CCUS becoming a commercial reality in China?26 May 2021
Responsible for nearly 15% of the world’s energy-related CO2 emissions, China’s vast fleet of coal power plants has long been regarded as a priority target for carbon capture, utilisation, and storage technology (CCUS). Given that over 70% of this generating capacity was built in the last 15 years, there is a legacy of ‘locked-in’ emissions for decades to come, regardless of the country’s impressive efforts to deploy low-carbon energy. President Xi Jinping’s announcement last year of a net-zero carbon emissions target for 2060 was therefore seen as a pivotal moment for CCUS, which must surely have a significant part to play in achieving such rapid decarbonisation.
Image: CCS pilot facility at Jinje power plant (source: China Energy)
Just as in most Western countries, CCUS has experienced mixed fortunes in China. Early interest in the 2000s led to active research programmes and numerous plans for large-scale projects on coal power plants – many developed in collaboration with Western governments or companies in search of both climate impact and a big market for their technologies. Faced with lukewarm political support and insufficient funding, none of these grander visions were ultimately realised. China has nevertheless managed to establish a number of medium-sized CCUS facilities (capturing up to 600 ktCO2/ year), mostly on processes with lower capture costs such as chemical plants and natural gas production. As in North America, these projects have also been largely driven by the use of CO2 in enhanced oil recovery (EOR), and have seen limited involvement from the big power generators.
But China’s colossal state-owned power companies have been far from idle on CCUS. Huaneng Group has successfully developed its own capture technologies through its Clean Energy Research Institute, implementing them at key coal-fired demonstration projects such as Shidongkou in Shanghai and the GreenGen integrated gasification combined cycle plant in Tianjin. In a reversal of earlier attempts to export Western technology to China, Huaneng’s solvent-based CO2 capture process will even be used for a planned demonstration in Australia – the Glencore-led CTSCo project at Millmerran coal plant. At a recent international forum for CCUS, Huaneng confirmed its intention of developing a megatonne-scale CO2 capture project from a coal plant in the next few years.
China Energy has also been an active player, having carried out (as Shenhua Group) the completed Ordos CCS project at a coal-to-liquids plant in Inner Mongolia – notable as the only project to have used dedicated CO2 storage in a saline aquifer formation, rather than EOR. The utility is now commissioning a new capture facility to feed CO2 into this geological store, this time taking 150 kt per year from the nearby Jinjie coal power plant. In March this year, the utility took another major step by announcing it would fund a 500 ktCO2/year capture facility on flue gas from Taizhou plant in Jiangsu province. With a budget of around 386 million yuan ($59 million), this project will mostly provide CO2 for EOR, as well as some for conversion to methanol, and is scheduled to start operating in 2023.
Elsewhere, Hong Kong-based China Resources Power has been actively developing CCUS at its Haifeng power plant in Guangdong, where a large test platform for solvent and membrane-based capture technologies was commissioned in 2019. Long-held plans to establish a megatonne-scale demonstration project at this site are expected to finally move to construction next year, and would be the first to employ offshore storage – a costly but most likely necessary option for much of the country’s heavily industrialised southern coast.
While these elevated ambitions for demonstration projects are a positive sign, there remains considerable uncertainty over what kind of financial incentives might be put in place to drive a self-sustaining CCUS industry.
Given the scale, uniformity, and high efficiency of much of China’s utility coal units, as well as stringent limits on flue gas contaminants, there is certainly potential for rolling out CCUS at lower costs than in other countries.
Analysis of China Energy’s coal fleet by its in-house research institute, NICE (National Institute of Clean-and-Low-Carbon Energy), shows that some units could be retrofitted with CCUS for as little as $25/t of CO2 under favourable regulatory conditions, while as much as 100 Mt per year could be captured and stored for less than $37/t of CO2.
China’s highly regulated electricity market might provide a straight-forward means of compensating this investment, in the form of increased tariffs or operating hour allocations, both of which have been successfully used for driving deployment of renewables and air pollutant controls at coal plants. However, as China moves towards more market-driven power prices, NICE suggests there could also be a route to profitability through the growing value of flexible power in a renewables-rich grid. The national emissions trading system for carbon – set to launch in the power sector this year – may also help drive CCUS retrofits under this more competitive model, provided the carbon intensity targets are sufficiently demanding.
Global experience has shown that a major hurdle to establishing a viable CCUS industry is the need to set up a co-ordinated CO2 transport and storage network which can serve multiple emitters. Opportunities for EOR in the north-western province of Xinjiang have led the Oil and Gas Climate Initiative – a consortium of major oil and gas companies – to create a ‘KickStarter hub’ for CCUS in the region, led by PetroChina. If it expands as planned, this cluster will likely source some CO2 from coal power plants.
China has tended to balk at the idea of CO2 as a waste disposal issue, emphasising the ‘U’ in CCUS with efforts to develop EOR and explore CO2 conversion to products. However, the sheer scale of the country’s emissions demand large-scale geological storage of the kind only saline aquifers can ultimately provide. Northern provinces like Shaanxi, rich in both coal and suitable CO2 storage geology, could represent another ideal region for developing a low-cost CCUS cluster.
In the past, CCUS may have struggled to capture the imagination of China’s political elite, with its unappealing characteristic of requiring more coal for less energy and – relative to renewables – limited opportunity for mass-fabrication and export. However, if the tide is indeed turning for the technology, the country’s top-down economy and large state-owned enterprises in the power and oil sectors present an opportunity for coordinated and rapid deployment. For CCUS to truly move from a research interest to a commercial reality, there is still much work to be done, particularly on the legal and regulatory structures which govern CO2 storage and long-term operational incentives. As the sector-specific versions of China’s latest five- year plan emerge from government ministries this year, we can expect greater clarity on how much CCUS will feature in the country’s journey to net zero.
Author: Toby Lockwood, IEA Clean Coal Centre