Insights

Ask the expert: What is the value of CCS to the energy system?

Carbon capture, utilisation and storage (CCUS) is back on the energy and climate agenda in the United Kingdom (UK). With the Clean Growth Strategy announced in October 2017, the UK government has re-affirmed its commitment to deploying cost effective CCUS at scale to meet its climate change commitments.  

The UK has long championed efforts to reduce greenhouse gas emissions and tackle climate change. Back in 2008, the Climate Change Act set a long-term and legally-binding framework for the country to cut its carbon emissions by 80% from the 1990 baseline level by 2050,  Adding to this, the international commitments made in Paris in 2015 also served as a catalyst for a concerted global effort to build a low-carbon energy future.

To build a low-carbon economy, significant emission reductions are required across electricity generation, industry and other complex sectors like heat and transport. Due to the increasing uptake of renewable sources of energy and electricity generation, decarbonising the electricity sector is often positioned as a relatively simple process. However, taking a simplistic view of what is a highly complex and evolving system, leads to expensive, inefficient and often impractical actions.

In the UK and other European countries, electricity systems have been through significant evolutions. Moving away from a fossil fuel dominated power system towards the use of renewable energy and other technologies, means looking beyond the simple electricity generation models and taking a whole systems approach to energy demand, use and storage.

It is when looking at these low-carbon energy systems that CCS technology begins to emerge as a critical technology to support the future UK energy system.

In order to dig a little deeper into this topic and answer some of our questions on the value of CCS to the UK electricity system and the role of the technology in decarbonizing of the power sector, we interviewed Dr Niall Mac Dowell who leads the Clean Fossil and Bioenergy Research group at Imperial College where he is also a Reader in Energy Systems, and is also a Fellow of the Institution of Chemical Engineers.

 

Niall, you have completed extensive research on the value of CCS to a future UK energy system. To begin, it would be helpful for us to have clarification on some of the terminology that is used when discussing this topic. First, could you explain how you define the concept of an energy system? What does this system include? Is this more than just the generation of electricity?

 

Dr Niall Mac Dowell:  When we speak of the energy system, this should include heat, power, transport and industrial services. The system is designed to provide energy to end-users including individual households and industry. It includes all the ways we convert energy sources into useful services such as home heating, lighting and industrial production.

To date, our work at the Clean Fossil and Bioenergy Research group has exclusively focused on the electricity system. It is very important to make clear this distinction when we speak of an electricity system and an energy system. These are two distinct concepts.

 

Your academic work has addressed the need for a new approach to define, quantify and qualify the value of power technologies like CCS to the electricity system.  How do you define the concept of value when comparing different power technologies and their ability to decarbonize our electricity system?

 

Dr Niall Mac Dowell:  To understand the value of a specific power technology to the electricity system, it is essential to have a whole system energy approach. We need to move away from using simplified metrics, such as levelised cost of electricity (LCOE), that are really only appropriate for a homogenous electricity system. We must adopt a whole system approach that recognizes and rationalizes the implications of today’s heterogenous electricity system. [1] [2]

We know that there have been significant changes in the electricity system. If we look back at the 20th century, the electricity system was very homogenous. With coal, gas or nuclear, all the assets within that system were comparable on an equivalent basis. They all involve large pieces of equipment consuming fuel, generating electricity and providing ancillary services that are essential to the electricity grid.[3]

In the 21st century, and in the transition to low-carbon power production, different types of energy generators were included in the system. Of course, the inclusion of intermittent sources of renewable power are valuable in terms of providing a low-carbon source of electricity. However, they don’t necessarily provide the ancillary grid services such as frequency control, system balancing, system inertia and firm reserve capacity that conventional thermal assets provide. [3]

Fundamentally, different technologies provide different values to the system.

Owing to their intermittent nature, wind and solar capacity don’t displace thermal capacity. They displace thermal generation. These technologies typically need back-up capacity and balancing services. In other words, building a wind turbine, doesn’t necessarily mean shutting down a coal or gas plant. We just use it less frequently. One of the key advantages of CCS is that if you build a gas CCS plant, you then shut down an unabated coal or gas plant. A CCS plant can displace these plants on a one-to-one basis.  

Finally, one aspect to keep in mind is that the concept of value is place and time specific. When considering the value of power technologies, we must take account of country specifics. The installed generation capacity varies around Europe. We need to think about the electricity system in terms of its generating capacity and what is installed, how it operates and how interconnected it is with its neighboring countries.

 

Why have there been significant changes in our energy systems?

 

Dr Niall Mac Dowell:  There are multiple competing reasons for these changes. Partially, this can be explained by the failing ratio of prices of gas and coal. In the United States, natural gas has become much cheaper. Here, it is not exclusively renewable power that is causing coal plants to retrie. They are closing because of gas plants. When gas prices are low, this provides a cheaper source of power than coal. Therefore, this has an effect on the composition of the electricity system.

In addition to this, we also have policy levers. First articulated in the UK with the Climate Change Act in 2008 and then more recently with the 2015 Paris Agreement.  We now have a global agreement driving us towards a low-carbon future. More generally, renewable energy has been explicitly supported for a long time, in a manner and scale that CCS has not been afforded, leading to its extensive deployment.

Fundamentally, we need to displace unabated fossil fuels as soon as possible, and replace this capacity with an optimal portfolio of low carbon, and carbon negative technologies. It is here that the value of CCS will become most apparent.  

The levelized cost of electricity (LCOE) is often used as a metric to compare the cost and value of different technologies within our energy system. Why do you believe that a technology’s value to the energy system cannot be adequately understood by using this measure?

 

Dr Niall Mac Dowell:  This is tricky. We come from this 20th century paradigm. Power and electricity generating technologies were thought to be part of a homogenous system.  In that context, it made perfect sense to compare gas plants, nuclear plants versus coal plants on a LCOE level. Indeed, LCOE was first derived as a metric to provide a readily accessible answer to the more complex question of “which technologies add the most value?” 

Once you start adding intermittent technologies to the system, that comparison breaks down. LCOE omits additional costs to accommodate intermittent power generators. We now have a set of climate targets. We need to meet demand and provide a security of supply in a cost-effective way. We need to ensure that everyone is able to afford power. Another important aspect is sustainability, which means there must be a carbon target.  

We therefore need a new metric – what this will be remains to be seen, but the energy systems community are certainly giving this some serious thought.

When you take a systemic approach rather than solely considering the traditional LCOE metric, what specific elements are you taking into account? 

 

Dr Niall Mac Dowell:  In our work, we specifically modelled the UK electricity system. We looked at the current composition of the grid as well as the future targets until 2050, this being zero carbon. [4] We assessed the capacity expansion to quantify the extent to which integrating different amounts of various technologies helps reduce the cost of the system.

We asked the following questions:  If we want a zero-carbon electricity system without CCS in the UK, how much would that cost? What would we be required to do? Is this system socially, politically, technologically and economically feasible?

If we have a system without CCS, this could mean that we need to vastly accelerate nuclear power. This could be mathematically feasible. But is it likely to be socially, technically and politically deliverable?

We need to think about the electricity system not only from a technical engineering perspective but from a broader social and political standpoint.

Ultimately, one wants this kind of academic work to have a broad social value as opposed to solving an interesting academic problem but not doing anything of material value to the world. 

 

Do you believe that CCS adds value to the UK’s future energy system? How so?

 

Dr Niall Mac Dowell:  Unequivocally, CCS has a critical role to play in the UK’s low-carbon electricity future. In our research, despite our best efforts, we haven’t found any scenario under which having CCS in the electricity system doesn’t add substantial value for the UK. 

CCS provides a reliable, and low-carbon source of electricity. To come to this conclusion, we stress-tested different electricity system architypes.  In our work, we haven’t explicitly modeled different countries, but we have changed the peak demands, degree of interconnection, initial system configuration, how much wind or nuclear is already build and so on. We did not find a single scenario where CCS did not add significant value.

In our models, we also included operability requirements. It is not enough that we solve the issue of meeting electricity demand, we must also ensure that demand is met in a way that physically allows the lights to stay on. This element of physical reality is important.

When CCS was not deployed in our models, a significant proportion of the demand (approximately 1/8) went unserved. In other words, the lights went out. We also observed that the cost to the economy of not serving that demand was in the order of £40,000 per MWh. This is far in excess of the cost of providing that electricity using a decarbonized source of electricity like CCS. [2] 

The deployment of CCS reduces capacity requirements and total system costs, leading to a reduction in the prices presented to the consumer.

 

Why is CCS so critical for the UK’s electricity system?

 

Dr Niall Mac Dowell:  The value of CCS lies in its dispatchability, or its flexibility. It’s there when you need it and you can switch it off when you don’t. We did a piece of work for the IEA Greenhouse Gas R&D programme and one of the key things that we observed was that CCS adds value to the system because a CCS power plant can shut down quickly. This allows you to integrate and utilise more renewable energy into the electricity grid when it’s available.

When the wind is blowing, CCS is out of the way and we can use the wind. When the wind dies down, CCS plants can step back in to meet the demand. Understanding the way in which dispatchable, low carbon power generators, such as CCS, can add value to the system by operating in concert with renewable power is key to uncovering their value proposition.

Without this dispatchable form of low-carbon electricity, what you would typically do is run an open cycle gas turbine to help manage that requirement. This both increases prices and increases the carbon intensity of the system. This could also increase the dependency on electricity imports.

 

Is it fair to say that CCS is complementary to a low-carbon energy environment, highly integrated with renewable energy?

 

Dr Niall Mac Dowell:  In our modelling, we couldn’t make a beyond 80% renewable system without accepting significant compromises. It is important to say that we were not trying to disprove a 100% wind, water and solar system.  Our work highlights that if we don’t use CCS and try to do everything with renewables, some nuclear and storage, there are some realistic constraints.

In our models, when CCS was removed the lights went out. This means we would need another strategy such as load shedding or demand management to keep up with the demand. Or we could simply choose to miss our carbon targets – this may well be more politically acceptable than allowing the lights to go out!

In a 100% renewable scenario, we would also need to ask consumers to use less power. That’s theoretically possible. You can hypothesize such changes. However, at what point does this become wishful thinking? You are requiring people to change the way they behave. That’s very difficult to do.

CCS provides an important value to the system and will be able to accommodate higher levels of intermittent renewable capacity.

 

If CCS is so valuable to the energy system, why is cost often cited as the reason not to accelerate the deployment of the technology?

 

Dr Niall Mac Dowell:  The existing narrative of CCS qualifying it as too expensive is dangerous.  We often hear the need for more R&D, but that only leads us to wait for a miracle technology to appear. Waiting for a Unicorn technology is the high regret strategy. [5] If we get started today with the technology that we have in hand, we can get the benefits from the commercial and technical learnings. This also puts us in a position to take advantage of new technologies when they become available. 

When thinking about the cost of CCS, we need to first think about where this cost comes from, which elements of the CO2 capture, transport and storage value chain contribute most to cost, and therefore where cost reduction priorities should lie.

In the US, the drive for CO2 capture focused on natural sources and then from industrial sources, for the purposes of enhanced oil recovery (EOR). This has led to the deployment of CO2 transport and injection infrastructure is available, and also the development of significant experience with the technical, commercial, insurance and banking systems to support CCS for EOR. Therefore, the challenges of developing new materials and technologies to reduce the cost of capturing CO2 is a priority in the context.

In the UK or in other Europe countries, there is no a mature EOR industry.  There is no transport and storage infrastructure. The challenge is to develop new, or adapt existing infrastructure. A key cost driver in this context are the “new” risks, notably the potential for cross chain, project on project risk, and the potential for a long-term liability associated with storage. Of course, then, from the perspective of a government seeking to procure some power generation capacity, CCS starts to look costly. Therefore, in this context, a priority for cost reduction will be developing commercial structures that lead to a reduction of risk, thus leading to cost reduction.

We have observed that the value of improved commercial structures, realized by a more mature partnership between the public and private sectors to deliver the very first CCS project, has an immense potential to drive the costs down.

 

What happens if we don’t successfully deploy CCS here in the UK?

 

Dr Niall Mac Dowell:  Without CCS, there will be significant challenges for our electricity system. We will see expensive electricity and compromise the security of our energy supply. We will also potentially not achieve the decarbonization targets.

For a country like the UK, it’s very unlikely that the lights will go out. However, it is likely that we would sacrifice the decarbonization target to avoid this.  

It all comes back to the question: do you want to decarbonize?

If you want to achieve the emission reduction targets, this is not going to be free.  If you want to decarbonize and meet the Paris targets, including CCS in the portfolio of technologies is unequivocally the least cost solution.

CCS will not only will keep the lights on and drive electricity prices down, CCS’ value goes beyond the electricity system.

It’s been shown that deploying CCS will have multiple ripples of benefit across our society. Investing in CCS will give back significant returns. A report published by CCSA back in 2017 has shown that deploying CCS will be profitable and beneficial for the entire UK economy. CCS could generate an estimated £160 billion for UK economy between now and 2060. We need to properly understand the value of CCS, not only as part of our energy system but also beyond.

 

 


[1]  C. F. Heuberger, I. Staffell, N. Shah and N. Mac Dowell, “A systems approach to quantifying the value of power generation and energy storage technologies in future electricity networks”, Computers & Chemical Engineering. 2017 (https://www.sciencedirect.com/science/article/pii/S0098135417302119?via%3Dihub

[2]  C. F. Heuberger and N. Mac Dowell, Real-World Challenges with a Rapid Transition to 100% Renewable Power Systems, Joule, Vol: 2, Pages: 367-370, 2018. (https://www.sciencedirect.com/science/article/pii/S2542435118300485)

[3] C. F. Heuberger, I. Staffell, N. Shah and N. Mac Dowell, “Quantifying the value of CCS for the future electricity system,” Energy & Environmental Science, vol. 9, pp. 2497-2510, 2016. (http://pubs.rsc.org/-/content/articlehtml/2016/ee/c6ee01120a)

[4]  C. F. Heuberger, E. Rubin,  I. Staffell, N. Shah and N. Mac Dowell, “Power capacity expansion planning considering endogenous technology cost learning“, Applied Energy, vol. 204, pp. 831-845, 2017. (https://www.sciencedirect.com/science/article/pii/S0306261917309479)

[5] C. F. Heuberger, I. Staffell, N. Shah and N. Mac Dowell, “Impact of myopic decision-making and disruptive events in power systems planning“, Nature Energy (https://www.nature.com/articles/s41560-018-0159-3.pdf)