Carbon Capture Technology (CCS) Could Trigger Surge in Consumer Electricity Prices

Fossil fuel power companies suggest that coal and natural gas plants can become cleaner and more environmentally friendly through Carbon Capture and Storage (CCS). However, this outlook is often attributed to “optimism bias,” as the resulting financial burden is likely to be passed on to consumers.

Fossil fuel corporations are eager to implement technologies that filter carbon dioxide—the primary driver of global warming. Yet, reliance on CCS presents a significant risk, with consumers expected to bear the escalating costs. According to a new report from the Institute for Energy Economics and Financial Analysis (IEEFA), electricity generated from plants equipped with CCS is 1.5 to 2 times more expensive than alternative power sources. Transitioning to renewables, such as solar and wind, remains a far more cost-effective solution.

The economic case for CCS in the power sector remains weak due to cost uncertainties, financing challenges, consistent technological failures, and the rapid evolution of competitive renewable alternatives. Christina Ng, co-author of the report, noted in a press briefing that despite these drawbacks, policymakers continue to view CCS as a sustainable investment or a lucrative opportunity for developers.

The Mechanism and Controversy of CCS

The technology is designed to capture $CO_2$ emissions at the source before they exit the flue gas stacks. Once captured, the greenhouse gas is stored underground to prevent it from entering the atmosphere. However, fossil fuel companies frequently use this captured $CO_2$ for Enhanced Oil Recovery (EOR)—a process that extracts hard-to-reach oil reserves. These companies then market the resulting product as “Carbon Neutral” oil.

This has made CCS a highly controversial climate solution. Critics argue it is a strategy used by fossil fuel firms to brand themselves as “climate heroes” while simultaneously increasing oil extraction. Furthermore, the infrastructure required for $CO_2$ storage and new pipeline networks adds substantial overhead costs.

Economic Impact: Comparing LCOE

In Australia, where electricity generation still relies heavily on coal, the analysis suggests that if developers pass these costs onto the public, wholesale electricity prices could soar by 95% to 175%.

When evaluating the Levelized Cost of Energy (LCOE)—the average cost of electricity generation over a plant’s operational lifetime—the report indicates that fossil fuels paired with CCS are at least 1.5 to 2 times costlier than solar, wind, or even traditional coal and gas plants.

While renewable energy projects require initial capital investment for solar farms, wind turbines, and grid expansion, the cost of solar and wind power has plummeted in recent years. Solar energy has now become the cheapest source of electricity in many parts of the world, making it the probable primary energy source for the future.

Historical Failures vs. Future Projections

To date, the few power plants equipped with CCS have underperformed. The U.S. Department of Energy (DOE) has lost millions of dollars on failed CCS initiatives. A 2021 report revealed that the government spent over $684 million to support CCS projects at six coal plants, yet only one became operational. The others remained incomplete due to “factors affecting economic viability,” according to the Government Accountability Office (GAO).

Despite these documented failures and high costs, global CCS capacity is still projected to quadruple by 2030.