Keeping coal and gas power plants alive while purporting to tackle climate change will likely make electricity more expensive for consumers, a new analysis warns. Fossil fuel companies have been eager to deploy technologies that filter planet-heating carbon dioxide out of power plant emissions. But relying on the technology, called carbon capture and storage (CCS), is a risky venture and consumers are likely to bear the costs.
The cost of electricity from power plants outfitted with carbon capture devices is at least 1.5 to 2 times more expensive than other alternatives, according to a new report from the nonprofit Institute for Energy Economics and Financial Analysis (IEEFA). It’s much more affordable to turn to renewable energy like solar and wind instead.
“The economic case for CCS in the power sector is weak”
“The economic case for CCS in the power sector is weak, considering input cost and funding uncertainties, continued failures of the technology, and the constantly improving alternatives,” report co-author Christina Ng says in a press release. “Yet, policymakers are recognizing it as a sustainable investment or providing generous financial incentives too easily to CCS producers and developers.”
The technology is supposed to capture a majority of a power plant’s CO2 emissions before it can escape from smokestacks. Then the greenhouse gas can be transported and stored away somewhere to keep it from entering the atmosphere and making climate change worse.
Fossil fuel companies typically pump that CO2 underground to “store” it. But they usually do so in a process called enhanced oil recovery. It’s a tactic used to push up hard-to-reach oil reserves, which companies can then sell as ‘carbon neutral’ oil. That’s made CCS wildly controversial as a purported climate solution. It’s been used by fossil fuel companies to cast themselves as climate heroes even as they drill for more oil.
Turns out, relying on CCS to prop up fossil fuels will probably raise electricity bills, too. Cost estimates for CCS projects often omit expenses related to transporting and storing CO2, according to the IEEFA’s analysis. And those costs, which might encompass building out networks of new pipelines, are significant.
The US Department of Energy (DOE) has wasted hundreds of millions of dollars on failed CCS projects.
Taking that into consideration, IEEFA estimated costs for outfitting power plants with CCS in Australia, which still relies heavily on coal for its electricity. If developers pass those costs on to consumers, according to the analysis, it could raise wholesale electricity prices by 95 to 175 percent.
That’s based on the average cost of electricity generation over the lifetime of a power plant, called the levelized cost of electricity (LCOE). The LCOE for fossil fuels paired with CCS is at least 1.5 to 2 times higher than solar, wind, or traditional coal and gas power plants without CCS, according to the report.
Getting power grids to run on renewable energy comes with investment costs, too, of course. There are solar and wind farms to build and new transmission lines to lay down. But deploying renewable energy has become remarkably affordable over the years, with solar becoming the cheapest source of electricity in many parts of the world. So it’s no wonder renewable energy is forecast to dominate global power sector growth over the next few years.
The few power plants outfitted with CCS so far, haven’t fared so well. The US Department of Energy (DOE) has wasted hundreds of millions of dollars on failed CCS projects, a 2021 report by the Government Accountability Office found. It spent almost $684 million dollars to support CCS projects at six coal plants, and only one of them ever came online. The other projects were never completed primarily because of “factors affecting their economic viability,” according to the GAO.
The one CCS project that was completed at a coal power plant still stumbled. The facility, called Petra Nova, started running in 2017 and only lasted a few years before its operators pulled the plug. The CO2 captured at Petra Nova was used to extract oil, and the facility reportedly relied on high oil prices to stay afloat. It stopped operating when oil prices crashed in 2020 at the start of the covid-19 pandemic. Now, with oil prices up again, Petra Nova is slated to come back online later this year.
There are plenty more carbon capture projects in the works thanks in large part to tax incentives and federal investment in the name of fighting climate change. CCS capacity is expected to quadruple globally by 2030, according to an analysis last year by financial services firm ING.
“Optimism bias is rampant,” the IEEFA report says. “But who ends up paying for it is an uncertainty adding to the financing risk.”