This page contains a limited version of this dossier in the EU Monitor.
|dossier||COM(2006)843 - Sustainable power generation from fossil fuels: aiming for near-zero emissions from coal after 2020.|
|date||January 1, 1945|
Commission action: The EU will continue its efforts to achieve a global agreement to limit and subsequently reduce global emissions of CO2 and other greenhouse gases, in line with the objective of limiting the increase in the earth's average temperature to a maximum of 2ºC above pre-industrial levels. The Commission will support the recognition of CCS activities respecting appropriate environmental safeguards as part of the broad portfolio of energy options necessary for the implementation of such agreement. |
There may be unwarranted barriers at international level to CCS in certain international agreements drafted without CCS in mind. While addressing the management of the CCS-related risks, amendments to these agreements should be negotiated and adopted, as has been recently done for the 1996 Protocol to the Convention on the Prevention of Marine Pollution by Dumping Wastes and Other Matter (the "London Protocol"), so as to permit environmentally sound geological storage of CO2 under the seabed.
Commission action: While assisting the development of a framework for CCS-related risk management, the Commission will support appropriate amendments to the international conventions (e.g. The Convention for the Protection of the Marine Environment of the North-East Atlantic – the "OSPAR Convention"). |
4.3. Clear framework for phasing in Sustainable Fossil Fuels
Further improvements in Clean Coal technologies and power plant efficiency, successful large-scale demonstrations and a suitable regulatory framework for CCS should make Sustainable Coal the business model of choice for coal-fired power generation in the period after 2020. Once the commercial viability of Sustainable Coal is demonstrated, appropriate framework should be in place so that new coal-fired power plants built after 2020 operate with CCS; capture-ready plants built in the previous period should be rapidly retrofitted. The future EU ETS should provide the primary incentives through stable and strong prices for CO2 allowances. It remains to be considered how strictly (i.e. whether and to what extent) the same approach should be applied to power generation from other fossil fuels, particularly gas. While it is important to maintain a level playing field, the imperative of reducing CO2 emissions is clearly much more evident with respect to coal.
Incentives may be justified to discourage traditional coal-based power generation and foster wide penetration and use of Sustainable Coal technologies . Relevant measures, although intended for the period after 2020, will need to be adopted sufficiently in advance to provide clear signals and useful input for investors' decisions. Such measures would need to be compatible with pro-active measures already in place for renewable energies, and their adoption would be preceded by an impact assessment evaluation.
Such incentives could be provided through various mechanisms, for example:
- Establishing a more favourable context for long-term investment decisions by ensuring the relative perpetuity of the emissions trading scheme and by facilitating commercial financing and risk-sharing instruments (e.g. through the EIB).
- Developing EU CO2 storage sites (onshore, offshore) and pipelines for multi-user access or projects for CO2 infrastructure development at Member State level.
- Adopting legally binding measures to regulate maximum allowed CO2 emissions per kWh after 2020 and/or introduce a timed phase-out (for instance by 2050) of all high CO2 emitting (i.e. non-CCS) electricity generation.
Commission action: In the light of the above, the Commission considers that a clear and predictable long-term framework is necessary to facilitate a smooth and rapid transition to a CCS-equipped power generation from coal. This is necessary to enable power businesses to undertake the required investments and research in the secure knowledge that their competitors will be following a similar course. On the basis of the information currently available, the Commission believes that by 2020 all new coal-fired power plants should be built with CCS. Existing plants should then progressively follow the same approach. In order to make a decision, in terms of both the timing of any CCS obligation and the most appropriate form and nature of the requirement, the Commission will undertake in 2007 an analysis including a wide-ranging public consultation on the issue. On the basis of such an analysis, the Commission will evaluate what is the optimal retrofitting schedule for fossil fuels power plants for the period after the commercial viability of Sustainable Coal technologies is demonstrated. |
5. COSTS AND BENEFITS OF SUSTAINABLE FOSSIL FUELS TECHNOLOGIES
Economically viable Sustainable Fossil Fuels technologies can help achieve deep carbon reductions at acceptable cost. Sustainable Coal is of particular importance as it can bring about dramatic carbon reductions while ensuring cost-efficient security of energy supply, especially if prices for oil and gas remain high. While the transition from traditional coal to Sustainable Coal will certainly not be costless, it may prove a priceless contribution to climate change mitigation.
For regular new installations, the requirement of capture-readiness in the period up to 2020 may not necessarily entail additional costs: it will first and foremost call for new investment to be made with the right technology choices and for the needs of future CCS operations to be taken into account in selecting the location, spatial planning and configuration of any new power plant.
Industrial-scale demonstration of Sustainable Fossil Fuels will, on the other hand, require substantial financial resources to be mobilized in Europe over a short period of time. A fleet of up to 12 CCS-equipped coal- or gas-fired power plants, each at 300 MWe, may, at current technology costs, require at least €5bn and possibly more. CCS retrofitting after 2020 will also entail significant additional investments, which are currently difficult to predict exactly and will depend on the level of technology development in the 2020 horizon as well as on R&D and demonstration advances and industry commitment in the interim period. The total capital requirement for CCS-retrofitting of coal-fired power plants is estimated to be in the range of €600,000 – 700,000 for 1MW of installed capacity (for capture-ready installations built in the period between now and 2020 with currently available technologies). The costs of retrofitting (after 2020) older power stations, i.e. installations already in place today, will probably be higher.
5.1. CCS costs and costs of electricity produced
Cost estimates for CO2 capture from power generation and subsequent storage at the current level of technology development range up to €70 per tonne of CO2, rendering the large-scale use of these technologies prohibitively costly for the time being.
However, major technology improvements are anticipated for the coming years. Gains in the efficiency of future plants and reductions in CO2 capture costs are expected in the near future, while the side-benefits of CCS (such as use of CO2 streams for Enhanced Oil Recovery) will further reduce the net costs of particular CCS operations in power generation.
Available models and studies with a medium- to long-term perspective thus estimate the costs of CCS by 2020 at about €20-30/tCO2. This translates in the models to costs of coal-fired power generation with CCS by 2020 or soon afterwards at just 10% above or even on the par with the current levels.
It is also worth comparing the estimated initial increase in the costs of power generated with Sustainable Coal technologies with the production costs of some renewable sources available today. Both turn out to be at least in the same order of magnitude, for what are all viable and environmentally beneficial alternatives. When commercially available, Sustainable Coal technologies may thus offer an additional economically sensible opportunity for countries wishing to reduce their CO2 footprint from electricity generation.
5.2. Electricity prices with Sustainable Coal
It is important to recognize that even if CCS does result in moderate increases in the costs of electricity production, these are unlikely to translate, at least not fully, into increased electricity prices for consumers. Sustainable Coal is expected to continue to provide a base-load electricity supply. As such, it would be unlikely to become the marginal electricity generation source on the economics of which electricity supply prices are generally based: this role would continue to be played by still more costly peak-load sources.
5.3. Environmental risks and benefits of Sustainable Fossil Fuels
The potential negative environmental impacts from sustained use of fossil fuels and the deployment of CCS stem mainly from potential leakage from CO2 storage. The leakage impacts can be both local (on local biosphere) and global (on climate). However, the International Panel on Climate Change's report on the issue concludes that, based on existing experience, the fraction of CO2 retained in well-selected and managed storage sites is very likely to exceed 99% over 100 years. Site selection and management are thus the key factors for minimising risk. The Commission impact assessment for enabling legal framework will identify all potential risks and will put forth appropriate safeguards.
Continued use of fossil fuels in power generation, reinforced by the arrival of Sustainable Fossil Fuel technologies, may translate into increased global production of fossil fuels, coal mining in particular. This could pose challenges to local environments. Best practices in the production and use of fossil fuels, including coal mining, have been sufficiently developed to guarantee that the inherent risks can continue to be adequately managed, inter alia, through further improvement and dissemination of such best practices.
On the positive side, Sustainable Fossil Fuels technologies, and particularly CCS, are expected to deliver significant positive results. First and foremost, of course, they can effectively eliminate up to 90% of the carbon emissions from fossil fuels power plants. This could translate into an overall reduction in EU-27 CO2 emissions of 25-30% by 2030 compared to 2000.
Furthermore, the combined emissions of major pollutants traditionally associated with coal combustion and seen as major contributors to acidification, eutrophication and ground-level ozone are likely to be significantly reduced by the deployment of Sustainable Fossil Fuel technologies. Although the effects are technology-specific, Commission analyses show that some of the envisaged technologies could reduce NOx and SO2 emissions significantly (by around 80% and 95% respectively in comparison with traditional pulverized coal power plants). In all, this would bring significant social benefits in the form of an improved environment and better public health (and thus reduced healthcare costs).
5.4. Contribution of Sustainable Fossil Fuels to the goals of prosperity and sustainability
The concept of Sustainable Fossil Fuels offers numerous potential benefits to the EU's efforts undertaken in the context of the Lisbon and Johannesburg agendas. The role Sustainable Fossil Fuels can play in the sustainable development strategy is, however, predicated on a strong international action taken by Europe as a leader in the development of the requisite technologies. By 2030, global annual electricity generation from coal alone is expected to increase by 7.8 TWh. More than two-thirds (70%) of this increase will take place in India and China, additional 10% in other non-OECD countries. The international dimension of EU's Sustainable Fossil Fuels strategy will therefore be crucial for the sustainability of continued global use of fossil fuels as well as for accessing opportunities this may generate for EU businesses.
Commission action: The Commission has already laid groundwork for close collaboration with China in the 2005 EU-China Partnership on Climate Change and the subsequent 2006 Memorandum of Understanding (MoU), focusing on joint CCS demonstration. The collaboration follows a three-stage logic, starting with exploratory work, continuing by the definition and design of a concrete demonstration project to be constructed and operated in the final stage. The first stage of the project should be completed by 2008, the operation of the demonstration project was initially previewed for 2020. While making efforts to accelerate the ongoing European collaboration with China in the demonstration of CCS (bringing the operation date from 2020 significantly forward), the Commission will look for opportunities to extend cooperation on demonstration projects to other key emerging economies (such as India, South Africa) and will seek to stimulate the creation of enabling policy and regulatory framework in those countries. The Commission will examine options for co-financing such projects and for close coordination of demonstration projects in the EU and in third countries. At the same time, the Commission will seek to identify and exploit the synergies with efforts under way in other coal-using economies (including the US, Japan, Australia). |
5.4.1. Sustainable Coal in the service of global sustainable development
An early involvement of third countries in the development and deployment of Sustainable Coal technologies and particularly the CCS component is essential for sustainable global economic development and for tackling climate change in a scenario with increasing global use of coal resources. Closer collaboration on zero-emission power generation with key third countries, with the focus on large fossil fuel exporters and large emerging economies, will therefore be imperative.
Concrete actions to reinforce collaboration with interested third countries should include projects in:
- increasing the energy efficiency of the coal chain
- identification and testing of potential sites for geological CO2 storage (including possibilities in hydrocarbon fields)
- cooperation in the development of Sustainable Coal technologies and in the preparation and construction of demonstration plants
- establishing a suitable regulatory framework for CO2 emission limits and the deployment of CCS using experience from the European model.
Furthermore, Energy Technology Centres could be established in key third countries, building on the closer energy cooperation already in place with e.g. the Gulf Cooperation Council (GCC), OPEC, China and India. Such centres could facilitate the launch and execution of projects in the areas mentioned above. They could also promote later on the penetration of Sustainable Fossil Fuels technologies in third countries.
5.4.2. EU as a competitive exporter of Sustainable Fossil Fuels technologies
European industry today plays a leading role on the world markets in developing and supplying advanced technological equipment to the coal-mining and coal-fired electricity generation sectors. By developing, demonstrating and further investing in Sustainable Fossil Fuel technologies, European industry will maintain a competitive advantage on world markets and contribute to growth and employment in Europe.
Sustainable coal mining and coal-fired power generation in developing and emerging economies creates opportunities for supplying new equipment to these countries. However, international competition in these markets will be fierce. It is therefore very important for European industry to seize early opportunities for developing Sustainable Fossil Fuels both in the EU and beyond, thus securing the EU’s continued leadership in advanced environmentally beneficial technologies.
The Commission recognises the importance of fossil fuels and particularly the contribution of coal to the security of energy supply. At the same time, the Commission stresses that the future use of coal in particular must be made compatible with sustainability objectives and climate change policy.
The success of Sustainable Coal and particularly the commercialization of CCS on a large scale will also offer opportunities for the exploitation of the new technologies in applications for other fossil fuels, first and foremost in gas-fired power production.
The Commission is ready to play its part in the promotion of Sustainable Fossil Fuels by establishing a favourable context and supporting the implementation of the technological solutions needed. The Commission plans to undertake concrete initiatives in order to make Sustainable Fuels a reality both in Europe and globally in the shortest possible time.
 Commission Staff Working Document SEC(2006) 1723 (referred to hereafter as IAES).
 IEA estimates in its WORLD DEMAND FORECAST 2006.
 Coal-based power generation in the EU-27 was responsible for around 950m tonnes of CO2 emissions in 2005, representing 24% of all EU CO2 emissions. Worldwide, emissions from coal-fired power generation amount to approx. 8bn tonnes of CO2 per year. See IAES for further details.
 This is in line, inter alia, with the recommendations of the First Report of the HLG (http://ec.europa.eu/enterprise/environnement/hlg.doc_06/first_report_02_06_06.pdf). See also the Strategic EU Energy Review adopted concurrently with this Communication - COM(2007) 1.
 While the oldest units still operating in the EU may have efficiencies of 30%, the most recently built coal-fired plants reach efficiencies of up to 43% (for lignite power plant) and 46% (for hard coal power plant). The technical limits are assumed to be above 60%.
 See IAES for further details.
 Up to 70 GW of EU coal-fired capacity will need to be replaced (out of a total of 187 GW) by 2020.
 See IAES for details.
 See IAES for details.
 See IAES for details.
 Some research projects currently under way aim to produce electricity from coal-fired power stations with CCS by 2020 at costs higher by 10% compared to current technologies without CCS. Simulations run by the Commission in cooperation with the National Technical University of Athens and based on the PRIMES model show that the costs of electricity in 2030 may be as low as ¬ ct 6.1/kWh. See IAES for details.
 Costs of ¬ ct 7.5-8.5/kWh for electricity from coal with present CCS technologies are comparable to the costs of wind-generated electricity reported by the European Wi may be as low as €ct 6.1/kWh. See IAES for details.
 Costs of €ct 7.5-8.5/kWh for electricity from coal with present CCS technologies are comparable to the costs of wind-generated electricity reported by the European Wind Energy Association for sites with low wind speeds (€ct 6-8/kWh). Technology improvements by the time of full commercialisation of sustainable coal (2020-2030) should bring costs down significantly to around €ct 6/kWh, i.e. levels comparable to the average costs of wind power (roughly €ct 5-6/kWh).
 See IAES for details. See also the IPCC Special Report on Carbon Capture and Storage, UN 2006.
 The overall benefits generated by some sustainable coal technologies (such as CCS-equipped IGCC power plants) could be as high as one-quarter to three-quarters of the costs of CCS. They could even outweigh the CCS costs for locations such as Central Europe. See IAES for details.
 Reference Scenario as presented in the IEA 2006 World Energy Outlook.