Research on incentive policies for optimizing the layout of carbon capture, utilization and storage clusters in coal-fired power plants in China under the goal of carbon neutrality

China Energy Storage Network News: This article is selected from the 12th issue of 2021 of Engineering, a journal of the Chinese Academy of Engineering

Authors: Chen Wenhui, Lu Xi, Lei Yalin, Chen Jianfeng

Source: A Comparison of Incentive Policies for the Optimal Layout of CCUS Clusters in China's Coal-Fired Power Plants Toward Carbon Neutrality[J].Engineering,2021,7(12):1692-1695.

Editor's Note

The realization of the carbon neutrality goal requires the energy system to carry out a low-carbon transformation to help China's economy decarbonize deeply, especially coal-fired power plants need to deeply reduce carbon emissions. Carbon capture, utilization and storage technology (CCUS) will play an indispensable role in achieving the carbon peak and carbon neutrality goals of coal-fired power. At present, although my country has the ability to industrialize the application of CCUS technology and is actively preparing for the construction of a full-process CCUS industrialization cluster, the high cost of infrastructure and the lack of supporting incentive policies are still the main challenges for the commercialization of CCUS.

The research team of Academician Chen Jianfeng of the Chinese Academy of Engineering published an article titled "Research on Incentive Policies for Optimizing the Layout of Carbon Capture, Utilization and Storage Clusters in China's Coal-fired Power Plants under the Carbon Neutrality Goal" in the 12th issue of Engineering, the journal of the Chinese Academy of Engineering in 2021. The article constructed multiple models to study how to formulate optimal incentive strategies to promote the deployment of CCUS technology in the coal-fired power industry to achieve the goal of carbon neutrality. The article studies and evaluates the impact of three incentive policies (carbon market prices, clean electricity price grid-connected subsidies, and carbon dioxide storage and utilization subsidies) on the economic feasibility of the entire chain of coal-fired power CCUS systems, and finally optimizes the incentive policy plan. The article has practical value and guiding significance for identifying coal-fired CCUS project clusters and optimizing layout plans, and formulating corresponding incentive policies for CCUS technology deployment.

1. Introduction

China has announced that it will adopt more powerful policies and measures to strive to peak carbon dioxide (CO2) emissions by 2030 and achieve carbon neutrality by 2060, which is basically consistent with the global 1.5°C temperature rise control target. The realization of the carbon neutrality goal requires a low-carbon transformation of the energy system to promote deep decarbonization of China's economy, especially deep carbon reduction of coal-fired power plants (CFPP). In 2019, China's coal-fired power generation capacity reached 1.04×109 kW, and CO2 emissions reached 3.5×109 t, accounting for about 35.6% of total CO2 emissions. However, given China's large and young coal-fired power generation fleet and power system structure, it is not feasible to completely eliminate coal-fired power plants with an average service life of less than 15 years and a remaining life of more than 30 years. Therefore, the formulation of a deep decarbonization strategy for the power system needs to avoid the premature elimination of coal-fired power plants, which will cause a large number of coal-fired power assets to be stranded. Under the carbon constraint scenario, carbon capture, utilization, and storage (CCUS) technology will play an indispensable role in achieving the carbon peak and carbon neutrality goals of coal-fired power generation.

As of 2020, there are 65 large-scale commercial CCUS facilities in operation or development worldwide, involving many large-scale power plant capture projects, indicating that some CCUS technologies are already in the commercial operation stage. At present, although my country has the ability to industrialize the application of CCUS technology and is actively preparing for the construction of a full-process CCUS industrialization cluster, the high cost of infrastructure and the lack of supporting incentive policies remain the main challenges to the commercialization of CCUS. Drawing on the experience of promoting other low-carbon technologies, government incentive policies are important factors in promoting the development and application of CCUS technology. In addition, the CCUS key deployment strategy will shift from large independent facilities to the construction of CCUS industrial clusters. Therefore, in order to achieve the goal of carbon neutrality, it is necessary to study the optimal incentive strategy with cost-effectiveness to promote the deployment of coal-fired power CCUS industrial clusters.

Under the 1.5℃ temperature rise control target, China needs to deploy CCUS technology on a large scale. By 2050, the annual CO2 emission reduction scale of coal-fired power CCUS technology will be about 7.1×108 t. This paper constructs multiple models to study how to formulate the optimal incentive strategy to promote the deployment of CCUS technology in the coal-fired power industry to achieve the carbon neutrality goal. First, based on the CO2 emission source data and storage potential distribution characteristics of large coal-fired power plants, a source-sink matching optimization model is constructed to obtain the layout plan of coal-fired CCUS projects under the 1.5℃ temperature rise control target; secondly, in order to achieve economies of scale and reduce costs, hierarchical cluster analysis (HCA) and minimum spanning tree (MST) models are combined to identify coal-fired CCUS project clusters, and a route strategy for establishing a minimum cost CO2 transmission pipeline network is proposed; finally, this paper studies and evaluates the impact of three incentive policies (carbon market price, clean electricity price grid-connected subsidy and CO2 storage and utilization subsidy) on the economic feasibility of the entire chain of coal-fired CCUS system, and selects the incentive policy plan. This study has practical value and guiding significance for identifying coal-fired power CCUS project clusters and optimizing layout plans, and formulating corresponding incentive policies for CCUS technology deployment.

2. CCUS technical economy and source-sink matching optimization analysis

According to China's carbon neutrality goal, the scale of CCUS technology transformation of coal-fired power plants in 2050 will reduce emissions by 7.1×108 t CO2 per year, and the coal-fired power industry will usher in a peak of unit carbon capture transformation between 2035 and 2045. The results of source-sink matching optimization analysis show (Note 1 in Appendix A) that 128 coal-fired power plants (267 units) with a total installed capacity of approximately 159 GW need to be transformed with CCUS technology. This paper uses the integrated environmental control model (IECM) developed by Carnegie Mellon University to calculate the costs of each link in the entire process of CCUS technology (for detailed information on the screening criteria for coal-fired power plant transformation, see Note 2 in Appendix A), and applies the published component-based learning curve theory to estimate the impact of technological progress on the cost of CO2 capture. The results in Figure 1 (a) show that by 2050, the scale of CCUS projects in coal-fired power plants will reach 7.1×108 t CO2 per year, with a total cost of US$53-87 per ton of CO2. Among them, the CO2 capture cost is 40~70 US dollars ∙ t-1, and the average capture cost is 57 US dollars ∙ t-1, accounting for 80% of the average total cost of the CCUS system. With technological advances, the CO2 capture cost is nearly 30% lower than the current cost, and the CO2 capture cost will gradually decrease to 32~46 US dollars ∙ t-1 in the future.

Figure 1 Cost-effectiveness results, storage basin transportation distances matched by power plants, and cumulative CO2 storage in 2050. (a) Comparison of CO2 capture, transportation, and storage costs with annual cumulative capture. The x-axis represents the annual cumulative CO2 storage scale; the y-axis represents the CO2 capture cost, CO2 pipeline transportation, and storage costs with and without technology improvements. (b) Relationship between cumulative CO2 storage and transportation distance in 2050. The x-axis represents the average transportation distance of CO2; the y-axis represents the cumulative CO2 transportation and storage by 2050.

Regarding the CO2 geological storage potential, the Tarim Basin, Ordos Basin, Northern Jiangsu Basin, Songliao Basin, Bohai Bay Basin, Junggar Basin and Tuha Basin have good CO2 geological storage and CO2 enhanced oil recovery and storage (CO2-EOR) potential, among which the total storage potential of deep saline aquifers is 1.78×1012 t CO2 and the CO2-EOR storage potential is 4×109 t CO2. According to the optimization results of source-sink matching (Figure 1 (b)), the average length of CO2 pipelines connecting the Tarim Basin, Ordos Basin, Northern Jiangsu Basin, Songliao Basin, Bohai Bay Basin, Junggar Basin and Tuha Basin with their well-matched coal-fired power plants are 275 km, 264 km, 242 km, 216 km, 189 km, 164 km and 120 km, respectively. In the scenario of direct point-to-point connection between sources and sinks, a total of about 29,490 km of CO2 transmission pipelines need to be built, and the cumulative CO2 transportation volume during 2020-2050 will reach 1141 Gt⋅km, which will bring high transportation costs. Therefore, it is necessary to identify CCUS project clusters, establish CCUS hubs to form a global network of CO2 pipelines, reduce unit costs, and promote large-scale system deployment of CCUS technology.

3. CCUS Priority Layout Cluster and Emission Reduction Potential

Based on the point-to-point direct source-sink matching connection results, HCA is first used to identify and classify the CCUS cluster centers, and then the MST model is used to construct the lowest-cost CO2 transportation pipeline network for the CCUS project cluster (see Notes 3 and 4 in Appendix A for detailed information on HCA and MST models). By establishing a CCUS project cluster and hub-shared transmission pipeline, the total pipeline length of the CCUS project cluster can be reduced to 8708 km (the average pipeline length is 86 km), and the average CO2 transportation cost can be reduced from US$10.62 t-1 to US$4.26 t-1. Assuming that the life of coal-fired power plants is 45 years, during the remaining life of these coal-fired power plants, a cumulative emission reduction of 1.1596×1010 t CO2 can be achieved through CCUS technology, of which 65.4% of CO2 can be reduced through deep saline formation (DSF) storage and 33.6% of CO2 can be reduced through CO2-EOR. In the North China region, 20 coal-fired power plants (49 units) with a total installed capacity of 26.4 GW can be geologically utilized and stored in the Bohai Bay Basin, with an average transportation distance of 67 km. By 2050, a CO2 emission reduction potential of 1.196×108 t per year can be achieved, with a cumulative reduction of 2.364×109 t of CO2, and a cumulative reduction of 4.3×109 t from 2025 to 2060. In the Northeast region, CO2 is captured from 11 coal-fired power plants (19 units) and transported to the Songliao Basin through pipelines for CCUS projects. The average transportation distance is 80 km, and a cumulative reduction of 5.32×108 t of CO2 can be achieved. In the East China region, 36 coal-fired power plants (75 units) with a total installed capacity of 57.65 GW are divided into three CCUS project clusters and transported to the Subei Basin for utilization and storage, with an average pipeline length of 60 km. In the northwest region, 42 coal-fired power plants (82 units) with a total installed capacity of 45.61 GW have captured a total of 3.071×109 t of CO2 and transported it to the Ordos Basin for storage, with an average transportation distance of 56 km. By 2050, a total of 8.68×108 t, 2.63×108 t, and 1.92×108 t of CO2 captured from coal-fired power plants will be transported through pipelines to the Junggar Basin, Tuha Basin, and Tarim Basin for storage using CCUS technology, matching 20, 3, and 5 coal-fired power plants, respectively.