EN­ERGY Al­berta cau­tions about high costs

National Post (Latest Edition) - - FRONT PAGE - Ge of­frey Mo rgan

HOUS­TON• Ma­jor oil com­pa­nies Royal Dutch Shell

PLC and BP PLC are tak­ing an­other hard look at car­bon cap­ture stor­age, much to the alarm of Al­berta which has sunk more than a bil­lion dol­lars in the tech­nol­ogy with lit­tle ev­i­dence that it can ef­fec­tively rein in the prov­ince’s car­bon emis­sions.

Al­berta En­ergy Min­is­ter Marg McCuaig-Boyd said she was “fairly sur­prised” at last week’s CERA Week en­ergy con­fer­ence in Hous­ton by the wide­spread en­thu­si­asm for CCS in­vest­ments. Al­berta had once been an en­thu­si­as­tic in­vestor in CCS projects, com­mit­ting $ 1.3 bil­lion to two projects in 2014, which at the time ac­counted for 10 per cent of the to­tal global in­vest­ment in car­bon se­ques­tra­tion. But the tech­nol­ogy was con­sid­ered too ex­pen­sive rel­a­tive to other emis­sions re­duc­tion strate­gies and fur­ther in­vest­ments in CCS in Al­berta were aban­doned. The prov­ince has since wound down its $2 bil­lion fund for CCS in­vest­ments, cit­ing the high costs.

“Right now, t here are tech­nolo­gies out there but it’ s very ex­pen­sive ,” McCuaig-Boyd said.

In Hous­ton, some of the world’s most in­flu­en­tial oil ex­ec­u­tives touted CCS — now re­branded as car­bon cap­ture, uti­liza­tion and stor­age ( CCUS) — as a way to re­duce global emis­sions. In ad­di­tion to Shell CEO Ben van Beur­den and BP chief ex­ec­u­tive Bob Dud­ley, the boost­ers in­clude In­ter­na­tional En­ergy Agency ex­ec­u­tive di­rec­tor Fatih Birol, U. S. En­ergy Sec­re­tary Rick Perry and Nor­way’s Min­is­ter of Petroleum and En­ergy Terje Sovik­nes.

“This is an ex­tremely im­por­tant tech­nol­ogy and we have seen re­cently a strong in­ter­est here,” Birol said of CCS, which he called “crit­i­cal” for en­ergy-pro­duc­ing ju­ris­dic­tions meet­ing their cli­mate-change goals un­der the Paris Agree­ment.

“There are plenty of ques­tions (fac­ing the en­ergy in­dus­try) but the big­gest one of them is still, in my mind, cli­mate change,” van Beur­den said, adding that fur­ther in­vest­ments in CCS/ CCUS could be part of Shell’s strat­egy for re­duc­ing its net car­bon foot­print by 50 per cent by 2050.

On Mon­day, IEA an­a­lysts Si­mon Ben­nett and Tris­tan Stan­ley pre­dicted in a re­port that pol­icy changes in the re­cent U. S. fed­eral bud­get “could trig­ger the largest surge in car­bon cap­ture in­vest­ment of any pol­icy in­stru­ment to date.”

The 2018 U. S. bud­get in­cludes tax cred­its of up to US$50 per tonne for cap­tured CO2, a move the IEA an­a­lysts be­lieve will boost the to­tal amount of CCS/ CCUS ca­pac­ity around the world by 66 per cent by 2026. Right now, CCS fa­cil­i­ties around the world cap­ture 29 mil­lion tonnes of CO2 per year, with projects in both Al­berta and Saskatchewan mak­ing a large con­tri­bu­tion to that to­tal.

With $ 745 mil­lion in fund­ing from Al­berta and $ 120 mil­lion from Ot­tawa, Shell Canada Ltd. built the Quest CCS project at a bi­tu­men up­grader near Ed­mon­ton, which re­duces the up­grader’s emis­sions by 35 per cent and has the ca­pac­ity to se­quester 1.2 mil­lion tonnes of CO2 per year, the equiv­a­lent of 250,000 cars, at an es­ti­mated cost of $ 1.35 bil­lion. But the tech­nol­ogy’s high price tag has made it a con­tro­ver­sial method for re­duc­ing emis­sions and there were some ini­tial per­for­mance is­sues at the sites where it has been in­stalled.

SaskPower’s $ 1.5- bil­lion Bound­ary Dam CCS project at a coal- fired power plant near Este­van, Sask., uses nearly iden­ti­cal tech­nol­ogy as Quest — SaskPower pur­chased the sys­tem from a Shell sub­sidiary — and is se­ques­ter­ing less than its de­signed ca­pac­ity. The provin­cially owned util­ity said Mon­day it had se­questered 2 mil­lion tonnes of CO2 since the project be­came op­er­a­tional in Oc­to­ber 2014, which trans­lates into a car­bon cap­tur­ing rate of about 585,366 tonnes per year, com­pared to ini­tial de­sign es­ti­mates of 1 mil­lion tonnes per year.

SaskPower spokesper­son Jonathan Trem­blay said the com­pany’s tar­get is to op­er­ate at 65 per cent of the CCS project’s de­sign ca­pac­ity be­cause it sells a por­tion of its de­sign ca­pac­ity to a third party, which uses the CO2 to stim­u­late oil and gas wells, and se­questers enough to meet those obli­ga­tions.

“In our first year of pro­duc­tion, we learned a lot,” Trem­blay said, adding the com­pany did ex­pe­ri­ence some in­con­sis­tent per­for­mance from the tech­nol­ogy when it was first in­stalled.

The Bound­ary Dam project has also been crit­i­cized for be­ing so ex­pen­sive as to be un­eco­nomic.

“Us­ing CCS to de­lay the shut­down of coal is ul­ti­mately not go­ing to be cost- ef­fec­tive in the long run,” said Pem­bina In­sti­tute pol­icy an­a­lyst Ja­son Switzer. “I would think the an­swer is that so­lu­tions are com­ing on the gen­er­a­tion side (like re­new­ables) and in power stor­age.”

Still, Switzer said CCS or CCUS in­vest­ments could make sense in other ap­pli­ca­tions, such as steel mills or pulp mills that are ex­pected to op­er­ate over a longer pe­riod of time so the high ini­tial in­vest­ment can be re­couped. “We do need to work on bring­ing the costs down and mak­ing the tech­nol­ogy more vi­able,” he said.

The in­vest­ments in CCS tech­nol­ogy in Al­berta had be­come so con­tro­ver­sial that for­mer premier Jim Pren­tice scrapped the fund in 2014, call­ing it “a very siz­able in­vest­ment of tax­pay­ers’ money and pru­dence dic­tates that we should en­sure that we be­gin to see some com­mer­cial vi­a­bil­ity to these in­vest­ments.”

Still, other ju­ris­dic­tions are mov­ing ahead with new CCS in­stal­ments, in­clud­ing Texas- based NRG En­ergy Inc.’s US$ 1- bil­lion Petro Nova CCS project at a coal- fired power plant near Hous­ton and new fa­cil­i­ties in Europe.

“It is not a big con­tra­dic­tion be­tween be­ing a big pro­ducer of oil and gas and hav­ing am­bi­tious cli­mate poli­cies,” Nor­we­gian en­ergy min­is­ter Terje Sovik­nes said in Hous­ton. Nor­way, which pro­duces oil from the North Sea, is con­sid­er­ing fur­ther CCS in­vest­ments in­clud­ing at a ce­ment plant, an am­mo­nia plant and a waste-in­cin­er­a­tion plant.

“Ev­ery­body agrees we need CCS on a large scale, and af­ford­able CCS, if we are go­ing to reach our goals on cli­mate change,” Sovik­nes said, adding that “to­day, it’s quite costly and we have to bring down the costs.”

He said other ju­ris­dic­tions should also in­vest in CCS re­search and de­ploy­ments in a col­lab­o­ra­tive ap­proach.

In his speech in Hous­ton, Perry touted the U. S. com­mit­ment to CCS tech­nol­ogy to re­duce emis­sions while grow­ing its oil pro­duc­tion to ex­ceed that of Saudi Ara­bia’s.

“Amer­ica is in the mid­dle of an en­ergy rev­o­lu­tion,” the En­ergy Sec­re­tary said, adding CCS would al­low that rev­o­lu­tion to con­tinue while re­duc­ing emis­sions, rather than re­duc­ing oil pro­duc­tion.

In Al­berta, the prov­ince’s NDP gov­ern­ment had cam­paigned on a prom­ise to back out of all CCS in­vest­ments but did not fol­low through once it came to power as the con­tracts the pre­vi­ous Pro­gres­sive Con­ser­va­tives signed were bind­ing.

De­spite the oil in­dus­try’s re­newed fas­ci­na­tion with CCS, the prov­ince says it has no plans to re­visit its de­funct CCS fund. Still, McCuaig- Boyd said the prov­ince is will­ing to con­sider new tech­nolo­gies as they emerge.

“Eco­nomic De­vel­op­ment and Trade has launched a car­bon prize, so I can see that there might be some projects come through that — ways to use that car­bon,” McCuaig- Boyd said, but in­di­cated that would be as far as the pro­vin­cial gov­ern­ment would be will­ing to fund CCS in­vest­ments at this point.

“If some­one comes up with a good use for car­bon, I don’t think the door is shut on that,” she said.


The Quest car­bon cap­ture and stor­age fa­cil­ity in Fort Saskatchewan, Alta., is de­signed to re­duce the up­grader’s emis­sions by 35 per cent.


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