its prime storage geology.  While CCS deployment is largely drivenby coal and its massive growing use in China, the UK wish to leave no stoneunturned, ensuring its extension to oil, gas and industry (eg. fertilizer, iron& steel, cement, paper). Significantly for Australia, this strategy isdesigned to develop and situate the UK’s CCS expertise as a contender forinternational public funding on CCS projects world-wide. Australianfederal and state governments have allocated A$3 billion towards CCSprojects and the Australiancoal industry a further A$1 billion. The UK wants a piece of this pie whilemeeting its own emissions objectives.

Other than setting out theeconomic and emissions-reductions benefits of CCS to the UK,  the strategy moves into initialdiscussion about the steps to seeing CCS realized. Preparing and organizing thesupply chain, the designation of Low Carbon Economic Areas, skilling theworkforce and fomenting innovation are all addressed in the document, invitingideas from the private sector for further improvement.

The UK was already proactive inthe field of CCS deployment with a competitionunderway to select the first commercial-scale CCS installation. The publicationof this document cements their commitment to rolling out CCS affordably whileaddressing climate change concerns.