CCS Demonstration in Developing

Countries – Analysis of Key Issues and

Barriers

Financing Roundtable

Singapore
7 April 2011

Ashok Bhargava
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 Disclaimer

The views expressed in this presentation are the

views of the ADB staff and DO NOT necessarily
reflect the views or policies of the Asian
Development Bank, its Board of Director or the
Governments they represent.

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Contents
 Background

 CCS Issues and Barriers

 “With CCS” coal-fired Power Plants – Financial Analysis

 Rationale for CCS Demonstration in Developing Countries

 Fast track CCS Demonstration in Developing Countries –

Recommendations

 Role of CCS Demonstration Fund

 Conclusions and Way Forward

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Background

 The Regional technical assistance ($350,000). CCS Demonstration

: Analysis of Key Policy Issues and Barriers approved in May 2009

 The TA aims to analyze key issues and barriers, in particular, financing

issues for CCS demonstration in developing countries

 The report (Sept 2010) includes analysis and recommendations

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CCS Issues and Barriers – An Overview
Technical Strategic
Not included in
Technology of technology portfolio
last resort
No experience in Mitigation only
Developing countries Limited technical technology
readiness No incentives
Limited No IGCC
experience plants No long term
No coal plant goal
Storage data not Weak strategic
With CCS High energy
available support Weak signal to
penalty
Delays in market
Only 5 plants Enabling framework
in operation Limited to
oil and gas industry
Need multi- Immature Uncertain market
Sectoral approach technology perception
Complex
design Slow progress
on CCS demonstration
Difficult financial
High risks
closure

Cautious process
Excessive energy
Expensive storage
penalty Uncertain
characterization Complex MMV
cash flow High environmental
requirements
and safety concerns
High cost Low risk Significant
Long term Limited
appetite operational risk
High Storage liability experience
capital costs High Complex regulatory
Offtake risks
risks needs
Financial Legal and Regulatory

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Issues and Barriers – Strategic
Strategic
Not included in
Technology of technology portfolio
last resort
Mitigation only
technology
No incentives

No long term
goal
Weak strategic
support Weak signal to
Delays in market
Enabling framework

Uncertain market
perception

CCS is seen as a climate change mitigation technology only rather

than a low-carbon or “near-clean” energy technology. It has weak
support from developing countries. No program, plan or targets in
place to promote CCS.
Uncertain market perception limiting investments and progress
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Issues and Barriers – Technical

Technical

No experience in
Developing countries Limited technical
readiness
Limited No IGCC
experience plants
No coal plant Storage data not
With CCS High energy
available
penalty

Only 5 plants
in operation Limited to
oil and gas industry
Need multi- Immature
Sectoral approach technology
Complex
design

 No coal-based power plant with CCS; no experience in

developing countries; complex design; no IGCC power plants
in developing countries; high energy penalty

Immature technology - high technical risks

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Issues and Barriers – Legal and Regulatory

High risks

Cautious process

Complex MMV
High environmental
requirements
and safety concerns

Complex regulatory
needs
Legal and Regulatory

Critical issue for environmental health and safety. Domestic

regulatory framework not fully developed. Long-term
stewardship rules are key element for CCS demonstration
and deployment.

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High perceived risks due to long-term liabilities
Issues and Barriers – Financial

Excessive energy
Expensive storage
penalty Uncertain
characterization
cash flow
High cost Low risk Significant
appetite operational risk
High
capital costs High
Offtake risks
risks
Financial

High costs, excessive energy penalty, no incentives which

make CCS a high cost-high risk investment decision.

Public funding is essential for initial demonstration projects.

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Coal-fired Power Plants with CCS –
Financial Analysis
 The analysis aims to capture the impact of equipping a coal-based
power plant with CCS

 400 MW IGCC and 600 MW Supercritical (SC) plants were

considered based on cost estimates in PRC

 Captured and stored CO2 is about 1.8 – 1.9 million t (Mt)

 The base cost for IGCC plant is $1.6 million/ mega watt compared
to $ 0.7 million / MW for SC

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Coal-fired Power Plants with CCS –
Financial Analysis………………..Contd
Without CCS

With CCS

120

Electricity Tariff $ /MWh

800 112
53% 90 90
600 24% 73 65% 80%
Cost - $ million

60
51
400
Base 30
Cost Base
200 Cost

400 MW IGCC 600 MW SC

01/10/2010 01/10/2010

With CCS coal-fired power plants are financially unviable with

the existing tariff.
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Coal-fired Power Plants with CCS –
Financial Analysis………………..Contd
Without CCS

With CCS

120

Electricity Tariff $ /MWh

800
90
75 65%
600 73
Cost - $ million

24% 67
60
51
400
Base Base 30
Cost Cost
200
$226 M $226 M

400 MW IGCC 600 MW SC

07/10/2010 07/10/2010

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Coal-fired Power Plants with CCS –
Financial Analysis………………..Contd

Electricity Tariff and Capital Cost Comparison in PRC

3.5 0.2
0.19 $/kWh
3
0.15
Cost ($million/MW)

2.5
0.11 $/kWh

Tariff ($/kWh)
2
0.09 $/kWh
0.1
1.5 0.08 $/kWh

1 0.05 0.05
0.5

0 0
Wind IGCC + CCS SC+CCS Solar Std Coal

Cost ($M/MW) Std Coal tariff (ct $/kWh)

Comparing “with CCS” coal-fired power plants with only coal-

fired power plant without CCS is not a fair comparison
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Rationale for CCS Demonstration in
Developing Countries
 Very good fit with the targeted
carbon intensity
6200
GWh
 Large-coal-fired capacity 6000
2200
addition (without CCS) will GWh
5000
undermine the impacts of wind

Electricity generated -
1GW
and solar plants 4000 Solar
1 GW
3000 Coal-

GWh
GWh fired
3000
power
plant
 Energy security solution 2000
1 GW
Wind
1000

 At the moment, CCS is the

only technology to reduce CO2
emissions from fossil fuel
power plants
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Fast Track CCS Demonstration –
Recommended Actions

Action Purpose By
Establish CCS Overcome near- to Contributions from
Demonstration Fund medium-term developed countries
of billion dollar scale commercial/economic
gaps (up to 2020) Multilateral
development banks to
Provide positive actively work with the
incentives for CCS donor governments
demonstration and developing
countries in setting up
Reduce time lag for the fund
CCS demonstration
between developed
and developing
15 countries
Fast Track CCS Demonstration –
Recommended Actions……………….contd

Action Purpose By
Provide complementary policy Encourage energy Governments in
support and power relevant developing
companies in countries
country–specific pilot regulatory developing
framework countries to move
forward with CCS
Provide suitable financial demonstration
incentives—tax relief, tariff
premiums for carbon-free
electricity, incentives, loan
guarantees, etc. for “with CCS”
demonstration projects

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Role for CCS Demonstration Fund
 A $5 billion fund to support CCS demonstration in developing
countries up to 2020

 The Fund to lower risk profile for CCS demonstration projects

 Capital subsidy to offset incremental cost
 Compensate energy penalty
 Complement traditional project financing

 It will motivate accelerated actions on other barriers put the CCS

demonstrations on the expected trajectory

 It may incorporate smart incentive mechanisms to encourage early

movers, higher rate for capture etc

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Conclusions and Way Forward

 CCS faces formidable challenges and barriers especially at its

demonstration stage in developing countries

 CCS will remain at high end of the risk spectrum of the

technologies and requires targeted financing and incentives

 Early demonstration through CCS demonstration fund in

developing countries can accelerate its wider deployment

 ADB analysis has brought forward some pertinent issues within

the uncertainties of costs and technologies.

 A follow on study can be commissioned to refine analysis and

recommendations and present a preferred financing mechanism

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For further details

abhargava@adb.org

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