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31 May 2019

Carbon Capture and Nuclear – doing nothing while Rome burns

It does not matter how much people want it, adding up one and one never gets you to either one or three, and that’s precisely the reason why the fossil fuel lobby will lose its markets over the next ten years. Two events happened this week – US Energy Secretary Rick Perry talking about making fossil fuels cleaner, instead of imposing draconian measures on oil, gas and coal; and the Drax Group, alongside Equinor and National Grid Ventures announcing a plan to build a carbon capture zone in the North of the UK.

Let’s make this simple. If 1 represents the number of people working in the sector and 1 also represents the cost of building a new plant, and 1 is also the cost of coal for a coal plant, then the cost of coal equals 3 plus CO2 or

1+1+1=3+CO2. The right hand side of the equation is total cost.

And for solar or wind this is 1+1+0=2 because both the wind and the sun are free, and you pay for the capex and salaries

When you get involved with carbon capture, that also costs 1 so the formula moves to 1+1+1+1=4 converting the CO2 into one more cost.

Rick Perry is basically saying the US has made so much money out of fossil fuels, there is no reason to stop if we can add carbon capture, and Drax is saying the same, but they are trying to avoid these equations, and it cannot work.

Sure the margins on oil are closer to 25% than the 8% or 9% that wind and solar make today, but a decade of subsidizing wind and solar has left them able to compete, and they are continuing to lower their costs; bifacial solar will add around 25% to the power delivered for the same price, and that alone would do the trick; and so in 10 years they have moved to a point of financial supremacy over coal, oil and gas, which have had the benefit of 100 years of operation.

Even without the CO2 in the equation, renewables wins and all you have to do is continue to invest in them over the coming decade and that will become abundantly clear, and investors will by then steer clear of anything to do with fossil fuels – not because climate change groups tell them to – but because their returns will be better guaranteed in renewables.

What both of these two would have us do is put money into trying to change the formula.

The UK initiative is in the form of a Memorandum of Understanding (MOU) committing the three companies to work together to explore how a large-scale carbon capture usage and storage (CCUS) network and a hydrogen production facility could be constructed in the Humber in the mid-2020s.

Of course the jury is out on hydrogen, but as a clean fuel, given that water is almost as free as the sun and the wind, it is likely to have a future, but it is not with us yet. Blue Hydrogen is what everyone wants right now, taking the carbon out of natural gas, so the frackers of the world can still make lots of money. But that’s a case of Gas plus decarbonization plus digging it out of the ground, so 1+1+1=3. Green hydrogen where water is electrolyzed, giving off hydrogen and oxygen, becomes 1+1=2 where 1s are the cost of an electrolysis plant, and providing spare electricity – which of course has to come from somewhere, so either renewables or fossil fuels. If it is fossil fuels we are back to the 1+1+1=3+CO2 formula, which has already been rejected by the world.

Perry has it all wrong talking about draconian measures. Five or ten more years of renewables subsidies and that world he talks about is dead from lack of investment. Just a case of someone coming along with a better idea. The subsidies have just been a way of ensuring investment during its formative years. Without further subsidies renewables will poison the fossil fuel world anyway, it’s just that it will take a little longer and the US will just be that bit further behind on renewable technology, with that many fewer jobs and its standing in the world will be altered dramatically in a negative way.

The thing is, before the climate change issue, renewables were already a great idea, economically better, and less poisonous to the environment and people’s health. It is just that people have made so much money, and threatened to make so much more from fracking and natural gas, that they want to delay the market shift to renewables, and they can. But policies like those Perry has talked about will not work long term but they may work for a second term President. Fossil fuel companies will pretend to be working on carbon capture right up to the point where climate changes dramatically, and then they will be swept aside with no financial legacy. Which is why they all must invest in renewables, despite it not yet being quite as profitable and easy as fossil fuels.

And Drax is a genuine case in point. It masquerades as a green company because it shifted from coal to biofuels in one plant, and tinkered with carbon capture enough to know it is too expensive. Now it is asking Equinor for help. We’re not sure of the National Grid’s reason for involvement.

And Perry’s speech also veered off into new nuclear plants. This is another blind alley, in that even if it took only 3 or 4 years to perfect a new nuclear plant design and only 3 or 4 years to build one and prove it is safe, and then another 3 or 4 years to install them at scale, that would introduce a one decade lag. Climate change pressure would reach a peak long before that, and the price of renewables will have gone down to about 30% of today’s costs, making nuclear uneconomic. The real agenda behind this is to have another decade of selling fracked gas before finally having to do something about CO2 emissions. This is head in the sand thinking.

This too is simple. You can use what we have now and it will work or we can invent something that will work in the future, and hope it will work, but do nothing for now. This would be fine is renewables were being pushed ahead at full steam by this administration for now, and then supplanted by hyper efficient nuclear energy in the future, but that’s not it’s policy.

This then is the agenda for Donald Trump to get elected, invest money doing R&D for the future, and clear the way for uninterrupted growth of oil, gas and coal for the time being. If he gets a second term, this is precisely what the US will do.

Let’s hope the plan to make Humberside in the UK a center for carbon capture and hydrogen does not turn out to be more of the same.