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![Page 1: CCS projects a North American perspective – Victor Der - Global CCS Institute Members Meeting - Rotterdam May 2011](https://reader033.fdocuments.net/reader033/viewer/2022051322/544f4e10af795902708b87b2/html5/thumbnails/1.jpg)
STATUS OF CCS DEMONSTRATION PROJECTS- NORTH
AMERICA
GLOBAL CCS INSTITUTE MEMBERS MEETING
ROTTERDAM, NETHERLANDSMAY 9, 2011
VICTOR K. DERFormer CSLF Policy Chair
Former USDOE Assistant Secretary for Fossil Energy (actg)
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HOW CCS FIT INTO U.S. CLEAN
ENERGY STANDARDS • U.S. Administration Advocating a Clean Energy
Standard for Electricity of 80 % (GHG - Carbon emission-equivalent free) by 2035
• Big finds in Shale Gas =>Push for Natural Gas Combined Cycle as part of the portfolio. The most NGCC can contribute is 40% since it’s value is taken as 0.5 GHG content per unit energy.o That means, absent coal and/or gas with CCS,
nuclear and renewables will have to shoulder 60%--a tall order by 2035
• That is why CCS is considered a necessary part of the portfolio, whether it be CCS on coal or natural gas generation.
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CURRENT CCS SITUATION IN U.S.• NO LEGISLATIVE CO2 MANDATE = TOUGH TO RATE BASE CCS
• EPA Underground Injection Code – Clean Water Act – Regional Class 2 Injection for EOR vs Class 6 Storage requirements
• EPA AIR EMISSIONS FOR GHG – issued in January 2011; working out details –perhaps in place by 2012; State of Texas law suit pending against EPA
• PROPOSED BILL IN SENATE FOR CLEAN ENERGY STANDARD ALIGNED WITH ADMINISTRATION PUSH FOR 80% CES BY 2035
• Projects that go forward will need to make it on the market demand for CO2 and other factors
• Absent a national mandate on carbon, some States may end up taking a lead role for CCS (e.g., California, Texas, etc.) , but for EOR--– CO2 demand creating a driver for capture.
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Federal government ~$1.3 billion for CCS supporting studies and demo projects Clean Energy Dialogue with the United States
Alberta government $2B towards deployment of 4 projects by 2015 Groundbreaking CCS legislation:
- Assumption of long-term liability - Establishment of long-term stewardship fund- Address pore space ownership
Saskatchewan, British Columbia & Maritimes Approval of SaskPower’s $1.24B CCS project Advancement of several other large-scale CCS projects Study work to understand underground storage potential
CANADA: Important Steps Have Been Taken ( $4.5B Government Funds)
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POLICY INCENTIVES FOR U.S. CCS
DEMOS
• TAX INCENTIVESo INVESTMENT TAX CREDIT –Secs 48A & 48B – limit
(~ 4GW)o PRODUCTION TAX CREDIT –Sec 45Q – limited to
75MM tonnes; $10 for EOR; $20 for Storageo FAVORABLE RECENT TREASURY PROCEDURAL
RULING ALLOWS “STACKING” BENEFITS (production credit now allowed for first 65% capture under 45Q requirement)
• LOAN GUARANTEES for gasification and combustion with CCS are funding limited thus far (Section 1703 of EPAct 2005)
• US DOE Demonstration Funding for CCS Power Demos:o Recovery Act ($800M + $1B for FutureGen 2.0)o Clean Coal Power Initiative- $600M from
Appropriations• Industrial CCS- pilot demos from Recovery Act
funding-$686M
• RECOVERY ACT- Industrial CC Utilization (CCUS) projects
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DEPLOYMENT INCENTIVES
LIMITATIONS
• EVEN WITH TAX INCENTIVES, GOV’T DEMO FUNDING, AND LOAN GUARANTEES WHERE THEY EXIST, PROJECT MUST BE ECONOMICALLY VIABLE ON ITS OWN
• HURDLES:o LACK OF CARBON VALUATION LIMITS THESE TYPES OF PROJECTSo STATE REGULATORY RELUCTANT TO ALLOW R&D (ELECTRICITY
COST PREMIUM FOR DEMOS) INTO RATE BASE o LONG –TERM LIABILITY NOT ADDRESSED AT THE FEDERAL LEVEL–
SOME STATES MAY BE WILLING TO ACCEPT LIABIILITY WITH TERMS TO BE DETERMINED– TEXAS SEEMS TO BE A LEADER (SEES A BUSINESS IN CO2 STORAGE ALONG WITH EOR )
• MAJORITY OF THE CCS PROJECT MAKE USE OF CO2 FOR EOR APPLICATIONS.
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STORAGE LIABILITY SITUATION IN
U.S.• CURRENT FOCUS ON LONG TERM LIABIILTY ON NATIONAL LEVEL
HAS COOLED - ABSENT A NATIONAL CARBON MANDATE
• PAST PROPOSALS ON LONG-TERM LIABILITY /INDEMNIFICATION INCLUDED:o An Industry proposal on capped pay-in fee with subsequent
hand-off of liability to government o Congressional draft legislation for indemnification of long-
term liability after post-closure stabilization for first 10 large scale CCS demos ( >1 MMT/YR) with a pay-in for risk coverage– monetizing storage risk
• INSURANCE INDUSTRY MAY COVER A LIMITED POST-OPERATIONAL PERIOD– BUT NEED TO COLLECT PREMIUMS DURING OPERATIONS
• EPA UIC REGS MANDATE NOMINAL 50-YEAR MONITORING IN POST OPERATIONS UNLESS CAN SHOW OTHERWISE A STABLE CO2 “PLUME”
• STATES (E.G., TEXAS) MAY WANT TO ASSUME LIABILITY – FOR REVENUES
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Nine Major U.S. CCS Demonstration ProjectsLocation & Cost Share
HECACommercial Demo of AdvancedIGCC w/ Full Carbon Capture$2.840B – Total$404M – DOE
Summit TX Clean EnergyCommercial Demo of AdvancedIGCC w/ Full Carbon Capture$1.727B – Total$450M – DOE
AEPPost Combustion CO2 Capture$668M – Total$334M – DOE
Archer Daniels MidlandIndustrial Power & Ethanol$208M – Total$141M – DOE
NRGPost Combustion CO2 Capture$334M – Total$167M – DOE
Leucadia EnergyMethanol$436M – Total$261M – DOE
Air ProductsH2 Production$431M – Total$284M – DOE
Future Gen 2.0Oxy-combustion/Regional Repository$1.24B – Total$1B – DOE
Southern CompanyIGCC-Transport Gasifier w/Carbon Capture$2.880B – Total$293M – DOE
Total Cost: $10.7BDOE – $3.4 BNon-Federal – $7.3 B
These projects collectively will capture up 16 million TPY of CO2Source: U.S. DOE Office of Fossil Energy
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STATUS AND DESCRIPTION OF CCS
DEMOS• SIX OF NINE U.S. AND ALL CANADIAN PROJECTS =
EOR; ALL AT >1MM CO2 TONNES/YR EXCEPT ONE
• SIX POWER CCS DEMOS IN U.S.: o FUTUREGEN 2.0 –OXYCOMBUSTION IN SALINE; o KEMPER- AIR-BLOWN IGCC WITH EOR; o AEP POST-COMBUSTION- SALINE; o HECA- OXYGEN-BLOWN IGCC - EOR; o TCEP- OXYGEN- BLOWN POLYGEN GASIFICATION-EOR; o NRG- POST-COMBUSTION-(400,000 TNS CO2/YR) -EOR
• THREE INDUSTRIAL CCS IN U.S. o ADM- ETHANOL POST-CAPTURE-SALINE; o LEUCADIA – METHANOL -POST CAPTURE - EOR; o AIR PRODUCTS- H2- SEPARATION - EOR
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Canada’s CCS Projects
Project Location Project Type Volume
1. Shell Scotford Upgrader Edmonton, Alberta
• Bitumen Upgrader• Post- combustion amine solvent
• 1 Mt/yr • EOR & Sequestration
2. TransAlta Pioneer
Wabamum Lake, Alberta
• Coal-fired power plant• Post-combustion chilled ammonia
• 1 Mt/yr • EOR & Sequestration
3. Enhance Pipeline
Industrial Heartland,
Alberta (3 facilities)
• Large-scale CO2 pipeline
• CO2 from fertilizer plant & bitumen upgrader
• 1.7 Mt/yr initially• Pipeline for up to 14Mt • EOR
4. Swan Hills Synfuels
White Court, Alberta
• In-situ coal gasification • (syngass for 300MW of co-
generation)
• 1.3 Mt/yr • EOR
5. SaskPower Boundary Dam
Estevan, Saskatchewn
• Coal-fired electricity power plant• Post Combustion Amine
• 1 Mt/yr • EOR
6. Spectra Energy Fort Nelson, British Columbia
• Capture at a natural gas plant• 1 Mt/yr • EOR & Sequestration
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FUNDING SOURCES FOR CCS
DEMOS• BALANCE VS OFF BALANCE SHEET PROJECT – DEPENDS ON
PROJECT ECONOMICS, RISK EXPOSURE, RATE BASING AND OPERATING REVENUE SOURCES; AND IF RECEIVE DOE GRANT FOR DEMO => TAXABILITY OF GRANT (US TAX CODE 118) IF NOT A CORPORATION VS LIMITED LIABILITY CORPORATION (LLC)
• DOE COST SHARE AND PARTNER EQUITY – DOE’S CONTRIBUTION DOESN’T DILUTE PROJECT EQUITY AND INCREASES LEVERAGING
• FINANCING FOR OFF-BALANCE SHEET – THOROUGH FINANCIAL DUE DILIGENCE, EQUITY CONTRIBUTION (“SKIN IN THE GAME”), ACCURATE COST ESTIMATION, RISK SHARING, OFF-TAKE AGREEMENTS STRUCTURE ARE A MUST FOR FINANCEABILITY EVEN WITH GOV’T LOAN GUARANTEES;
• TAX INCENTIVES CAN HELP EARLY-MOVERS IN A MERCHANT MARKET ABSENT A REGULATED RATE BASE ALLOWANCE
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SOME U.S. EXPERIENCES AND LESSONS
LEARNED • Absent Carbon mandate, must base CCS projects on
project economics that meet risk and return with value products slate including CO2 and off-take agreements
• Engage the State early to solicit support on: o Long –term liability; o Site unitization plans and subsurface rights; o Work with state commissions, regulators,
legislators, public interest groups, and affected public
• Enlist support of environmental groups by showing the project advantages vs. the alternatives over the long term
• Locate CCS projects in communities willing to accept by offering economic, social and environmental benefits – DON’T GO WHERE YOU’RE NOT WANTED.
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SOME U.S. EXPERIENCES AND LESSONS
LEARNED (continued)• Lock in feedstock supply agreements, off-takes
agreements for CO2 or other co-produced products (Gasification advantage), and rate-basing or Power Purchase Agreement in States with low-carbon or clean coal electricity portfolio (e.g., Calif., Illinois)
• Tightened, detailed cost-estimates , contingency management, and incentivize holding to schedule; go with reputation via use of world-class contractors (EPCs and A&Es, vendors)
• Allocate and manage risks among equity holders, suppliers, and financiers with proven technology components, securing warrantees and performance guarantees, and design for optimal availability for revenue and return.
• Engage stakeholders, and local community to answer the question: “What’s in it for me?” if you locate in my area.
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SOME FINAL THOUGHTS ON FIRST
WAVE OF CCS DEMOS IN NORTH
AMERICA • DIFFICULT SITUATION ABSENT FEDERAL CARBON MANDATE• STATES AND PROVINCES ARE KEY TO HELPING FIRST CCS
DEMOS
• PROJECTS THAT MOVE FORWARD HAVE A VALUE PROPOSITION VIA CO2- EOR APPLICATIONS (6 OF THE 9 US DEMOS AND ALL CANADIAN DEMOS INVOLVE EOR) – A KEY TO EARLY ADOPTION OF CCS AND CCUS
• LESSONS LEARNED FROM PROJECTS ARE IMPORTANT TO IMPART (E.G., SECURIING RIGHTS/PERMITS; COMMUNITY, STATE REGULATORY SUPPORT)
• IN U.S. , CCS CAPACITY BUILDING IS OCCURRING AT THE STATE AND REGIONAL LEVELS, IE, CAPACITY BUILDING IS NOT JUST FOR DEVELOPING ECONOMIES ANYMORE!
• CCUS- A WAY TO VALUE CARBON AS A FEEDSTOCK FOR PRODUCTS
• FINDING FUNDING FOR NEXT GENERATION OF DEMOS WILL BE DIFFICULT