Subsidizing Carbon Capture and Storage

The federal Budget kicked in a rather hefty $240 Million subsidy to a proposed new SaskPower coal-fired power plant that will demonstrate CCS technology. Perhaps this is a good thing which should be welcomed – climate change activists sound vaguely impressed – but I wonder if  we should be so heavily subsidizing CCS, as opposed to forcing it on power generators and others (such as the tar sands) by putting a price or cap on carbon emissions. It strikes me that the latter approach is preferable in principle in that it would force up prices of  energy produced by high carbon emissions processes, and thus limit demand and consumption. That said, there is no doubt a case for getting a promising technology up and running, developing Canadian technical expertise and capacity etc.

Breaking News from The Globe and Mail

SaskPower tries retrofit route

Wednesday, February 27, 2008

OTTAWA — Saskatchewan’s provincially owned utility said Wednesday it will spend $758-million, on top of $240-million provided by this week’s federal budget, to rebuild an aging power plant into North America’s first clean-coal unit that will capture and store carbon dioxide.

Armed with $240-million in federal funding announced in Tuesday’s budget, Saskatchewan’s Minister for Crown Corporations, Ken Cheveldayoff, said the provincial utility will proceed with a 100-megawatt plant that will capture a million tonnes a year of CO{-2}.

The greenhouse gas will then be piped to nearby oil fields, where it will be injected underground to boost the recovery of crude.

The Saskatchewan project represents a major shift in the search for technology that would allow utilities to burn cheap and plentiful coal without emitting greenhouse gases that cause global warming.

Until recently, companies focused almost exclusively on new gasification plants that separated the carbon dioxide prior to combustion. In this project, SaskPower will rebuild a coal unit at the Boundary site in the southeastern part of the province, extend its life by 30 years and include postcombustion capture technology.

“It’s a leading-edge project that, if it works out well, it can be replicated in other plants,” Mr. Cheveldayoff said. He added the clean-coal project will allow SaskPower to cut its greenhouse gas emissions by 7.2 per cent from 2006 levels.

The Boundary site is near Estevan, where EnCana Corp. already uses carbon dioxide – piped from North Dakota – in an enhanced oil recovery project. The EnCana operation has been widely studied, and scientists believed the CO{-2} injected there will remain trapped for thousands of years.

SaskPower had considered constructing a new, 300-megawatt clean-coal plant that would capture the carbon dioxide prior to combustion but cancelled the project because of rapidly rising costs.

SaskPower president Patricia Youzwa said the demonstration project is a critical step in the commercialization of clean-coal technology.

“By doing a project like this, we’ll better understand what the economics are and how the technology performs relative to other alternatives that there may be for reducing greenhouse gas emissions,” she said in an interview.

She said SaskPower has not yet chosen the technology that it will use to capture the gases from its flue, though experts say there has recently been progress with ammonia chilled scrubber technology.

The province has committed to sharing the information from its demonstration project with coal-dependent utilities in Alberta and Nova Scotia.

There have been substantial advances in postcombustion clean-coal technology in the past year, and several North American utilities are now considering projects.

David Lewin, senior vice-president with Edmonton-based Epcor Utilities Inc., said the industry will be watching the Saskatchewan project to assess the commercial viability of retrofit carbon-capture.

David Keith, a University of Calgary environmental engineer, said the retrofit technology could be an important tool in the battle against climate change.

But a recent task force on carbon capture and storage, on which Dr. Keith served, recommended that government spend $2-billion to implement the technology throughout Western Canada. This week’s budget effort, he said, will leave Canada far short of its goals to reduce emissions.

© The Globe and Mail




Clean coal

Sask. Party moving forward with plans for clean coal project

James Wood, Saskatchewan News Network

Published: Wednesday, February 27, 2008

REGINA — With federal money in hand, the Saskatchewan Party government is moving forward with plans for a clean coal carbon sequestration demonstration project.

A day after the federal budget earmarked $240 million to the province for the project, Crown Corporations Minister Ken Cheveldayoff and SaskPower president Pat Youzwa announced plans for a seven-year, $1.4 billion project that involves the retrofit of one of SaskPower’s coal-fired power generation units at Boundary Dam near Estevan.

The end result is intended to be the production of 100 megawatts of power with zero greenhouse gas emissions, reducing the Crown corporation’s emissions by about one megatonne a year.

Casting a shadow over the project however is SaskPower’s last foray into clean coal, which saw a planned new 300-megawatt plant shelved last year, partly because projected costs rose from $1.5 billion to $3.8 billion.

The U.S. government also recently pulled its funding for a clean coal project in Illinois because of cost overruns.

But Cheveldayoff expressed confidence in the financial projections for the new project.

“It’s happening immediately. Planning is beginning right away, we’re looking at construction starting in 2011. It’s happening as soon as possible. We’re keeping our finger on the numbers that are out there. This is the best information that we have recognizing the cost escalations that are happening around us and some of that has been built in,” he told reporters at the provincial Finance building.  

SaskPower will put $758 million into the project on top of the federal funding.

With the plant itself projected to cost $1 billion, the additional $400 million is needed for surrounding infrastructure such as the pipelines for the carbon dioxide.

Cheveldayoff said the government will look to the private sector for the additional funding, with the anticipation that costs will be offset by the sales of carbon dioxide for use in enhanced oil recovery.

Youzwa said the facilities at Boundary Dam would need to be refurbished or replaced in coming years in any case, which the company estimated would cost $800 million without the clean coal component.  

The SaskPower president cautioned that the company must still undertake detailed engineering work, choose the technology to clean emissions at the stack and complete discussions with  the oil industry on the carbon dioxide sales.

“Until that’s completed we won’t be … bringing forward decision items to commit large amounts of capital. The project has to work and make sense both environmentally and economically,” she said.

The prospect of a coal-burning plant with minimal greenhouse gas emissions through the capture and storage of carbon dioxide has been a beacon for Saskatchewan governments of all stripes given the province’s large coal reserves, its per capita greenhouse gas emissions that lead the country and the prospect of selling the developed technology to other jurisdictions.

NDP Leader Lorne Calvert said he’s glad to see the government moving forward with a new clean-coal project but he’s concerned about the uncertainty around many aspects, especially the private-sector funding.

There is also a question about the potential for cost escalation given the seven-year timeframe involved, said Calvert, whose government put the $300-megawatt project on the backburner.

“If they haven’t even determined now the technology they’re going to use, how can they be definitive about the numbers,” he said.

The ex-premier noted that if the costs do go up, it’s unlikely the federal investment will rise in kind and those increases will likely fall on the province.

The Saskatchewan Party government has committed to keeping the greenhouse gas targets adopted last year by Calvert’s government, which included stabilizing emissions by 2010 and cutting them by 32 per cent by 2020.

The projected reduction from the new clean coal project represents a roughly six per cent cut from the province’s greenhouse gas emissions in 2005.  

While the interest in clean coal and carbon sequestration is growing among governments and industry, it represents a mirage for many environmental groups.

“If the government told SaskPower it needed to reduce its emissions by one megatonne, it could invest probably one-tenth to one-fifth of that amount ($1.4 billion) and get one megatonne of reductions, by investing in efficiencies, by investing in other renewable sources of power,” said Dale Marshall, climate change policy analyst with the David Suzuki Foundation.

The costs for Saskatchewan’s new project are in fact significantly higher than recent power-generation projects brought on line by SaskPower.

The Centennial Wind Power project, officially commissioned in 2006, cost $250 million and provides 150-megawatts of generation. The planned addition of two natural gas-powered turbines near Kerrobert is estimated to add nearly 100 megawatts at a cost of $150 million.

Cheveldayoff and Youzwa said the government is looking at all options for power generation.

But coal-fired generation represents part of Saskatchewan’s “base load power” while wind power faces limitations because it is intermittent, said Cheveldayoff.  

Natural gas, while cleaner than regular coal-fired generation, still has significant greenhouse gas emissions.

Bob Stobbs, the chair of the Canadian Clean Power Coalition industry group, said the price for future clean coal projects will come down once a plant is actually up-and-running.

© Canwest News Service 2008








  • “will remain trapped for thousands of years.”

    Maybe the journalist is too lazy to given an accurate number, but thousands of years doesn’t seem long enough. It should be millions.

    At a cost of billion dollars a nuclear plant might be a similar price with a lower cost for fuel and a much lower volume of toxic waste (I understand coal ash is more radioactive per watt of power generated then nuclear waste, but the radioactivity is diluted so no one worries about.)

  • Certainly, it is an interesting strategic choice to provide the subsidy to Saskatchewan and to a provincial crown corp no less. Had they given this to EnCana in Alberta the outcry would likely have been huge.

    At the current stage of technology development a subsidy seems warranted. The upside potential is high, and the spillovers immense. Carbon pricing is coming and with a demonstration project, the combination is a good one.

  • I’m posting a comment from the David Suzuki Foundation on this issue:

    “DSF has a position that no government money should go into CCS. Government’s role should be to set a sufficient price on carbon. If that were done, very few if any electric utilities in Canada would invest in attaching CCS to coal-fired power plants since there are so many other more cost-effective ways to reduce GHGs from the power sector. CCS applications could eventually be a cost-effective solution for the tar sands, but there is no reason that we see that government should be subsidizing the oil and gas industry.

    So DSF’s response would never be to “welcome” subsidies for CCS, no matter what the reservations or caveats. Just our two cents worth.

  • I have not followed this story closely, but the timing seems potentially noteworthy. When Saskatchewan’s former NDP government announced its intention to build a clean-coal plant, I do not remember the federal Conservatives stepping forward with financial assistance. Even in the context of much tighter federal finances, they now seem willing to do so for Saskatchewan’s New Government, albeit with different technology. Could this be why the federal Environment Minister flew to Regina immediately after the provincial election?

    Whatever its relative environmental merits, I think that getting ahead of the curve on clean coal technology is sound industrial strategy. The US has massive coal reserves, sharply limited hydro potential, and a strong desire to reduce its dependence on foreign oil (or liquefied gas). Even if the US pursues the controversial nuclear option, it will almost certainly also be investing heavily in coal power.

  • What is your guys opion on carbon capture and storage with regards to the african economies? It appears that many African countries are sitting on vast amounts of natural resources, such as oil. So if we are to lift them out of poverty, and at the same time fight global warming, don’t you think Carbon Capture is a viable way to go?

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