1 Economics of CO 2 Storage and Sink

1 Economics of CO 2 Storage and Sink Enhancement Options: A Utility Perspective Research Funded by DOE, TVA, and EPRI Collaborators: EPRI, MIT, Parsons, IEA GHG Programme, SFA Pacific, UTK Bert Bock

2 Utility Options • Internal operations – Improved energy efficiency – Fuels containing less carbon per unit of energy – Renewable energy sources • External operations – Storage of captured CO 2 – CO 2 storage in forests and soils (CO 2 sink enhancement) • Utilities need better economic assessment of external options

3 CO 2 Sequestration Options Compared • Storage of Captured CO 2 --Depleted gas reservoirs --Depleted oil reservoirs --Deep saline aquifers --Enhanced oil recovery --Enhanced coalbed methane recovery --Ocean pipeline --Ocean tanker • CO 2 Sink Enhancement --Forest management New plantations Restoration Agro-forestry Avoided deforestation --Cropland via reducing tillage (USA)

Challenges • CO 2 capture costs + storage costs (DOE/EPRI, 2000) (this project) compared with CO 2 sink enhancement costs (this project) • Estimating net reductions in GHG emissions (avoided GHG emissions) • Life-cycle basis (cradle to grave) • Accounting for timing differences – Costs of Storage and sink enhancement (NPV) – Avoided GHG emissions • Revenues from GHG markets (NPV) • Avoided carbon taxes (NPV) • 100 -year planning horizon 4

5 Net Cost of Storing Captured CO 2

6 CO 2 Capture Cost (DOE/EPRI, 2000) • IGCC reference plant (425 MW net, 43% efficiency) vs. IGCC CO 2 capture plant (404 MW net, 37% efficiency) • $64/tonne C eq. LC GHG avoided in capture process • IGCC CO 2 capture costs are 3 to 7 times > typical storage costs without by-products

CO 2 Capture + Net Storage Costs: Base Cases, NPV Basis CO 2 Storage Process $/tonne C eq. LC GHG avoided Enhanced oil recovery 15 Enhanced coalbed methane recovery 41 Depleted gas reservoir 86 Depleted oil reservoir 81 Deep saline aquifer 77 Ocean pipeline 89 Ocean tanker 143 7

Deep Aquifer Example: COE, $/MWh Reference plant (no capture) 43. 98 CO 2 Capture costs (years 1 -20) 11. 10 CO 2 Storage costs (years 1 -20) 2. 27 Monitoring costs, etc. (years 21 -100) 0. 03 Total cost of electricity 57. 38 8

9 Conclusions • Methodologies were developed to compare economics of a wide range of CO 2 storage and sink enhancement options from a utility perspective • Base-case cost ranges: – CO 2 capture and storage ($15 to 145/tonne CE avoided) – Forest management • Aboveground ($10 to 175/tonne CE avoided) • “All” ($-160 to 55/tonne CE avoided) – Cropland via reducing tillage ($50 to 90/tonne CE avoided) • Significant opportunity for early adopters to reap “low hanging fruit”

Forestry Cases Management Type 1 0 Type of Trees Country/region New Plantation Loblolly pine USA (South) New Plantation Douglas Fir USA (Pacific NW) New Plantation Spanish Cedar Mexico Restoration Pine-oak Mexico Restoration Miombo Southern Africa Agro-forestry Mango-Tamarind India (South) Avoidance of deforestation Various Mexico

Costs: Medium Productivity Cases, NPV Basis 1 1

Reducing Tillage on U. S. Cropland: Factors Affecting Costs ($/tonne C eq. LC GHG avoided) • Adoption incentive paid to farmer by utility = f (Δ crop yield, Δ crop production costs, Δ risk) • Transaction costs • Monitoring costs • Δ C sequestered in soil organic matter • Δ N 2 O emissions from soil • Δ GHG emissions from crop production inputs 1 2

Intensive Till to No Till Costs: Base Cases, NPV Basis 1 3