CCS Cost Reduction - Final Report

A week or so ago the CCS Cost Reduction Task Force published its final report. To those of you who have been following the work of this group the overall findings will have a familiar ring - particularly the reaffirmation that CCS can become cost  competitive with other low CO2 generation technologies with levelised costs approaching £100/MWh (real 2012 monies) by the early 2020s. Indeed, the report itself states "The contents of the Interim Report of the CRTF remain largely unchanged".

The report lays out 7 key next steps which are worth repeating:
1) Ensure optimal UK CCS transport and storage network configuration;
2) Incentivise CO2 EOR to limit emissions and maximise UK hydrocarbon production;
3) Ensure funding mechanisms are fit-for-purpose;
4) Create bankable contracts;
5) Create a vision for development of CCS Projects in the UK from follow-on projects through to widespread adoption;
6) Promote characterisation of CO2 storage locations to create maximum benefit from the UK storage resource;
7) Create policy and financing regimes for CCS from industrial CO2.

You could be forgiven if your first reaction is that this is all motherhood and apple pie but actually I think this illustrates a very important point - we are still in the very early stages of developing this industry and there are some big, fundamental issues still to be resolved.

For instance, consider transportation network configuration. Optimising this (or getting as near as possible to an optimum position) is a vital element of cost reduction. However, as with any network, there are all the issues that arise from the possibility of monopolistic action, and the problem of making "over-sized" transport systems (i.e. to some extent future-proofed) bankable.

I had to smile (wryly) at key step 2, having been on the margins of a project proposing an EOR element. As is well known, in its competition DECC selected 2 projects to take forward to FEED and potentially full development neither of which will enable EOR.

Step 6 is also an interesting one. Many storage locations, especially those that might be candidates for EOR are licenced to private organisations. How these organisations are incentivised to characterise their holdings for CCS potential is quite a question. I shall follow this aspect with interest.

The Task Force will now disband but it recommends the establishment of three "national leadership groups" to take forward its recommendations:
1) A UK CO2 Storage Development Group;
2) A UK CCS Commercial Development Group;
3) A UK CCS Knowledge Transfer Network.

As well as the 7 key steps noted above the report outlines a further 26 supporting steps. I sha'n't go into detail here - suffice it to say that many of the headings begin with "Ensure" or "Facilitate" or "Continue". 'Tis quite a read.

Ideology and Energy Efficiency Decisions

Ashutosh Jogelekar has penned an interesting article in Scientific American discussing how one's political position may affect energy efficiency purchases (the post is repeated by Rod Janssen in Energy in Demand). Broadly, he suggests that "liberals" will make EE investments based (at least partly) on an ideological stance whereas "conservatives" are more likely to be persuaded by economic arguments and, indeed, may actually be put off by environmental messaging. If the studies that produced these results are to be believed then there are lessons to be learned by the environmental lobby - beating the environmental drum - even if long-term economic rationality is on their side - may not be effective.

More on Shale Gas

In his latest Energy in Demand blog, Rod Janssen reposts a blog piece by Nick Butler in the FT.  In it, Butler argues that shale gas is here to stay and that the pragmatic thing to do is to recognise that reality and work with it to manage supply, demand, economics, environmental impacts and the like. He cites Exxon's decision to build a $10bn LNG export facility in Texas as a sign of big money demonstrating confidence in the industry.

I suggest that there's a lot of truth in what Butler is putting forward. The economics of energy supply will trump environmental concerns in the end - whether the latter are expressed as an ideological stance or a long-term economic one - and it is the potential get-out-of-jail-free (or at least cheaply) card for HMG and its bodged energy policy. Watch this space!

Another Capacity Doomsayer

A couple of days ago the FT (sorry, cannot give you a better link - I've reach my limit for the month!) reported that yet another senior energy industry figure was warning about an electricity capacity squeeze looming. This time it was Sir Roger Carr, president of the CBI and chairman of Centrica. Slightly ironic the latter one, isn't it, given that it was Centrica who pulled out of the JV with EdF to build a new nuclear station at Hinkley Point.

Potential For Massively Improved Reverse Osmosis

The world needs potable water. One source is sea water desalinated using reverse osmosis. The downside of doing this is the energy intensity of current systems. Now Lockhead Martin has announced a patent of a material they call Perforene (essentially graphene) which they claim allows water flow at 100 times better than current reverse osmosis systems. Their announcement doesn't spell out what "100 times better" actually means but I have seen it interpreted as requiring a 100 times lower pressure differential. I have to say I'm a little sceptical about that, but I hope I can be convinced. It would be some breakthrough if this material really does perform in this way and industrial size application become viable.

CO2 @ 400 ppm

Sorry about putting "CO2" in the title line of this post. The chemist in me hates not being able to use proper nomenclature (I suppose I could have spelt out the words). Worse still are those people who, when they have the capability to make the 2 a subscript, still fail to do so. OK - one minor rant over.

Some figures have a certain totemic value to them and 400 ppm CO2 is surely just such a one. I am, of course, referring to the announcement from the Scripps Institution that a 24 hour average of 400.08 ppm CO2 has been measured at Mauna Loa. No matter where on the "climate change by anthroprogenic CO2 debate" spectrum you are, to see such a rapid change in one component of the atmosphere must be of concern. And if you are convinced that a significant proportion of global warming and climate change is indeed produced by anthroprogenic CO2 then you must be very worried that mankind in staring down a rather nastly looking barrel.

New Environmental Fight Looming in Sussex

The FT reported the other day that Cuadrilla is planning some exploratory drilling at a site in West Sussex. The FT's headline called the company "fracking firm Cuadrilla" which is a little bit naughty as there is no evidence that in drilling for oil, which is what this latest adventure is about, Cuadrilla will involve fracking at all. However, pressure group Frack Free Sussex is already on the case - "If they find any oil or gas, they'll frack"; "They're going to have a big fight on their hands". Dealing with single issue pressure groups like this one is extremely difficult - I know, I've just been on the receiving end of just such a group's protest on an entirely different issue (no names, no pack drill). Reasoned argument can very easily go out of the window. We should be very thankful that we live in a country where people may raise concerns freely but often the wider context is forgotten, or pushed aside. No doubt many members of Frack Free Sussex use oil or gas; I bet the majority practice wasteful habits; they are probably concerned that the UK as a whole retains its position of relative energy security; but as long as production is not in their back yards these considerations may be quietly ignored.

Dimming Solar

The FT today reports that new solar power installations in Europe fell from 22.4 GW in 2011 to 17 GW in 2012. This is quite a steep decline. Is it a signal of the end of Europe's leading role in PV? The FT suggests that the focus now could be on China, the US, India and Japan. Interesting that there are a couple of BRICS featuring in that analysis. Surely as the technology becomes more affordable it will be developing nations that really benefit.

Nobody Wanted To Be Elected

On Thursday I exercised my electoral right and wandered over to our local polling station to cast my vote in the elections for members of Surrey County Council. There were 4 candidates on the ballot paper. What did I know of them? Very little. In the run up to the election I received 1 piece of literature and 1 visit from a party member (both from the same party). Did nobody wish to be elected? How does one choose between these anonymous, faceless non-people?

What Is Happening At DECC?

What is going on at DECC? Not so long ago John Hayes departed as minister to be replaced part time by Michael Fallon. Then we learned that Jonathan Brearley is leaving. And now it appears that Ravi Gurumurthy is also going. This has the potential to leave the Energy Bill and EMR in tatters. I have hinted before that I have concerns about the capacity market mechanisms and, to be frank, I still think this looks like a dog's breakfast. Is it problems with the design of EMR that has precipitated these latest departures? I don't have an inside track any more but perhaps it's time to start stock-piling those candles!

Who Would Be A Saver?

I've just been sorting out this year's ISAs for House Management and myself. Being a cautious fellow I like to have cash available for emergencies so I've tended to use cash ISAs first and only gone into equities when there has been residual spare capital. However, the cash rates available are so dire that this year the full whack for both of us has gone into equity ISAs.

I have to say, I don't think life is going to become any easier in the short, or even medium, term. Did you notice the nasty little squib in George Osborne's recent budget whereby he will now allow the Bank of England to "look through" the inflation figures and target other variable such as growth? This looks to me very much like our Georgie boy saying " Hello savers. Guess what? I have a nasty state borrowing and debt problem. I can't default - that's just unthinkable. I can't really take the austerity route (what I'm doing at the moment is fiddling around the edges) - that's politically untenable. So what I've decided to do is let inflation off the leash so that the value of my state debt is quietly eroded. Unfortunately that means the value of your savings will be eroded, too. Tough". Basically what is going to happen (actually, it's already happening) is that there's going to be a transfer of wealth from savers to borrowers. And guess who is the biggest borrower of them all? Yup, the government.

So, the wrong side of 60 I may be but there is going to have to be a little bit of raciness in my life. Cash holdings may be stable but they are losing value - with equities there's just a chance of some value gain.

The footnote to all this is that the equity ISAs that we already hold have performed somewhat differently. They are both in the money but I placed the majority of House Management's dosh into income funds whereas I put some of mine into growth opportunities. House Management is doing somewhat better than me!

Schizophrenia in the Energy Saving World

DECC's recently published wave 5 of its public attitude tracker makes for some interesting reading. While 80% of those surveyed said that they think about energy saving behaviours, 67% admit to, at least sometimes, boiling the kettle with excess water, 52% leave lights on unnecessarily and 52% leave the heating on when they go out for a few hours. Support for renewables is relatively high, 76% supporting offshore wind for instance; but views on nuclear are mixed with 40% support rising from 37% in the previous wave. All this suggests to me that a coherent message is not getting across - and certainly coherent thinking is not taking place. I'm not sure (actually, let's make that a firmer statement - I don't know) how to change this situation. Ideas anyone?