Carbon capture and storage: a reality check

TORONTO, ONTARIO - Daunting technical and cost gaps must be closed before Canada can turn the corner on climate change.

The federal government unveiled an aggressive plan to reduce Canadian greenhouse gas emissions 20 per cent by 2020. The centre piece of the plan is a requirement for carbon capture and storage to be built into all new coal-fired power plants and oil sands facilities beginning in 2012, and be fully operating by 2018.

The Canadian electricity industry and Epcor support the federal goals and have already made substantial investments that reduce the carbon intensity of power generation. But in our view the plan underestimates the scale, scope, time and cost required to achieve its objectives.

There are two key challenges. First, it demands that industry go from a standing start to full implementation of a technology no one in the world has commercially deployed. The second challenge is the cost. Best estimates put the cost of electricity from one of the most promising clean power technologies at nearly five times the cost of a new natural gas plant.

Unless we find a way to close the gap by flowing increased costs through to consumers, the short-run effect will be to meet the growing demand for power with natural gas. This will, in turn, put pressure on Canada's dwindling natural gas supply, drive up electricity and home heating prices, and make Canada more dependent on energy imports. In our eagerness to reach a cleaner future by legislating aggressive targets we'll have traded one problem for another.

These issues do not mean the federal plan is without merit. From an environmental perspective, the plan gets the most important points right. The best way to permanently reduce emissions is through breakthrough technologies such as carbon capture and storage and intensity-based targets.

As a nation we can't solely use conservation and efficiency measures to diet our way to zero emissions. Changing light bulbs and driving more fuel-efficient cars are worthy activities, but population growth will quickly overwhelm these incremental gains. Meanwhile the efficiency paradox suggests that consumers will continue to use the economic benefits from efficiency gains to support increased consumption. National forecasts call for at least 14,000 megawatts of new power generation by 2020 to meet demand growth.

The key is not to tinker at the margins, but to invest in transformative technology. The electricity industry has already made large strides to reduce the carbon intensity of power generation. Renewables are growing rapidly, and investments have been made in cleaner power sources. The Genesee 3 power plant opened by Epcor in 2005 is the cleanest coal-fired generator in the country, and its greenhouse gas emissions are 18 to 24 per cent lower than those from recently retired facilities.

The next step is to replace today's facilities with near-zero emission power generation, allowing Canada's economy and population to grow without increasing emissions. Through partnerships such as the Canadian Clean Power Coalition (CCPC), the Integrated Carbon Dioxide Network (ICO2N) and the Alberta Saline Aquifer Project (ASAP), industry and governments are working together to develop the power plants, carbon pipelines and long-term carbon storage to make this a reality.

The CCPC's flagship project is the design and engineering of an Integrated Gasification Combined Cycle (IGCC) power plant at Epcor's Genesee, Alta., site. The work is backed by $11-million investments from each of Natural Resources Canada, the Alberta Energy Research Institute and Epcor. The plant would transform coal into a synthesis gas composed mainly of hydrogen, and use the gas for electricity production. It would also allow the capture of both carbon dioxide and air pollutants.

Worldwide, there are only four IGCC facilities operating and producing electricity. None have carbon capture and sequestration. Likewise, there is limited experience with carbon pipelines and underground storage, but not at the scale and real-time reliability required by large utility operations. Putting all three pieces together is an extraordinary engineering challenge, and one that will also require the resolution of regulatory and permitting issues related to the storage of carbon dioxide.

Best estimates suggest commercial operation of the first facilities could be achieved by 2015, but a great deal of uncertainty remains. We will need to test these early demonstration facilities and ensure that utility-scale operations are capable of delivering the reliable performance required to keep the lights on.

Epcor remains optimistic that time and effort will close the technical gaps, and we will continue to invest in these technologies. We also recognize that the new federal policy helps industry accelerate design and engineering through precertified investment credits that can be used as offsets against emission targets. But we caution that the scale, cost and timeline required to meet the federal targets is not well understood.

Furthermore, Canada's aggressive greenhouse gas reduction goals need to be synchronized with those of its major trading partners. Failing that, rising energy input costs could lead to the export of Canadian manufacturing jobs to lower-cost jurisdictions and an increase in Canadian carbon emissions from the prolonged and increased combustion of natural gas.

If Canadians aspire to a cleaner environment with lower emissions we should not wait for the market to close the gap. Instead, we should bridge the gap by creating a mechanism to flow the costs of cleaner electricity through to consumers today. The cost should ultimately be borne by each of us as citizens and consumers of power because we will each reap the environmental benefits. The price signal, carbon tax or fee would be a further incentive to conservation.

One of Canada's strengths is its diversity of fuels, which enhances our energy security, the reliability of our power supplies and price stability. Building on that strength, we believe that all fuels - including hydro, coal, natural gas, nuclear and renewables - have an important role to play in meeting the energy needs of the future.