Encouraging Deployment of CCUS –

Asian Development Bank’s Activities

Ashok Bhargava Asian Development Bank

Beijing, 19 September 2011

IEA –MOST Workshop on Carbon

Capture Utilization and Storage

Asian Development Bank – An Introduction

ADB – A Regional Development Partner in Low-Carbon Growth

Focusing on reducing poverty and improving quality of life in Asia and the Pacific

founded in 1966 and Headquarters in Manila

67 Member countries and 27 field offices

with triple “A” credit rating, mobilizing low-cost funds for development

In 2010, it approved $17.5 billion in financing operations

ADB in People’s Republic of China

ADB – PRC

partnership

PRC became ADB member country in 1986and is one of the largest borrowers

ADB cumulative lending in the past 25 yearshave reached more than $ 23 billion

Average annual lending is about $1.5 billion

The energy sector is one of the prioritysectors for ADB operations

In energy sector the cumulative lending hasreached more than $ 4billion

Why CCS is needed in developing countries?

High growth trajectory

for fossil fuel,

especially carbon

intensive coal

Without CCS, the

CO2 emissions are

unlikely to peak out

Large capacity addition, especially in next 10

– 15 years, with high proportion of coal-

based plants

Rapidly rising coal consumption has wider

implications for the global climate change

mitigation efforts

CCS is the only near commercial technology

to decouple CO2 emissions from fossil fuel

consumption

Why CCS is needed in developing countries?

High growth trajectory

for fossil fuel,

especially carbon

intensive coal

Without CCS, the

CO2 emissions are

unlikely to peak out

Large capacity addition, especially in next 10

– 15 years, with high proportion of coal-

based plants

Rapidly rising coal consumption has wider

implications for the global climate change

mitigation efforts

CCS is the only near commercial technology

to decouple CO2 emissions from fossil fuel

consumption

But ……CCS is not a priority in developing countries

“wait and see”

approach on CCS

No incentives or

supporting policies

for CCS

Reliance on energy efficiency and renewable

to lower carbon intensity; CCS is not included

in the low-carbon technology portfolio

No targets, programs or incentives for CCS,

which is delaying its demonstration and

deployment

Slower uptake of CCS in developed countries

is also raising concerns in developing

countries

Challenges in CCS Financing

High upfront project

development cost

Complex multi-

sectoral set up

Regulatory risks

and liabilities

Perceived risks

Expensive and time intensive storage

characterization

The whole CCS chain will involve multiple

agencies to collaborate over a long period

Evolving regulatory framework with

uncertainties; potential long-term liabilities

High perceived risks due to unfamiliarity

Impact of High Capital Cost and Energy Penalty

CCS is

expensive and

energy penalty

is high

Using captured

CO2 for EOR can

marginally lower

the cost impact

But ……………..

Base

Cost

24%

200

400

600

800

01/10/2010

400 MW IGCC

Base

Cost

65%

01/10/2010

600 MW SC

Co

st

- $

millio

n

30

60

90

120

Ele

ctr

icit

y T

arif

f $

/M

Wh

51

90

73

112

With CCS

Without CCS

53%

80%

with CCS coal-fired power plants are financially

unviable with the existing tariff.

What if …………….

Additional

capital cost and

energy penalty

are

compensated

Concessionalities

provided to bring

“with CCS” tariff

to within 20% of

the existing level

Base

Cost

24%

200

400

600

800

07/10/2010

400 MW IGCC

Base

Cost

65%

07/10/2010

600 MW SC

Co

st

- $

millio

n

30

60

90

120

Ele

ctr

icit

y T

arif

f $

/M

Wh

51

677375

With CCS

Without CCS

$226 M $226 M

CCS demonstration will require international

support in developing countries

Cost of electricity comparisons

“with CCS” power is

competitive with

other low-carbon

technologies

Electricity Tariff and Capital Cost Comparison in PRC

0.05

0.19 $/kWh

0.09 $/kWh

0.11 $/kWh

0.08 $/kWh

0

0.5

1

1.5

2

2.5

3

3.5

Wind IGCC + CCS SC+CCS Solar Std Coal

Co

st

($m

illi

on

/MW

)

0

0.05

0.1

0.15

0.2

Tarif

f ($

/kW

h)

Cost ($M/MW) Std Coal tariff (ct $/kWh)

Comparing a coal-fired “with CCS” to a “without

CCS” plant is unfair

Why Renewable and CCS …. not Renewable or CCS

Renewable and CCS both are needed

Large renewable capacity addition and energy efficiency improvements alone are not sufficient

1 GW

Wind

3000

GWh

1000

2000

3000

40001 GW

Coal-

fired

power

plant

Ele

ctr

icit

y g

en

era

ted

-

GW

h

1GW

Solar

2200

GWh

5000

6000

6200

GWh

Each GW of coal fired power plant “without CCS”

emit more CO2 than avoided by a GW each of solar

and wind combined

Financing CCS Demonstration in Developed

Countries - Role of Public Financing

CCS demonstration is being rolled out in developed countries

Multibillion dollar public funding needed to kick start CCS demonstration

No such funding mechanism available in developing countries

.

Source: IEA/CSLF Report to the Muskoka 2010 G8 summit

ADB approach to support CCS in Developing

Countries

Established a CCS dedicated fund

Formed partnerships

Prioritized the People’s Republic of China

. The CCS Fund with $21.5 million contribution

from Global CCS Institute is operational

CCS partnership with the CCI, stakeholder in

the CSLF, Member - Global CCS Institute,

$1.25 million studies with NDRC Department

of Climate Change and Greengen Company

completed on the CCS roadmap; a pilot CCS

project is being assessed, a natural gas

project for possible CCS ready application is in

program.

Financing CCS in Developing Countries – ADB

Report (TA 7278-REG)

ADB submitted a report to CSLF on financing CCS in emerging economies

Key recommendation -set up $5 billion CCS dedicated fund for developing countries

It will - support storage characterization, FEED studies and nearly offset incremental CapEx and OpEx.

.

Strategic Analysis and Capacity Development in

PRC– TA 7286 - PRC

ADB completed the TA with NDRC Department of Climate Change and Greengen

Report identified key role of CCS in CO2 emission reduction but identified challenges

It called for more innovative CCS and suitable financing mechanism

. Key conclusions and recommendations

Both post and pre-combustion capture should

be considered for demonstration

Current high capital cost of IGCC plants will

reduce sharply when installed capacity reaches

5 GW and higher

EOR may provide early opportunities but cross

sectoral cooperation is proving difficult

Pilot regulatory framework modeled on

international best practices can guide

demonstration projects

Near-term CCS activities (2011 – 2013) in the PRC

Expand capacity development to new area

Strengthen regulatory and policy capacity

Prepare a demonstration project for investment

. $1.8 million Capacity development TA with

Datang International for a natural gas power

plant (2011)

Potential capacity development TA for an oxy

fuel project (2012)

Policy and advisory TA for NDRC Department

of Climate Change

FEED studies for potential project (2012 –

2013)

Looking ahead …..

Preferred financing mechanism for CCS in developing countries

Strengthen ADB’s CCS Fund

Support capacity development and policy formulation

. ADB will continue to work with partners in the

CCUS action group to identify and establish a

CCS financing mechanism

Seek more near-term contributions to support

project development activities – FEED studies,

storage characterization

Submit a CCS road map for the PRC; provide

need based support to NDRC and energy

companies

Conclusions

CCS technologies face unique challenges

Compelling reasons to fast track CCS demonstration in developing countries

MDBs have a critical role to play in capacity development and creating enabling environment

Unlike other low-carbon technologies, there is

weak policy support for CCS technologies.

Surging demand for fossil fuel but unsatisfactory

progress on CCS in developing countries

demands early CCS demonstration

Without a targeted CCS Fund to substantially

mitigate higher CapEx and OpEx, the CCS

demonstration at-scale will be difficult in

developing countries. Some work is underway

but it requires support and funding from

developed countries.

Conclusions

Compelling reasons to fast track CCS demonstration in developing countries

MDB’s like ADB are ready to support PRC and other developing countries

Energy efficiency and renewable alone can not

provide the desired carbon intensity reductions

in PRC

PRC has a critical role to play in CCS

demonstration and deployment

Pilot CCS activities have laid the groundwork for

near-term CCS demonstrations (by 2015) if right

funding and policy supports are available in time

Successful demonstration will build confidence

in CCS and may lead to supporting policies and

programs

For further information

abhargava@adb.org