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Transcript of HO Binh Geoengineering
Binh, Ho Thai – s4281168
1 | P a g e TIMS7328 – Strategies for Business Sustainability and Innovation – Individual Assignment
Geo-Engineering in Australia:
Carbon Capture and Storage
Binh, Ho Thai
S4281168
Binh, Ho Thai – s4281168
2 | P a g e TIMS7328 – Strategies for Business Sustainability and Innovation – Individual Assignment
Contents Introduction ............................................................................................................................................ 3
Geo-engineering in Australia .................................................................................................................. 3
Definition of Geo-engineering ............................................................................................................ 3
Importance of Carbon Capture and Storage (CCS) ............................................................................. 3
Carbon Capture and Storage technologies ............................................................................................. 5
Carbon Capture ................................................................................................................................... 5
Carbon Storage ................................................................................................................................... 6
Market Readiness of CCS ........................................................................................................................ 7
Scenario Analysis ..................................................................................................................................... 9
High emission scenario ....................................................................................................................... 9
Low emission scenario ...................................................................................................................... 11
Business Implication ............................................................................................................................. 16
Reference .............................................................................................................................................. 20
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Introduction Climate change is the world’s today most pressing issue which results in a quick changing
social, business and legislative environment. Many technological solutions have been introduced in
order to fight against climate change at different stages of market readiness. Among geo-
engineering alternatives designed to lessen the impact of climate changes, Carbon Capture and
Storage (CCS) is considered to deliver great emission reduction at the same time energy security
from fossil-fuel.
This report will briefly review the current stages of market readiness of the technology. After
that, possible future macro-environment uncertainties in different scenarios will be analysed in
order to project different future development paths of CCS. Finally, business strategies will be
proposed so that the energy sector could effectively response to technological development and
climate-induced changes in macro-environment.
Geo-engineering in Australia
Definition of Geo-engineering Geo-engineering is the deliberate intervention to Earth's climatic system with the aim of
reducing effect of climate change. There are two major approaches for geo-engineering: Carbon
Dioxide Removal which attempts to remove greenhouse gas from the atmosphere and Solar
Radiation Management which tries to reflect some of sunlight away from the planet in order to cool
it (White 2001). The practices range from as simple and inexpensive as painting house's roof white to
reflect sunlight or as radical and unproven as fertilizing algal in ocean to absorb CO2 (Paull, 2009).
Despite of all the benefits proposed by supporters, Geo-engineering is widely criticized by
public and academia. Firstly, it all comes down to our imperfect understanding of how climate
behaves in respond to geo-engineering especially when most of interventions are still not proven to
be beneficial in longer time scale. Victor and co-author (2013) concerned that quick and cheap
engineering messing around with the eco-system which is already stressed by greenhouse gases
could end up badly. Secondly, they also expressed a major view that geo-engineering is but a
distraction from the urgent effort of greenhouse gases reduction before climate gets out of hand.
Among all the techniques of geo-engineering, Carbon Capture and Storage promises a safer
approach to ensure major reduction in industrial scales.
Importance of Carbon Capture and Storage (CCS) According to Energy in Australia 2011 report (Cuevas-Cubria et al. 2011), for the period
2008-2009, 77% electricity was generated using coal for its abundant reserves in the country.
Although power generation from coal has been declining steadily since 2009, a study from University
of Queensland found that coal power will continue to be a significant part of the country power
generation mix for at least another 20 years (Eastley 2013) despite all the determination to reduce
greenhouse gases set out by Australian government. The reason is firstly Australian economy is
heavily dependent on one energy source-coal; it will take a lot of time for a major transition to a
cleaner economy. Secondly, until renewable alternatives mature, coal will remain the only
economically feasible and reliable mean for base-load power. As a result, it is undeniable that
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renewable energy will not replace coal power in a foreseeable future. Thus reducing emission from
coal power has to be dealt with simultaneously with raising contribution of cleaner sources.
On the other hand, coal is responsible for 75% of Australia's greenhouse gases from energy
(Department of Climate Change and Energy Efficiency, 2013). Therefore, any major advancement in
reducing coal emissions will contribute significantly to the national emission target or 80% reduction
by 2050.
To address such problem, CCS promises a sound solution for generating power from coal at
the same time mitigating emission issue. CCS is the process of removing carbon dioxide from flue
gases typically from fossil-fuel power station then storing them in underground reservoir. CCS
technologies are claimed by developers to remove 80% to 90% of CO2 from flue gases under certain
conditions (D’Alessandro, Smit and Jeffrey, 2010). Despite its current limitation on efficiency and
power consumption, CCS is the only technology available for maintaining power security and
achieving significant reduction in CO2 in medium-term future. Especially, CCS removes CO2 from the
sources rather than intervening in eco-system, hence, can be considered safer than other large-scale
geo-engineering alternatives.
From life cycle assessment of Kadam (2002), the traditional process of generating energy
from coal start from Coal Production to Coal Transports and ends at Coal firing which produces
electricity and CO2. Uncaptured by-product CO2 results in external costs for environment and
society.
Successful deployment of CCS will isolate greatly impact of the energy production to
external environment.
Coal
Production
Coal
Transport
CO2
Electricity
Coal Firing
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Carbon Capture and Storage technologies
Carbon Capture There are 3 major CCS technologies under development which are at different stages of
market readiness and have different implications.
Post combustion capture (PCC): this technology removes CO2 after combustion of fossil
fuel. CO2 is often scrubbed from flue gases using chemically active agents (solvents) which are then
regenerated by heat to release CO2 for collection. The major challenge for this technique is that CO2
concentration in flue gases is low (about 15%) and has to be separated from other component gases
such as N2 and SO2. Besides, degradation of solvents because of by-products also contributes to
efficiency reduction and increased costs. Especially, the current energy penalty for the PCC facility is
still high, could account for 25%-40% of energy generated by a power plant for solvent regeneration
and CO2 compression.
On the other hand, this technology is commercially mature and well-understood and has
already been used in other industrial applications. PPC can be economically retrofitted into existing
power plants or provided as a feature for new ones. There have already been several pilot-scale
demonstrations in Australia and overseas at Lake Munmoral (New South Wales) by Delta Electricity,
Tarong power station (Queensland) by Stanwell Power, Loy Yang Power Station (Victoria). The
demonstrations' results are being used for technology selection for commercial-scale PCC, assessing
performance and trial of new solvents and configurations.
There have been clear R&D objectives by 2015 such as development of new solvents, reduce
thermal energy consumption to 2Gj/tonne CO2, efficiency loss of less than 5% at 90% recovery
(Wall, 2007).
Coal
Production
Coal
Transport
CO2
Electricity
Coal Firing
Carbon
Capture
Carbon
Storage
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Pre-combustion capture (IGCC-CCS) involves Integrated Gasification Combined Cycle (IGCC)
which uses gasifier to turn coal and other carbon based fuels into synthesis gases (CO, CO2, H2). A
water-gas shift reactor converse CO to CO2 and H2. CO2 is then removed prior to combustion and
elevated to high pressure. Removal and high pressure of CO2 reduce CCS energy penalty to 10% to
16% which is more efficient than PCC. Some configurations of this technology can be suited for low
rank coal which is commonly used in Victoria. Besides, the process also generates hydrogen-rich fuel
which can be used as chemical feedstock in fuel cell or power generation.
However, this technology can't be retrofitted to existing power plants. Moreover,
components for such technology are not readily available from suppliers. The coal reaction
mechanism itself is reasonably developed but far from complete. There has not been any IGCC-CCS
demonstration in Australia but there are a few commercial IGCC plan with CCS in operation in U.S
(FutureGen Plant) and China (GreenGen).
Oxyfuel combustion: generates energy from combustion of fossil fuel in oxygen and
recycled exhaust gases rather than air. The process produces concentrated stream of CO2 rich gases
to be cooled and compressed in subsequent processes. Similar technologies have been used in glass
and steel industries for a long time. However, because combusting in pure oxygen would get boiler
hot enough to melt, flue gases are recycled to maintain temperature at acceptable level. The
technology is the basis for Zero Emission Cycle plants (Wall, 2007). Oxyfuel combustion is being
demonstrated at the scale of one hundredth of the size of Callide project. The technology is said to
be retrofitted to existing coal-fired power stations, however, it requires redesign of turbines. As the
result, new installation is more economical than retrofitting existing plans.
Carbon Storage Progressing along with Carbon Capture, Carbon Storage technologies have to be proven
options by the time Carbon Capture is applied on industrial scale. Although methods of estimating
actual global storage capacity are controversial, it appears to be sufficient for decades to come.
Carbon Storage has been widely tested in many countries with many aspects being well-understood
(Jenkins et al. 2011). Some of projects have made to industrial-scale experiments which will validate
concern of long-term leakage, engineering feasibility and scale of deployment.
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Source: IEA and NEA (2010)
Market Readiness of CCS CCS has not yet been demonstrated on commercial-scale in Australia, until realistic
demonstration plants are in operation, costs of CCS will remain uncertain (NEA an IEA, 2010). There
has been a road map for CCS to be available on large scale by 2015 earliest (Wagner and Foster
2011). The two authors emphasized that inability to deploy CCS rapidly on large scale will make the
technology lose its competitive advantages against low emission alternatives as Australia moves
towards renewable. Currently, CCS is receiving several Australian Government funding for its
demonstration (Calder, 2012):
- CCS Flagship program ($1.7b)
- National Low Emissions Coal Initiative ($370 million)
- National CO2 Infrastructure Plan ($61m)
- Global CCS Institute ($315m)
CCS demonstration has been deployed at various sites at different stages of readiness
Projects CCS Demonstration Stages
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Callide Oxyfuel Capture Advanced
Tarong Capture Operational
Munmorah Capture Completed
H3 Capture Completed
Hazelwood Capture Operational
UNO Mk3 Capture Operational
Loy Yang Capture Operational
Mulgrave Capture Completed
Wandoan Storage Feasibility
CabonNet Storage Hub Feasibility
Otway Storage Operational
South West Hub Storage Hub Feasibility
Gordon Storage Advanced
(Hardistym et al 2011)
CCS still has to overcome its weakness of energy penalties and costs. Firstly, CCS greatly
impairs performance of power plants, to capture CO2, more coal must be burned to compensate for
additional energy requirement. CCS is expected to increase production cost for stationary power by
between 39% and 78% depending on power generation technologies, however, the penalty is only
about 1% for natural gas plants as the technology inherently capture CO2 in its design (Hardistym et
al. 2011). CCS cost is also expected to fall when the technology is more widely deployed worldwide.
Cost for CCS retrofit on existing coal power station is predicted to be about $71 to $90/ t
CO2e for Preferred scenario (shared infrastructure, low estimate of costs and optimal reservoir
performance) and about $120 to $145 for Least-preferred scenario (dedicated infrastructure, high
estimate of cost and poor reservoir performance). Among these aggregated costs, 80% is for
capture, 10% is for transport and 10% for sequestration. Sequestration cost is the most uncertain
cost component (Hardistym et al.2011).
Taking into account the social costs of carbon emission is about $50-$100/t CO2e, CCS for
natural gas plants and retrofitted CCS under preferred scenario settings can be considered economic
in society’s perspective.
However, there are many criticisms about feasibility of CCS Rochon (2008) criticized CCS for
not being feasibly deployed before 2030 while the global greenhouse emission has to start falling
after 2015. The criticisms are also about energy waste, high electricity price and unclear risks on
health, ecosystems and climate. Tsouris and Aaron (2010) shared the same opinion that instead of
spending astronomical amount in the CCS, such cost would be avoided in the first place by large-
scale implementation of renewable sources which emit nothing at all. Moreover, the same amount
investing in wind-turbine would save much of carbon price over its lifetime.
On the other hand, Gluyas and Daniels (2010) believe it best to develop CCS and renewable
side-by-side as complementary rather than either/or selection. They argued that the shift from fossil
energy will require a transition period instead of disruptively scaling up solar and wind energy at the
same time total removal of fossil energy. Pacala and Socolow (2004) asserted that no single
technology is capable of delivering all necessary reduction but by many available technologies
simultaneously.
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Scenario Analysis The scenario analysis will be based on modelling outcome of Graham (et al., 2008) in order
to discuss different future possibility for CCS. The analysis took into account not only policy settings
at 2007 but also Australia's first period of Kyoto commitment and emission trading scheme which
was introduced in 2012. Thus, the report can be considered a relevant proxy to current development
of energy market.
This paper will employ High Emission Scenario and Low Emission Scenario as two extreme
situations in order to define a range of future possibilities that CCS will face. Future actual outcome
is predicted to be within the range depending occurrences and interplay of future critical events
(Courtney, 1997).
High emission scenario Business As Usual (BAU) or unconstrained scenario: the modelling for this scenario assumed
policy settings at 2007 including: Greenhouse Gas Abatement Scheme (NGACS), Victorian Renewable
Energy Target (VRET), NSW Renewable Energy Target (NRET), Photovoltaic Rebate Program (PVRP)
and Queensland's 13% natural gas target. However, it didn't considered Clean Energy Future and
other legislations by the ALP after 2007. As a result, this could be considered the future scenario
when future events have negating effect on policies setting progress made after 2007.
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Events Impacts
Political Tony Abbott promises to overthrown the Emission Trading Scheme if they are to win the election. Although LNP will face a lot of opposition about such approach, the current politic view of LNP (Berill, 2012) will likely adversely affect the transition to clean energy:
- Little acceptance of Global Warming Science - No Renewable Energy (RE) and Energy Efficiency (EE) target - No GHG target - Little consideration on EE - CCS is not mentioned
Cheap carbon price will damage competitiveness of CCS and other renewable energy against coals without CCS. Uncertainty and revised carbon tax and projection of future carbon price adds more uncertainty and cost to CCS
Economical Assuming that there will be no change in current climate policies, the effect of such policy will be very uncertain and add more risk to the future of clean energy as well as CCS. The transition from carbon tax to ETS will be commenced by 2015 with one-way link to EU ETS and full link to EU ETS by 2018. From 2015 onward, Carbon permit price will be directly influenced by EU carbon market. However, with the recent crash in EU ETS market due to large oversupply of permit (Carrington, 2013), the future price of Australia carbon market will rely on how Europe resolves its problem. There has been a call to revise the Treasury's forecast on carbon price and its impact to recent developments.
Long-term resource demand in Asia resulted in 42.3% increase in investment in coal project. Recovery of the world economy (Queensland Government, 2012).
A surge in coal demand will attract more private investment and government subsidies. As a result, coal will remain more abundant and cheap.
Social Growing population without significant energy efficiency improvement. Pressure on energy supply
Technological CCS will not be available before 2015 (Wall, 2008) The feasibility of CCS is questionable. The $188million CCS project ZeroGen failed, the implemented CCS technology proved to be too expensive and had high energy penalty.
In short-term to medium there will not be any affordable CCS. Chances that other CCS projects may also fail.
Environmental Negligible effect.
Legal - Coal industry is heavily subsidized in various forms: Coal industry is heavily subsidized: over the past 5 years, Australian government has spent over $6.92 billion subsidies in forms of infrastructure projects compared to about $913 million for renewable energy and energy efficiency (Berill, 2012). Another $13 billion is projected to be spent in the future because of rapid expansion for export purpose. Many resources have already been committed and these projects will not likely to be stopped in the future as it will damage long-term government’s and investors’ revenue.
Increasing dependence on coal will make opportunity cost of foregoing committed infrastructures in order to switch to new technologies more and more expensive.
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The overall result of these critical events is either an absence of explicit carbon price or not
effective enough carbon price to tip the competitiveness of CCS (Graham, 2008). There would be no
economic incentive for adopting more expensive new power plants with CCS features or to retrofit
CCS to existing power plants. CCS will not be financially feasible if an adequate market mechanism is
not in place for a high enough price on emission.
This scenario is characterized by the dominance of pulverized coal-fired power plants
throughout the time horizon. The proportion of electricity generated from coal will rapidly expand to
play a larger role in the electricity mix. In longer-term, after 2030 the current pulverized coal-fired
power plants are predicted not to expand anymore, more advanced brown coal IGCC will be
deployed in order to meet increasing electricity demand.
Source: Graham, Reedman and Coombes, 2008
This scenario is characterized by the dominance of pulverized coal-fired power plants
throughout the time horizon. The proportion of electricity generated from coal will rapidly expand to
play a larger role in the electricity mix. In longer-term, after 2030 the current pulverized coal-fired
power plants are predicted not to expand anymore, more advanced brown coal IGCC will be
deployed in order to meet increasing electricity demand. Electricity sector emissions are projected
to rise from around 200Mt in 2005 to around 450Mt by 2050.
Low emission scenario This scenario assumes commitment of the government to reduce carbon emission at more
substantial level with an introduction of explicit and effective carbon price. In this case, CCS can be
commercialized at different extents and different time frame. If CCS is possible, there is only one
available choice for Carbon Storage which is geological storage in deep saline formations. However,
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choices of technology for Carbon Capture depend largely on levels of possible emission reduction
target and future market conditions.
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Events Impacts
Political Carbon tax has been implemented by the Australian Prime Minister Julia Gillard from July 2012 and there is a road map for Emission Trading Scheme for the period 2015 onward. The government may make conditional target of 80% of emission reduction by 2050 binding.
Create opportunity costs for big polluters to reduce pollution and incentives to invest in clean energy and CCS. Stop construction of new power plants.
Economical There has been a trend of decreasing electricity demand since 2011. Electricity generated by black coal has decreased by about 17% since 2008; there is a slight decrease in brown coal and considerable increase in gas generated electricity (Department of Climate Change and Energy Efficiency, 2012). The trend will likely to continue thanks to improved energy efficiency, carbon pricing and increasing supply for natural gas.
Continue the trend of reducing generation capacity of existing coal power pants.
Financial Institutions who market themselves as socially responsible will be reluctant in financing ‘dirty’ coal projects due to reputational risk and public objections.
Limit funding sources for conventional coal projects. Financing for coal projects is made expensive
Possible future economic recessions and slow recovery of world economy Lower demand for coal mining and export
Further appreciation of Australia dollars
Tighter emission regulations from overseas, especially in large market like China
Social Increasing public concern about climate changes Pressure on political and legal changes
Technological CCS is receiving large government funding support (about $2.5 billion) and is making significant progress on large scale pilot and medium scale demonstration (Department of Mines and Petroleum,WA, 2012). CCS technologies will be matured quicker for increasing investment in R&D and commercial-scale demonstrations as a result of more commitment from Political and Legal factors.
Coal with CCS will be more competitive than coals considering carbon price effect.
Environmental Negligible effect.
Legal Currently, CCS is receiving funding support from Australian Government (Department of Mines and Petroleum,WA, 2012):
- CCS Flagships program: $1.7 billion - National Low Emissions coal Initiative: $370 million - National CO2 infrastructure Plan: $61 million - Global CCS Institute ($315 million)
Accelerate time to market of CCS Make coal and natural with CCS more available and competitive compared to coal and natural gas without CCS
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The funding is expected to increase as the consequence of future commitment for 80% emission reduction by 2050 target. In order to achieve deeper emission cut set out by the target, Hohne (et al. 2013) suggested significant changes in legislative environment will be required including ones that affect development of CCS: - $1.7 billion for construction and demonstration of large-scale of CCS - Construction of coal power plants will be stopped in the future - 2000 MW brown coal will be replaced by highly efficient gas power plant - Clean Energy Finance Cooperation will invest $10 billion in innovative clean energy
and technologies.
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This paper will employ result from Graham (et al., 2008) model under assumption of carbon
target of 60% under 1990 baseline in 2050 to analyse the outcomes of this scenario. Even though
there is a slight different between 60% under 1990 baseline target in 2050 and the current 80%
under 2010 target in 2050, the results can be still employed as a proxy to well illustrate the
outcomes of the later.
From the modelling of Graham (et al., 2008), the characteristic of this scenario is the uptake
of CCS at different levels varying on price of natural gas in medium-term and long-term. In short-
term, CCS will not be available. Natural gas price will also contribute considerable effect on
development of CCS.
2013-2020 2020-2030 2030-2050
Abundant and cheap natural gas
According to objectives of CCS development, CCS will not be available before 2015. Moreover, there has not been any commercial-scale demonstration.
Investment in Natural Gas with Combined Cycle (NGCC) without CCS will immediately stop. 2020: NGCC with CCS will dominate 2024-2029: Black and brown coal with CCS will be employed
NGCC with CCS will be dominant Coal with CCS will be reduced
Natural gas becomes expensive
2020: black and brown coal and NGCC with CCS will all increase. NG will be initially dominant but coal will catch up and exceed when NG becomes more expensive than coal
Coal with full CCS will be equipped for both coal and NG plants
Source: Graham, Reedman and Coombes, 2008
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Business Implication Base on Hart’s (2011) Sustainable Value Framework, CCS and fossil dependant energy sector can
be considered as a today Typical Corporate Portfolio which focuses on existing elements and
immediate time horizon rather than more disruptive revolutionary approach to capture future
opportunities. This approach is characterized by incremental and continuous improvements which
rationalize industry (Heart, 2011). There are typically two strategies for immediate focus:
Pollution Prevention: this strategy is driven by cost and risk reduction incentives. The energy sector
has been shifting towards efficiency improvement by construction of more efficient coal and natural
gas power plants. This shift is helping the sector to comply with strengthening legislative and public
pressure. Efficiency improvement and emission reduction are helping the sector to reduce cost and
exposure from the current carbon tax. Although CCS is designed for deep emission reduction in the
future, it only provides incremental improvement to the existing fossil energy business instead of
fundamental shift to more sustainable zero-emission future like non-hydro renewable energy does.
Thus, CCS may lie well within the boundary of immediate focus approach.
Product Stewardship: this strategy integrates stakeholders’ concern in to the business’ process. As
carbon emission and climate change consequences become unequivocal, energy sector has to
consider environmental consequences on its stakeholders from its carbon emission in balance with
their future energy consumption demand. As a result, the sector has to assume responsibility for the
product’s entire life cycle (Hart, 1997). CCS is regarded as a way to effectively isolate externality of
fossil energy production life cycle from the environment.
Sustainable Value Framework
Hart (2010) suggested that an unbalanced portfolio indicates missed opportunity and
vulnerability. The Typical Corporate Portfolio suggests good position for today but vulnerabilities for
tomorrow. Energy sector needs to extent itself to the 2 other quadrants of the framework.
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With the same opinion, Metzger (2012) asserted that many businesses now considered
‘mitigation’ as emission reduction rather than building competencies for future adaptation.
Considering the results of scenarios analysis, the 2 extreme forecasts present significantly different
energy contribution landscapes. The possible changes in composition of energy mix alone indicate
considerable risk for any business decision today. Stay on the track of Business As Usual without
adaptation capacities will expose the business to the risk of any critical events that may happen in
Low Emission Scenario. Especially in the case of energy sector, heavy capital commitment and long-
term horizon of investment weaken agility of the sectors to response to extreme events. The
scenario model of Graham (et al. 2008) assumed a gradual and orderly shift from BAU to Low
Emission Scenario resulted from long-term government commitment without taking into account
other disruptive critical events. For example, today an energy corporation locks their investment
solely in coal without CCS today with assumption of BAU. If in 2015, the carbon market soars at the
same time domestic electricity demand and overseas coal demand drops, the business will not only
bear all the burden of carbon prices but also revenue losses from overseas demand. In fact, many
low emission scenario critical events have already taken root and possibly will possibly gain
momentum in near future. As a result, shifting corporate strategy toward the upper quadrants will
help the sectors to adapt and build up resilience against future unfavourable events:
Clean technology: this strategy builds up future shareholders’ value by innovation and repositioning.
By diversifying the sector’s portfolio towards clean energy, its position will be less vulnerable to legal
and economic shocks happening in Low Emission Scenario. As a result, these risks will be
incorporated in increasing cost of funding for the sectors, especially when major financial
institutions market themselves as sustainable and socially responsible. By making CCS feasible, the
sector can maximize its shareholder’s value in several ways:
- Energy sector will emit less thus become less susceptible to any future movement of carbon
price.
- If the EU carbon market recovers quickly enough and CCS can be rapidly deployed to reach
optimal efficiency, there is an immerse business opportunity for domestic carbon permits
sale to European market.
- Major importers of Australia’s coal are tightening regulatory framework for coal sector near
future. China has recently announced its plan for energy consumption to peak at 4 billion
tonnes of coal equivalent within 5 years (Sussams et al., 2013). The overseas legislative
changes will threaten demand for Australia coal as well as profitability of shareholders’
investment. Instead of considering such development as a risk, the sector should also exploit
the climate-induced demand (Porter and Reinhardt, 2007). Successful deployment of CCS
also represent several opportunities:
o Technology transfer to help the importers to solve their problem of carbon emission.
Thus they can rely on coal for cleaner energy for population and economic growth.
o New revenue stream from technology transfer and construction of clean coal
infrastructure overseas will compensate the falling trend in coal demand. Australian
coal reserves owned by listed companies are equivalent to 15-25% of the global coal
carbon budget to 2050 while currently Australia only produces 11% of the world’s
annual coal output (Sussams et al., 2013).
o Maintain overseas demand for Australia’s coal.
o Continuance of large coal export revenue.
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o World-wide availability of CCS drives down construction and electricity price.
Despite of all significant advantages of CCS, a clean energy portfolio with CCS may not be
well diversified enough as there is also a risk that the technology will not be available at all. Failure in
deployment of CCS represents a large loss of shareholder value from fruitless heavy investment for
R&D. Gaining more share from Renewable Energy would position the business better. In addition, all
available technologies would be needed to achieve significant emission reduction (Pacala and
Socolow, 2004). On top of that, because of long-term capital intensive nature of the sector, having
limited technological and business options will leave itself vulnerable in dealing with simultaneous
extreme events. The sector can’t just come up with a new technology or solution as an immediate
response. Australian airline industry which shares the same characteristic has heavily suffered when
extreme weather events, rising fuel price and increasing competition happened all at once (Qantas,
2011).
Hart (2010) suggested that a left skewed portfolio indicates inward focus which may ignore
important perspective of external stakeholders. CCS has been criticized for being an improper
solution for carbon reduction. Firstly, CCS only minimizes emission from coal and natural gas instead
of the whole coal energy supply chain including mining and transportation. Secondly, storing carbon
underground indefinitely represents intergenerational risk that none could hold responsible for.
Moreover, the sector is also responsible for externalities on other climate-sensitive sectors like
agriculture and tourism. In order to achieve total sustainable value, the energy sector has to also
spread toward the upper-right quadrant of the model which aims to meet external stakeholders’
demand in the future.
Base of the Pyramid: this strategy directs corporate vision towards addressing social and
environmental problem.
- Voluntary disclosure of carbon emission: business tends to avoid public disclosure of
potential risk. However, reporting also opens a communication avenue with stakeholders so
that the sector could demonstrate commitment and accurately position itself. The reports
also serve as an accountability mechanism which forces the sector to formulate strategies
around plan-do-check-act cycle. This also applies to CCS development. Currently, CCS
projects also involve participations of public by disclosing their results.
- Active participation in policy making: any investment in new technologies always faces
uncertainty of future market, the investment in CCS or any RE may not be compensated
enough if carbon price is too low. However, the shift towards cleaner energy is inevitable.
Instead of being a bystander who resists or suffers the impact of such shift, the sector can
actively participate in policy-making progress to ensure future profitability of today’s
investment (Hoffman, 2007). By becoming leaders of the movement, the sector will not only
earn public support but also can advise on shaping future regulations towards
recommendations in Low Emission Scenario in order to reap larger rewards for investing in
clean technologies.
- Collaboration with other sectors: instead of causing climate change burden of other sectors,
with IGCC-CCS, power generation can be integrated with agriculture, transportation and
chemical industries to not only reduce waste emissions but also relieve resource burden as a
whole. The diagram depicts the process of IGCC-CCS. The system will take by-products of
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19 | P a g e TIMS7328 – Strategies for Business Sustainability and Innovation – Individual Assignment
agriculture (biomass) and industrial and household wastes together with coal as input. The
outputs of the process are: hydrogen for transportation fuel, feedstock for chemical
industry, solid waste as components for building materials and captured carbon dioxide.
However, in order to deploy such an integrated supply chain of several industry, it will
require large infrastructure investment and standardization from various sectors
simultaneously in long-term.
Adapted from Diniz Da Costa, Prasad, Pagan (2004)
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