Shell’s Barry: On Clean Coal and Carbon Capture and Storage

THE WALL STREET JOURNAL

MAY 1, 2009, 11:02 AM ET

By Keith Johnson

Much as it may pain environmentalists, coal still seems to have a future in the world’s energy mix, especially for big economies such as the U.S. and China. To keep it in the mix and still tackle climate change, though, coal’s greenhouse-gas emissions need to be kept in check.

To do this, the industry and government leaders are turning to “clean coal,” or capturing and storing carbon emissions and socking them away underground. It’s the great black hope of the energy business—but isn’t yet up and running at commercial scale anywhere in the world.

We took the opportunity to talk with John Barry, vice president for Unconventionals and Enhanced Oil Recovery for Royal Dutch Shell, one of the old-energy companies making the strongest push for carbon capture. He talked about whether it was safe, when it would be cost effective and the need for increased government spending.

Why so much emphasis on carbon capture, when there are other energy options out there?

The promise for [carbon capture and storage] is enormous. Shell’s own analysis shows the global take-up of CCS, across power generation and other industry sectors, could potentially avoid more than a third of annual CO2 emissions from energy use in 2050.

Well, why has it been so slow to actually come about? Is this a technology challenge?

The technology is out there. We know how to inject carbon dioxide underground. Do we know it will stay there? Yes, because it’s been there for millions of years—naturally. Can we capture CO2? Yes, because it’s all been done on a small scale. What remains to be demonstrated, however, is that they work in concert and at commercial scale. Know-how is what we need to work on—learning more by doing more.

But the idea of sticking CO2 underground has drawn a lot of flak, not least for you in the Netherlands. Is that the problem?

Transporting and injecting CO2 into the subsurface is not new. The oil and gas industry has done it for the past 40 years all over the world.

As for Barendrecht [the Shell capture and storage project in the Netherlands], we just got the environmental impact assessment, which said there is no environmental impact. Storing CO2 underground is safe. There used to be methane underground, which is to be replaced by CO2, which can’t explode, and now people are getting afraid?

What about the economics of carbon capture?

Carbon capture and storage is presently generating costs but yields no revenues. It is one of the few technologies that is entirely climate change driven. Without policy intervention to create a market price for CO2, development and deployment of CCS will simply not happen.

But what price? The prices for emissions permits in the Obama plan, even in Europe, are well below what CCS costs.

Today, we know the cost is above the price of European carbon permits. But you’ve got to believe that the CCS cost and the CO2 price will meet—otherwise, why do carbon capture?
By 2030 or 2040, the CO2 price will need to be at the level of CCS costs. We won’t get to where the world needs to be without CCS, in addition to energy efficiency, renewables, nuclear power, etc.

I see the biggest opportunities for technology innovations and improvements in cost-efficiency on the capture side; that’s 75% of the total cost of CCS. Industry is already doing a lot to find more cost-efficient solutions, but it needs incentives to bring them to bear and further improve them in demonstration projects.

Speaking of which, what’s your appraisal of the recent flurry of government support for clean coal demonstration plants in the U.S., Europe, and Australia?

I want to give recognition—enormous progress has been made. Compared with where we were a year ago, the sun has finally come up. Is it enough? No, but it’s a great start.

Shell welcomes the inclusion of funding for CCS in the [U.S.] stimulus package. This is a step change in the rate of spending and will accelerate the progress of CCS development and deployment in the U.S.

But the cost of first-generation major industrial facilities with CCS is going to be high, and with costs running into the billions of dollars for an individual installation, we expect that more funds will be needed.

This is where emerging public-private funding solutions can help to drive down the cost curve of CCS, accelerate technology development and ultimately make CCS commercially viable.

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