STATUS OF CCS DEMONSTRATION PROJECTS- NORTH AMERICAGLOBAL CCS INSTITUTE MEMBERS MEETING ROTTERDAM,  NETHERLANDSMAY 9, 2011...
HOW CCS  FIT INTO U.S. CLEAN ENERGY STANDARDS <br />U.S. Administration Advocating a Clean Energy Standard for  Electricit...
CURRENT CCS SITUATION IN U.S.<br />NO LEGISLATIVE CO2 MANDATE =  TOUGH TO RATE BASE CCS <br />EPA Underground Injection Co...
CANADA: Important Steps Have Been Taken ( $4.5B Government Funds)<br />Federal government<br /><ul><li>~$1.3 billion for C...
Clean Energy Dialogue with the United States</li></ul>Alberta government <br /><ul><li>$2B towards deployment of 4 project...
Groundbreaking CCS legislation:
Assumption of long-term liability
Establishment of long-term stewardship fund
Address pore space ownership</li></ul>Saskatchewan, British Columbia & Maritimes<br /><ul><li>Approval of SaskPower’s $1.2...
Advancement of several other large-scale CCS projects
Study work to understand underground storage potential</li></li></ul><li>POLICY INCENTIVES FOR  U.S. CCS DEMOS<br />TAX IN...
DEPLOYMENT INCENTIVES LIMITATIONS <br />EVEN WITH TAX INCENTIVES, GOV’T DEMO FUNDING, AND LOAN GUARANTEES WHERE THEY EXIST...
STORAGE  LIABILITY SITUATION IN U.S.<br />CURRENT FOCUS ON LONG TERM LIABIILTY  ON NATIONAL LEVEL HAS COOLED  - ABSENT A N...
Nine Major U.S. CCS Demonstration ProjectsLocation & Cost Share<br />Total Cost: $10.7B<br />DOE – $3.4 B<br />Non-Federal...
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CCS projects a North American perspective – Victor Der - Global CCS Institute Members Meeting - Rotterdam May 2011

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CCS projects a North American perspective – Victor Der - Global CCS Institute Members Meeting - Rotterdam May 2011

  1. 1. STATUS OF CCS DEMONSTRATION PROJECTS- NORTH AMERICAGLOBAL CCS INSTITUTE MEMBERS MEETING ROTTERDAM, NETHERLANDSMAY 9, 2011<br />VICTOR K. DER<br />Former CSLF Policy Chair<br />Former USDOE Assistant Secretary for Fossil Energy (actg) <br />
  2. 2. HOW CCS FIT INTO U.S. CLEAN ENERGY STANDARDS <br />U.S. Administration Advocating a Clean Energy Standard for Electricity of 80 % (GHG - Carbon emission-equivalent free) by 2035<br />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.<br />That means, absent coal and/or gas with CCS, nuclear and renewables will have to shoulder 60%--a tall order by 2035<br />That is why CCS is considered a necessary part of the portfolio, whether it be CCS on coal or natural gas generation.<br />
  3. 3. CURRENT CCS SITUATION IN U.S.<br />NO LEGISLATIVE CO2 MANDATE = TOUGH TO RATE BASE CCS <br />EPA Underground Injection Code – Clean Water Act – Regional Class 2 Injection for EOR vs Class 6 Storage requirements<br />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 <br />PROPOSED BILL IN SENATE FOR CLEAN ENERGY STANDARD ALIGNED WITH ADMINISTRATION PUSH FOR 80% CES BY 2035 <br />Projects that go forward will need to make it on the market demand for CO2 and other factors<br />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. <br />
  4. 4. CANADA: Important Steps Have Been Taken ( $4.5B Government Funds)<br />Federal government<br /><ul><li>~$1.3 billion for CCS supporting studies and demo projects
  5. 5. Clean Energy Dialogue with the United States</li></ul>Alberta government <br /><ul><li>$2B towards deployment of 4 projects by 2015
  6. 6. Groundbreaking CCS legislation:
  7. 7. Assumption of long-term liability
  8. 8. Establishment of long-term stewardship fund
  9. 9. Address pore space ownership</li></ul>Saskatchewan, British Columbia & Maritimes<br /><ul><li>Approval of SaskPower’s $1.24B CCS project
  10. 10. Advancement of several other large-scale CCS projects
  11. 11. Study work to understand underground storage potential</li></li></ul><li>POLICY INCENTIVES FOR U.S. CCS DEMOS<br />TAX INCENTIVES<br />INVESTMENT TAX CREDIT –Secs 48A & 48B – limit (~ 4GW)<br />PRODUCTION TAX CREDIT –Sec 45Q – limited to 75MM tonnes; $10 for EOR; $20 for Storage<br />FAVORABLE RECENT TREASURY PROCEDURAL RULING ALLOWS “STACKING” BENEFITS (production credit now allowed for first 65% capture under 45Q requirement)<br />LOAN GUARANTEES for gasification and combustion with CCS are funding limited thus far (Section 1703 of EPAct 2005)<br />US DOE Demonstration Funding for CCS Power Demos:<br />Recovery Act ($800M + $1B for FutureGen 2.0)<br />Clean Coal Power Initiative- $600M from Appropriations<br />Industrial CCS- pilot demos from Recovery Act funding-$686M<br />RECOVERY ACT- Industrial CC Utilization (CCUS) projects<br />
  12. 12. DEPLOYMENT INCENTIVES LIMITATIONS <br />EVEN WITH TAX INCENTIVES, GOV’T DEMO FUNDING, AND LOAN GUARANTEES WHERE THEY EXIST, PROJECT MUST BE ECONOMICALLY VIABLE ON ITS OWN<br />HURDLES:<br />LACK OF CARBON VALUATION LIMITS THESE TYPES OF PROJECTS<br />STATE REGULATORY RELUCTANT TO ALLOW R&D (ELECTRICITY COST PREMIUM FOR DEMOS) INTO RATE BASE <br />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 )<br />MAJORITY OF THE CCS PROJECT MAKE USE OF CO2 FOR EOR APPLICATIONS.<br />
  13. 13. STORAGE LIABILITY SITUATION IN U.S.<br />CURRENT FOCUS ON LONG TERM LIABIILTY ON NATIONAL LEVEL HAS COOLED - ABSENT A NATIONAL CARBON MANDATE <br />PAST PROPOSALS ON LONG-TERM LIABILITY /INDEMNIFICATION INCLUDED:<br />An Industry proposal on capped pay-in fee with subsequent hand-off of liability to government <br />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<br />INSURANCE INDUSTRY MAY COVER A LIMITED POST-OPERATIONAL PERIOD– BUT NEED TO COLLECT PREMIUMS DURING OPERATIONS<br />EPA UIC REGS MANDATE NOMINAL 50-YEAR MONITORING IN POST OPERATIONS UNLESS CAN SHOW OTHERWISE A STABLE CO2 “PLUME”<br /> STATES (E.G., TEXAS) MAY WANT TO ASSUME LIABILITY – FOR REVENUES<br />
  14. 14. Nine Major U.S. CCS Demonstration ProjectsLocation & Cost Share<br />Total Cost: $10.7B<br />DOE – $3.4 B<br />Non-Federal – $7.3 B<br />Archer Daniels Midland<br />Industrial Power & Ethanol<br />$208M – Total<br />$141M – DOE<br />Future Gen 2.0<br />Oxy-combustion/Regional Repository<br />$1.24B – Total<br />$1B – DOE<br />Summit TX Clean Energy<br />Commercial Demo of Advanced<br />IGCC w/ Full Carbon Capture<br />$1.727B – Total<br />$450M – DOE<br />NRG<br />Post Combustion CO2 Capture<br />$334M – Total<br />$167M – DOE<br />AEP<br />Post Combustion CO2 Capture<br />$668M – Total<br />$334M – DOE<br />HECA<br />Commercial Demo of Advanced<br />IGCC w/ Full Carbon Capture<br />$2.840B – Total<br />$404M – DOE<br />Southern Company<br />IGCC-Transport Gasifier <br />w/Carbon Capture<br />$2.880B – Total<br />$293M – DOE<br />Air Products<br />H2 Production<br />$431M – Total<br />$284M – DOE<br />Leucadia Energy<br />Methanol<br />$436M – Total<br />$261M – DOE<br />These projects collectively will capture up 16 million TPY of CO2<br />Source: U.S. DOE Office of Fossil Energy<br />
  15. 15. STATUS AND DESCRIPTION OF CCS DEMOS<br />SIX OF NINE U.S. AND ALL CANADIAN PROJECTS = EOR; ALL AT >1MM CO2 TONNES/YR EXCEPT ONE<br />SIX POWER CCS DEMOS IN U.S.: <br />FUTUREGEN 2.0 –OXYCOMBUSTION IN SALINE; <br />KEMPER- AIR-BLOWN IGCC WITH EOR; <br />AEP POST-COMBUSTION- SALINE; <br />HECA- OXYGEN-BLOWN IGCC - EOR; <br />TCEP- OXYGEN- BLOWN POLYGEN GASIFICATION-EOR; <br />NRG- POST-COMBUSTION-(400,000 TNS CO2/YR) -EOR<br />THREE INDUSTRIAL CCS IN U.S.<br />ADM- ETHANOL POST-CAPTURE-SALINE; <br />LEUCADIA – METHANOL -POST CAPTURE - EOR; <br />AIR PRODUCTS- H2- SEPARATION - EOR<br />
  16. 16. Canada’s CCS Projects<br />
  17. 17. FUNDING SOURCES FOR CCS DEMOS<br />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)<br />DOE COST SHARE AND PARTNER EQUITY – DOE’S CONTRIBUTION DOESN’T DILUTE PROJECT EQUITY AND INCREASES LEVERAGING<br />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; <br />TAX INCENTIVES CAN HELP EARLY-MOVERS IN A MERCHANT MARKET ABSENT A REGULATED RATE BASE ALLOWANCE<br />
  18. 18. SOME U.S. EXPERIENCES AND LESSONS LEARNED <br />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<br />Engage the State early to solicit support on: <br />Long –term liability; <br />Site unitization plans and subsurface rights; <br />Work with state commissions, regulators, legislators, public interest groups, and affected public <br />Enlist support of environmental groups by showing the project advantages vs. the alternatives over the long term<br />Locate CCS projects in communities willing to accept by offering economic, social and environmental benefits – DON’T GO WHERE YOU’RE NOT WANTED.<br />
  19. 19. SOME U.S. EXPERIENCES AND LESSONS LEARNED (continued)<br />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) <br />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) <br />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.<br />Engage stakeholders, and local community to answer the question: “What’s in it for me?” if you locate in my area.<br />
  20. 20. SOME FINAL THOUGHTS ON FIRST WAVE OF CCS DEMOS IN NORTH AMERICA <br />DIFFICULT SITUATION ABSENT FEDERAL CARBON MANDATE<br />STATES AND PROVINCES ARE KEY TO HELPING FIRST CCS DEMOS<br />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<br />LESSONS LEARNED FROM PROJECTS ARE IMPORTANT TO IMPART (E.G., SECURIING RIGHTS/PERMITS; COMMUNITY, STATE REGULATORY SUPPORT)<br />IN U.S. , CCS CAPACITY BUILDING IS OCCURRING AT THE STATE AND REGIONAL LEVELS, IE, CAPACITY BUILDING IS NOT JUST FOR DEVELOPING ECONOMIES ANYMORE!<br />CCUS- A WAY TO VALUE CARBON AS A FEEDSTOCK FOR PRODUCTS <br />FINDING FUNDING FOR NEXT GENERATION OF DEMOS WILL BE DIFFICULT <br />

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