The cost of pipeling climate change mitigation : an overview of the economics of CH4, CO2 and H2 transportation

Abstract

Gases like CH4, CO2 and H2 may play a key role in establishing a sustainable energy system: CH4 is the least carbon-intensive fossil energy resource; CO2 capture and storage can significantly reduce the climate footprint of especially fossil-based electricity generation; and the use of H2 as energy carrier could enable carbon-free automotive transportation. Yet the construction of large pipeline infrastructures usually constitutes a major and time-consuming undertaking, because of safety and environmental issues, legal and (geo)political siting arguments, technically un-trivial installation processes, and/or high investment cost requirements. In this article we focus on the latter and present an overview of both the total costs and cost components of the distribution of these three gases via pipelines. Possible intricacies and external factors that strongly influence these costs, like the choice of location and terrain, are also included in our analysis. Our distribution cost breakdown estimates are based on transportation data for CH4, which we adjust for CO2 and H2 in order to account for the specific additional characteristics of these two gases. The overall trend is that pipeline construction is no longer subject to significant cost reductions. For the purpose of designing energy and climate policy we therefore know in principle with reasonable certainty what the minimum distribution cost components of future energy systems are that rely on pipelining these gases. We describe the reasons why we observe limited learning-by-doing and explain why negligible construction cost reductions for future CH4, CO2 and H2 pipeline projects can be expected. Cost data of individual pipeline projects may strongly deviate from the global average because of national or regional effects related to the type of terrain, but also to varying costs of labor and fluctuating market prices of components like steel.