July 31 (Bloomberg) -- Technology to remove and bury carbon dioxide emissions from coal-fired power plants will require at least a decade of government subsidies before becoming economically viable, a Harvard University researcher said.

Start-up costs for carbon-capture and storage, known as CCS, are high enough to “need some kind of subsidies” for 10 or 20 years before the technology can compete with other forms of low-carbon power generation, Mohammed Al-Juaied, a visiting scholar at Harvard’s Belfer Center for Science and International Affairs, said in a phone interview from Boston.

CCS involves stripping carbon emissions from electricity generation or oil and gas production. The CO2, which scientists say contributes to global warming, is stored underground or underwater. The U.K., which relies on high-emission coal for 37 percent of its electricity, is one of the countries counting on CCS to meet environmental targets.

“Government support should be there to accelerate the learning process,” said Al-Juaied, trained as a chemical engineer. “It’s a 10 to 20 year timeframe.”

No commercial-scale CCS-equipped coal power plants are yet operating. The technology is in use at Statoil Hydro ASA’s Sleipner natural gas field off the coast of Norway, and as part of a research project in Saskatchewan, Canada part-funded by Royal Dutch Shell Plc and Chevron Corp.

In a discussion paper published earlier this month, Al- Juaied and research partner Adam Whitmore argued that the additional capital and operating costs of electricity generation with CCS would be about $100 to $150 per ton of carbon dioxide avoided for early plants, and about $30 to $50 per ton when the technology is “mature.” The estimates exclude the cost of transporting carbon dioxide to reservoirs.

Economically Competitive

Falling costs will make CCS economically competitive with wind and nuclear power, depending on future prices for carbon under cap-and-trade emissions regimes like the one in place in the European Union, al-Juaied said. A credit for a ton of carbon dioxide currently trades for about 14 euros ($19.70) on the European Climate Exchange in London.

RWE AG, E.ON AG, and Iberdrola SA’s Scottish Power unit are competing in the U.K. for government funds to cover as much as 100 percent of the costs of fitting CCS equipment to a single coal power plant. The government said earlier this year that it would underwrite up to three more CCS demonstration projects.

“There’s likely to be a phase beyond this where public subsidy is required,” David Kennedy, chief executive of the U.K.’s Committee on Climate Change, said in a July 28 telephone interview. The Committee was appointed by the U.K. parliament to provide advice on slowing climate change. While “the technology won’t be mature after four demonstration plants,” by the 2020s “you would expect the carbon price to be high enough to make the economics viable,” Kennedy said.

After 2020

Two of the three competitors for the first public subsidies for commercial-scale CCS in the U.K. said that they could not proceed without public funds.

“There’s absolutely no question you couldn’t do that on the balance sheet,” RWE spokesman Leon Flexman said in an interview about funding a full CCS-equipped plant out of the company’s own resources. “The economies of scale will kick in probably after 2020.” RWE is seeking government funds to build a new plant in Tilbury, Essex.

E.ON, which hopes to win public funding to rebuild its Kingsnorth coal plant in Kent, “couldn’t proceed with a demonstration” of CCS without subsidies, spokeswoman Emily Highmore said by telephone. “It’s going to be the carbon market that’s going to incentivize investment” later on, Highmore said.

To contact the reporter on this story: Matthew Campbell in London at mcampbell39@bloomberg.net.

Last Updated: July 31, 2009 06:14 EDT