2020 March 07

G20 Workshop

Report from a Workshop on Circular Carbon Economy

The context

This year's summit of the G20, the 20 largest industrialized countries, takes place under the chairmanship of Saudi Arabia. The summit is being prepared through dozens of conferences, ministerial level meetings and expert workshops that drag on throughout the year.

It is interesting that Saudi Arabia has made "Safeguarding the Planet" one of the 3 main topics of this huge political carousel. Among other things, the workshop on Circular Carbon Economy was held on this topic, to which around 100 experts from all over the world were invited. I attended the event as a representative of the World Bioenergy Association. Under the motto “Reduce, Reuse, Recycle, Remove”, strategies for dealing with the CO2 problem should be discussed in line with the well-known principle from waste management.

It is clear that the issue was set from the perspective of continuing oil and gas exploration. Nevertheless, one has to acknowledge that renewable energies and other alternatives to oil and gas were treated seriously as development opportunities and were also dealt with in a qualified manner.

Case study Saudi Arabia - what PV and wind can already do today

One of the most interesting contributions to the event was that from Saudi Arabia itself. The population of Saudi Arabia has increased from 4 million to 32 million in the past 60 years. During this period, Riyadh developed from a small town with around 100,000 inhabitants to a metropolis with 6.5 million people, in the middle of the desert with average daily highs of over 40 degrees from May to September.

For the provision of water to this population, 5.6 million m3 of water per day are obtained from seawater desalination. Saudi Arabia already spends almost 20% of its oil production on the energy consumption of the desalination plants. In 2015, a total of around a third of total oil production was used for domestic energy consumption. It is therefore not surprising that energy efficiency and renewable energies are also considered seriously. Replacing old inefficient air conditioning systems in Saudi Arabia alone would result in a saving effect of 35 TWh - and is now being promoted and subsidized.

The almost unlimited availability of space and the weather conditions are also ideal for wind and PV. 35 large wind and solar parks are to be built by 2030. Even with the first projects implemented, a 300 MW PV plant was able to generate electricity costs of 2.1 € cent / kWh and wind (400 MW) of 1.76 c / kWh. Saudi project developer ACWA currently operates 6.4 GW of installed capacity for wind, PV and solar thermal power plants, mainly in the Middle East. In their last PV project, electricity generation costs of 1.5c / kWh have already been achieved. In 2011 it was 7c / kWh.
The political goal is that by 2030 the proportion of wind and PV components manufactured in Saudi Arabia should be 40-45% of total investments. This is to be guaranteed by the corresponding steadily increasing requirements for project tenders. Until then, the local capacity for up to 6 manufacturers of PV components should reach a capacity of 0.5 - 1GW p.a. and the capacity of 2 or more domestic wind power companies should also reach this level. Consequently about 4 GW of wind and PV capacity could be built in Saudi Arabia per year by 2030.

For comparison: the approximately 9 million barrels of oil that are currently extracted every day correspond to an energy output of 243 GW. Taking into account the energy losses for the conversion of electricity into hydrogen or methanol and the much lower availability of the wind and PV systems, the power of wind and PV would have to be at least four times as high in order to provide the same amount of energy. This would mean that 16 GW per year would have to be built in Saudi Arabia for 60 years in order to achieve the same energy output as is currently the case through oil production.

Outlook for hydrogen

As a representative of the IEA reported, around 70 million tons of hydrogen are already being produced worldwide, of which around 2/3 are used in the chemical industry and the rest mainly in refineries. The hydrogen production costs based on natural gas or coal are between 0.9 and 2 € per kg, which corresponds to 2.6 - 6 c / kWh energy content. With carbon capture and storage (CCS), the costs would be between 4 - 8c / kWh according to IEA estimates. With electricity production costs of 1.5 c / kWh, the electrolytic production of hydrogen is already competitive with fossil hydrogen production, especially since the production costs are 75% based on energy costs. Assuming 70% efficiency the price of hydrogen from renewable electricity could be around 2.5 cents / kWh.

Australia, which has sufficient fresh water at least in the coastal regions, has even better conditions for hydrogen production than Saudi Arabia, since 8 kg of water are required for the production of 1 kg of hydrogen. The production of hydrogen from natural gas or coal while simultaneously depositing the CO2 could also play a role for Australia, since the country is already the largest exporter of liquefied natural gas and coal.

Consequently, the representative of Japan also reported an intensive cooperation with Australia with the aim of supplying Japan with liquid hydrogen. The obvious thing would be to use hydrogen in Australia to process iron ore that is exported from there all over the world. But apparently this has not yet been considered, at least it has not yet been reported.

Two issues that were considered particularly important in connection with a possible hydrogen economy in Australia were security and certification. For the former there are already existing structures such as the Center for Hydrogen Safety and the International Association for Hydrogen Safety. The origin of the hydrogen from fossil or renewable or at least CO2 neutral production is to be differentiated by means of certification.

The presentation of a top expert from the US on methanol was also very interesting. With an energy loss of around 50%, hydrogen can be converted into methanol, which is much easier to transport, which is 100% compatible with the existing vehicle fleet, can also be used in aircraft turbines and which has much more favorable emission properties as a fuel or fuel additive as ethanol. In fact, China relies on methanol from coal, which is added to more than 10% to automotive fuels there. Methanol is also extensively used as raw material for the chemical industry. (Book tip: Beyond Hydrocarbons - the methanol economy, Surya Prakash - the speaker).

Outlook for carbon capture and storage

The topics of Carbon Capture and Storage (CCS) and Carbon Capture and Use (CCU) were a major topic. The first speaker was a representative of the Oil and Gas Climate Initiative, an initiative to which almost all the major oil companies belong which pursues the development of CCS. He pointed out, that the IEA assumes that climate goals will not be achievable without the substantial use of CCS. In its reference scenario, IEA assumes the following distribution of contributions to the 2 degree target: 40% efficiency, 35% renewable, 5% fuel switching (coal - gas), 6% nuclear, 14% CCS. Another scenario even assumes a 32% contribution from CCS, in this case mainly at the expense of nuclear (1%) and renewables (15%). In this case, the CCS industry would have to reach the size of today's oil and gas industry and grow immediately with 25% growth per year until 2040. But actual development is miles away from such growth.
There are currently 19 CCS projects in operation worldwide, which inject between a few 100,000 t and a few million t CO2 in oil and gas fields. With the exception of 4 projects, all of these projects are part of Enhanced Oil Recovery projects, in which the compressed CO2 should serve to increase the yield of oil fields. The 4 projects for which this is not the case are financed by financial incentives in the range of 30-60 $ / t CO2. Two of these projects are operated by the Norwegian state and have exceptionally low CO2 separation costs.

The key questions on which CCS success depends:
  • How can a financing mechanism be established that makes CCS a sustainable business model that justifies high capital investments.
  • How can a solid verification of the disposed CO2 quantities take place
  • What about the warranty? How long should the disposal company be responsible for ensuring that the disposed amounts of CO2 do not escape into the atmosphere again?
  • What about social acceptance to direct very high financial flows in this direction?

The Carnegie Climate Governance Initiative sees its role in mediating a qualified debate about CCS and other methods that come under the heading geo-engineering. The latter topics include approaches such as fertilizing the sea to remove CO2 by algal blooms, bringing alcaline substances into the sea to increase CO2 absorption and preventing acidification of the oceans, storing carbon in the soil (e.g. by fertilizing with charcoal) , reforestation, the burrial of biomass in the oceans or the change in the reflection of sun rays by finest salt crystals in the atmosphere, by application of foam to the oceans, etc. The speaker mentioned that even environmental organizations such as the Climate Action Network now recognize the need for CCS.

The use of captured CO2 for technical purposes (CCU – carbon capture and use) was stressed by several presenters. However, the global market for technically used CO2 was estimated at 200 million tons, which is not very much in view of the 30 Gt of emissions from fossil energy use per year.

All in all, it became clear that without vigorous political intervention and the creation of robust international financing mechanisms, CCS will not be able to play a key role in reducing CO2 emissions. Whether the use of oil and gas in connection with CCS can achieve higher overall prosperity gains than the switch to renewable energy and an emphasis on energy efficiency seems questionable.

Nuclear energy outlook

The situation of nuclear energy is somewhat similar to the situation of CCS. It was emphasized at the beginning of the session that nuclear energy still generates (a bit) more CO2 neutral electricity than the combined use of wind and photovoltaics. However, the number of new installations of nuclear power plants is far too small to make a relevant contribution to climate protection and there would need to be a reversal of trends to change that. This will not happen unless massive policy interventions take place.

There is a very active scene in the USA of start-up companies working on new reactor concepts promising higher safety, smaller unit sizes or other benefits compared to current technology. There are even investment funds specializing in investments in such companies. In contrast to this development, experts at the workshop were of the opinion that the risks of developing a new nuclear reactor technology are impossible to finance. They believed the only realistic option was to continue to build the light water reactors used so far as this concept is proven.

The fact that Saudi Arabia is still pursuing the construction of a nuclear power plant given the cost of electricity from this plant will be maybe more than 5 times as expensive as the cost of renewable electricity is surprising.

Outlook for bioenergy

The role of bioenergy in the context of climate protection becomes clear when you keep in mind that the biosphere absorbs around 230 GT CO2 per year - around 7 times as much as is released by fossil fuels. Of these, around 220 GT are released again by decomposing biomass, so that a net uptake of CO2 of around 10 GT is currently taking place - according to the last IPPC report of around 7 GT.

If it is possible to reduce the proportion of natural decay due to rotting or burning of plants, very substantial amounts bioenergy could be used without increasing the CO2 release into the atmosphere. The fact that bioenergy is the most widely used form of renewable energy on all continents shows that the use of bioenergy in many cases is economically viable. Given the limitations described for other solutions such as CCS or nuclear energy, bioenergy together with wind and photovoltaics will have to play a decisive role in achieving the climate goals.

5.-6.3.2020 Riyadh
Christian Rakos