Reality Check: 'Clean Coal' in the European Union

The European Union has pledged to have 12 demonstration carbon capture and sequestration (CCS) power plants -- so-called "clean coal" -- up and running by 2015 and the technology fully commercialized by 2020.

But there is not a single utility-scale CCS plant now functioning in Europe, nor on the planet, and not one on the horizon. On top of that, some experts say EU dollars have all but dried up for funding the overpriced, pie-in-the-sky fossil fuel "fix."

Cloudy forecast? Yes. But it's way too premature to write off "clean coal" on the continent, because even as the economy crumbles, projects press on. A full reality check on the state of CCS technology in the EU follows, courtesy of an analysis by global research firm Innovest Strategic Value Advisors.

The EU's CCS Subsidy

On October 7, EU lawmakers approved two draft laws that would create a pool of 500 million one-ton CO2 emission allowance permits for investors of CCS plants. Originally, as per the regs, utilities would have to buy 100 percent of their allowances by 2013 -- not get them all for free.

Not anymore. In the latest update of the Emission Trading Scheme (ETS), the EU ruled that utilities should not have to purchase 100 percent of their allowances until 2020. Until then, they'll get a large portion of permits for free -- the amount of which will gradually decrease as the 2020 deadline nears.

How much will CCS investors get in return? Innovest crunches the numbers:

Assuming an 80% capacity factor, an emission intensity of 105 g/kWh and compared with a typical supercritical pulverized coal plant without CCS (emissions of 850 g/kWh), a 250 MW coal-fired plant with CCS could potentially earn 1.5 million emission allowances annually from the pool, worth approximately EUR 32.5 million at current EUA prices.

The Players

The following big European investors have poured money into CCS technologies to date: E. ON, Enel, Electricite de France, CEZ, Union Fenosa, Iberdrola, Fortum and Energias de Portugal.

Only one company, Swedish utility Vattenfall, currently has a functioning pilot plant -- a mini 30-megawatt facility at Schwarze Pumpe in the Lausitz region of eastern Germany. The $100 million plant was commissioned in September 2008. It boasts a proprietary "oxyfuel boiler" that can separate and squash the emitted CO2 into one-500th of its original volume, which then gets stuffed deep into the Earth "for permanent storage."

Germany-based E. ON is said to be building two pilot plants, using two different carbon capture technologies and plans to build larger demo facilities in 2014. The company's goal is to capture one million tons of CO2 each year from the projects. Italy's Enel is also experimenting with capture technologies. It claims a similar goal of trapping one million tons of carbon annually within five years. And Finland-based Fortum is planning to retrofit an existing 565-megawatt coal fired plant to make it carbon-capture ready by 2015.

The other companies -- EdF, CEZ, Union Fenosa, Iberdrola, EdP -- have "no concrete development goals" in CCS plants per se but rather scattered investments in R&D, says Innovest.

Slow Start

The EU sector leaders -- Iberdrola, Fortum, Babcock and Brown Wind and TrustPower -- are busy expanding their portfolios in renewables and gas, not in coal, says Innovest.

It's economics, of course. But also: Turning solar, wind and geothermal into power doesn't carry the giant PR liability of burning coal in a climate-aware world. And CCS requires far more coal than your average dirty coal plant.

Innovest says that using CCS "translates to increased coal consumption per kWh of power produced, greater than some of the most inefficient currently operating plants." Indeed, the Vattenfall pilot plant burns 10 percent to 40 percent more coal than existing designs.