Abu Dhabi and California Projects; the Commercial Aspects of Making it Work and What is Needed fromand What is Needed from Governments

Preston Chiaroesto C a oChairman, World Coal Institute

29 May 2008

We need to deploy CCS technology

Cumulative globally sequestered CO2

Cumulative global need to sequester CO2

Princeton wedges:Princeton wedges:technology options for GHG stabilization

The Stabilisation Wedge 1 GtC Slices of the Stabilisation Wedge

Emission trajectory BAU

Emission trajectory to achieve 500ppm

How big is a wedge?Examples of Lower Carbon Slices Scale for 1GtC Reduction by 2050

Increased energy efficiency across the economy 2 billion gasoline/diesel cars achieving 60 mpggy y y g g pg

Fuel switching natural gas displacing coal for power 1400GW fuelled by natural gas instead of coal

Solar PV or Wind replaces coal for power 1000x scale up PV, 70x scale up for wind

Biofuels to replace petroleum based fuels 200x106 ha growing area (equals US agricultural land)

Carbon Capture and Geological Storage CO2 captured from 700 1GW coal plants; storage = 3,500x In Salah/Sleipner or CCS applied to 5% of new power growthp pp p g

Carbon Free Hydrogen for transport 1 billion H2 carbon free cars; H2 from fossil fuels with CO2capture and storage or from renewables or nuclear

Nuclear displaces coal for power 700 1GW plants (2x current)

Bio-sequestration in forests and soil Increased planted area and/or reduce deforestation

The energy sector emissions challenge

CO emissions by sectorThe power sector is already the largest contributor of CO2

CO2 emissions by sector

2004

41%45%

2020

44% contributor of CO2

Growth in coal-fired generation is projected to be the single largest

21%

41%38%

25%30%35%40%45%

22%

34%

the single largest contributor of new GHG emissions over the next

a s5%

10%15%20%

fifteen years

CCS is a key solution for this industry

0%Transport Power Heat Transport Power Heat

industrySource: IEA World Energy Outlook, 2004

Comparison of CO2 emissionsCO2 emissions from fossil–fuel power generationg / kWh net electricity generation

CO2 capturedCO2 released to atmosphere

800

900

1,000

855

600

700

800

876

705

855

488300

400

500

390 355

95 54

100

200

Existing coal fleet(UK example)

Modern coal(Ultra–supercritical)

Existing gas fleet(typical example)

Modern gas(CCGT, F–class)

Coal with pre-combustion CCS

(90% capture)

Gas with pre-combustion CCS

(90% capture)

Source: DTI (March 2006); Foster Wheeler; Hydrogen Energy analysis

540

cos o c c CCS sThe cost of electricity with CCS is competitive

5

4

CC

GT

= 1)

2

3

Rel

ativ

e C

ost (

C

1

R

0CCGT SCPC CCGT +

CCSIGCC + CCS Nuclear Onshore

WindOffshore

WindSolar

Thermal

We are entering a vital period if CCS is to take offCCS is to take off…

so what are we doing

What is Hydrogen Energy?What is Hydrogen Energy?

A company jointly owned by BP and Rio Tinto

established to supply low carbon hydrogen fuel to the power sector

using fossil fuels and carbon capture and storagestorage

Hydrogen Energy - what does it do?

H2

Fuel

CO2

Hydrogen Power Abu Dhabi

Hydrogen Power Abu Dhabi project

Relocating and leveraging Peterhead learnings

HP Abu Dhabi

Geography - Middle East

Fuel – natural gas

Size 500 MW power productionSize – 500 MW power production

Technology – gas reforming/combined cycle turbines

Sequestration – oil field with EOR benefit

HE focused on power and CO2 salesHE focused on power and CO2 sales

Strong political commitment

Project scopeHydrogenation & P R f iHydrogenation &Desulphurisation

Pre-Reforming

Auto-ThermalReforming

A i Ab b

Air (pre-heated in HRSG)

HPHPSS

SteamShift Reactors

Hydrogen

NG Feed Compressio Regen

Amine Absorber

CO2NG Pre-treatment

Process

Cond

Natural GasSulphur Removal

n

Fuel (H2 + Nitrogen)

Syngas ProductionCO2

Removal

HRSG DESALINATION PLANTAir HRSG

Fuel (H2 + Nitrogen)

BFW

Water for in-house plant use

Steam Turbine

Generator

Combustor~ GTCompr.

Gas Turbine

~ST

Turbine Generator

Vacuum condensatePower Production

Hydrogen Energy California project

• Adjacent to Occidental Elk Hills Field and CO2 injection point and EOR revenuerevenue

• Area provides proximity to feedstocks and intrastate transmission

BAKERSFIELDELK HILLS

and intrastate transmission

• Low population density

• Utilize local area petcoke supply and/orrailed coal for feedstock

Hydrogen Energy California Hydrogen Energy California project

Size – 400MW power production

Geography – US West Coast

Fuel – Pet coke/bituminous coalHE California

Technology – coal gasification

CO2 Capture – 4 million tonnes/yrtonnes/yr

Sequestration – oil field with EOR benefit

HE interest is focused on H2 sales

Strong political environmentStrong political environment

Project scopeProject scopePower Block

Air

AIR SEPARATIONAIR

HYDROGENTURBINE

GENERATOR

HEAT RECOVERYSTEAM GENERATOR

SCR/CO CATALYST

STEAM TURBINE

GENERATOR

ELECTRICPOWER

N2STEAM

Separation

260 MW net380 MW Gross

75 MW

O2

Petcoke &

Coal

CARBON DIOXIDE

Gasifier KitH2

GASIFIERWATER

DIOXIDE CAPTURESULFUR

REMOVAL

SHIFT REACTORS AND GAS

COOLING

H2CO2H2S

H2CO CO2H2OH2S CO2

TRANSPORTCO2

SEQUESTRATION

CO2COMPRESSION

FLUXANT

CO2

25 MW

SULFURCONVERSION

LIQUID SULFUR

H2S S

GasifierSolids

CA political environment is rightCA political environment is rightPolitical support California environmental policies

• California Energy Action Plan I and II• AB 32: Global Warming Solutions Act• SB 1368: GHG Emissions Performance Standard • California Loading Order• California Policies Supportive of Carbon Capture and Storage• AB 1925: Carbon Capture and Sequestration Legislation

Power demand350 Limited options in California

200

250

300

GW

H Utilities need 5500 MW of additional

100

150

200

1980 1985 1990 1995 2000 2005 2010 2015

capacity (16% of load) by 2014

Without CCS

Hydrogen Energy project evolution

Sink

Mat re Mat re

Lower risk

Higher risk

Lower Cost

Higher Cost

1st

Mature hydrocarbons with

proven demandfor CO2 for EOR

Mature hydrocarbons with potential

for EORDepleted

hydrocarbonsSaline

formations

1stAbu

DhabiGas

Liquid fuels

Lower risk

2ndCaliforniaFuel Pet coke

Bituminous3rd

Kwinana

(Cancelled)

Sub–bituminous

LigniteHigher

risk Ligniterisk

However power projects with CCS need support to develop

Support already provided to renewables

Comparable costs for electricity

Over time, experience gained from building and operating the first plants of thi t d t h lW

h

with

out

ure

and

gen

ener

gy

CC

S, n

ucle

ar

this type, and technology advances will help to bring the cost of hydrogen energy and CCS (and

$/M

W

foss

il fu

els

wca

rbon

cap

tust

orag

e hydr

ogan

d C

rene

wab

les

renewables) down

Sources: BP Estimates, Navigant Consulting, Deloitte and Touche LLP

Eventually carbon price will support CCS

$/tCO

Industrial scale demonstration projects Wide-scale deploymentCO2

Time Carbon price supports CCS

Others’ views on costs

International Energy Agency

Others’ views on costs

International Energy Agency

US$16 trillion will be needed to meet global energy demand next 30 years

US$1 5 trillion of that for coal fired power US$1.5 trillion of that for coal-fired power generation

Princeton University (Sokolow) / Columbia University (Sachs Lackner)(Sachs, Lackner)

Carbon emission charges of about US$100/tC (i.e. about US$30/tCO2) would enable commercialisation of CCS and all other commercialisation of CCS and all other necessary technologies

Shell / RWE 2

Early projects likely to require a level of support equivalent to $100 – 150 / tonne CO

In the near term —In the near term —A range of support mechanisms are availableare availableType of mechanism Examples

Mandated requirements for new plant to be low

• EU suggestion that all new plant be low carbon from 2020 (EU ETS would cover emissions from existing as for new plant to be low

carbon2020 (EU ETS would cover emissions from existing as well as new plant)

• Portfolio standards in US

Carbon pricing • Tradable allowances• Taxes• Hybrids of taxes and tradable allowances • Potentially supported by other financial instruments

Industrial policy support • Capital Grants• Tax breaks• Government or public utility equity• Government or public utility equity

Support for new technologies, especially renewables

• Reserved market (may be implemented with tradable certificates)

• Premium price set by regulator (e.g. feed-in tariffs) • Premium price set by auction, tender or negotiation

Sources: Deloitte and Touche LLP

The support mechanisms can be The support mechanisms can be funded in different ways

Customers

• electricity prices are higher due to the carbon price• additional costs from quantity obligations (e.g. Renewable Portfolio Standards or

Green Certificate Schemes)• the cost of premium priced contracts (e.g. feed in tariffs) passed through

Tax payers• general or earmarked taxation may fund support as grants, premium price

payments or tax breaks (capital or per MWh support)

• separate tax or levy on the retail price or wires business charges

Tax payers

l t d b f ll ti f ll b i t d b f

• government or publicly owned utilities may provide cheap capital (debt or equity)

Shareholders• surplus created by free allocation of allowances can be appropriated by means of

auctions, windfall taxes or price floor arrangements and channelled to clean generation

Sources: Deloitte and Touche LLP

Pointers to widespread policy Pointers to widespread policy support

US joins international

climate change

ff tstan

ces

only

elop

ed w

orld

‘Son of Kyoto’

replacement C t t hiefforts

tiona

l circ

ums

cros

s th

e de

ve

ptreaty 2012-

2015Catastrophi

c events resulting

from global warmingEU-wide or

US f d l

wor

k in

exc

ept

are

feas

ible

ac

Successful Individual government

US federal policy

support

Proj

ects

w

Proj

ects

aearly projects up and running

governments support individual projects

Summary

Contribution to tackling climate change from CCS can be considerable

Early industrial scale commercial projects ready to be developedto be developed

Government and policy incentives needed to enable construction and operation of these early plants

Long term instruments such as a higher carbon price should eventually be sufficient to support widespread deployment of CCS