By 2030, the cost of capturing and storing carbon dioxide emissions from heavy-polluting coal power plants could be reduced to levels where it can compete with other low-carbon technologies, including renewable energies, according to a new study by McKinsey & Company, a business consulting firm.

If successfully rolled out, the technology would allow countries such as Poland and Germany to continue using coal as a major part of their energy mix while meeting their commitment to reduce CO2 emissions, according to the report, which was presented in Brussels on Monday (22 September).

"CCS has potential to play a significant role in the European and global response to climate change by 2030 as the only technology that can address emissions" from coal-fired power plants, the report says. CCS could also reduce emissions from all sort of industrial installations already regulated by the ETS, such as steel, cement and refineries, it added.

"Our reference cases have shown that the costs for integrated CCS projects could come down to 30-45 €/tonne of CO2 abated for new coal-fired power by 2030," McKinsey notes. According to the report, this price range is "in line with expected carbon prices" under the EU CO2 emissions trading scheme (EU-ETS) for that period.

Filling the 'economic gap'

But in the meantime, Europe will be left with an "economic gap" that needs to be filled if CCS technology is to take off. Early demonstration projects, which according to McKinsey are not expected before 2012-2015 "at the earliest", will typically cost 60-90 €/tonne, representing a gap of "0.5-1,1 billion euro per project".

For Europe as a whole, this 'economic gap' is estimated at "around 10 billion euro", according to Chris Davies, a British MEP in charge of steering an EU legislative proposal on CCS through the European Parliament.

According to the study, the main costs in early demonstration plants will mainly be absorbed by the CO2 capture phase, representing roughly two thirds of total costs. The remainder is divided between the transport phase - via existing pipeline networks - and the actual injection of CO2 in underground rock formations. 

But both transport and storage costs could vary widely according to the ability to 'cherry pick' projects with favourable storage locations in order to minimise transport distance, the study said. Long-distance transport to a suitable storage location "could increase the cost of transport significantly," it said, potentially adding 10-12 euro per tonne for distances of 200-300 kilometres.

But these are expected to go down as CCS technology moves from the demonstration phase to the early commercial scale (at the beginning of the 2020s "at the earliest", according to the study). Tomas Nauclér, a director at McKinsey's Stockholm office, told EurActiv: "As you go from the demonstration phase to the first commercial full-scale phase, prices will come down pretty fast. Then, you will need a number of projects over the next 5-10 years in order to get down to the 30-45 euro price range we mentioned in the report."

Time is of the essence

But time is running out. According to the report, "if projects are delayed due to difficulties with permits or other uncertainties, CCS could struggle to reach large scale in 2030". To achieve the 2030 goal, it says the first commercial projects would have to be started shortly after the demonstration phase. 

In March 2007, EU heads of state and government agreed to build 10 to 12 CCS demonstration plants by 2015 but securing enough funding for the demonstration projects has proved a major obstacle. 

A proposal to draw funds from the 'New Entrants Reserve' under the EU-ETS is currently being examined in the European Parliament and could provide a solution (EurActiv 23/09/08).