SaskPower’s CCS debacle knows no bounds!

Published by MAC on 2015-11-12
Source: Star Phoenix, Bloomberg, End Coal

Hanley: SaskPower carbon capture project a billion dollar bizarro-world boondoggle

By Paul Hanley

The Star Phoenix

5 November 2015

The carbon capture and storage facility at the Boundary Dam Power Station is generating only 40 per cent of its capacity and not any revenue. And to add to its financial woes, SaskPower was six months behind in delivering captured CO2 to Cenovus for enhanced oil recovery forcing a $12 million payout to Cenovus

"There's no question that over the past year, there's been statements made that were missing a word or two," said SaskPower CEO Mike Marsh about his company's hype about the carbon-capture facility at Boundary Dam.

He's got that right. I first heard rumours that all was not well at the facility in June. I was told carbon dioxide was being vented into the atmosphere rather than pumped underground, defeating the purpose of the costly megaproject.

I asked SaskPower if this was true. In an email, it responded that the facility was producing at full levels. SaskPower apparently missed the word "not" in that statement. As we now know, the CO2 facility was not working at all more than half the time.

But is the CO2 being pumped underground, I asked? "Yes," was its answer. Here, the missing word was "no." We now know SaskPower failed to fill all its contracts with Cenovus, which planned to pump the CO2 underground to enhance oil recovery.

Still suspicious, I asked for monthly records of the amount of CO2 captured and sequestered, assuming these would be part of the public record. I received this reply: "Now that the project has been operational for several months, we're pleased to see that the process is working even better than expected." Here, the missing words were "worse than expected."

SaskPower went on to say that it was still in the fine-tuning phase. Wondering why it had to fine-tune when operating at "full levels" and "better than expected," I again asked for monthly records, but was told these were confidential. No wonder.

We now know why. But that didn't stop SaskPower and the provincial government from hawking the project as the best thing since sliced organic bread.

But what upsets me most is not the fact they have been misleading the media and public, or that they have conned the international press, professional associations and visiting politicians at much-hyped conferences and tours. Nor is it the fact that the facility is vastly more expensive than planned.

Originally pegged at $1.24 billion the cost rose to $1.4 by the time it opened. Soon thereafter, it was being described as a $1.5 billion project. Now we find that an additional $80 million has been spent trying to get it to work and that penalties of up to $17 million will be owed Cenovus, plus the loss of CO2 sales revenues. With total costs at $1.6 billion and counting, it's about 30 per cent above the original budget.

That's a lot of money for 120 megawatts of electricity, especially given that the costly carbon capture technology mostly doesn't work.

Other, cleaner sources cost less than half that amount. Still, it's not that our power bills have grown that most upsets me.

The most egregious issue is that the project never was economically or environmentally feasible, even at the original cost and if the technology worked. Wind, a cheaper and proven alternative that eliminates CO2 emissions entirely, was rejected despite growing evidence of its suitability.

For $1 billion less, the same amount of electricity could have been generated using wind. Note that this $1 billion saving includes additional backup costs needed to compensate for the variability of wind.

It is becoming ever more clear that this project is a politically-motivated boondoggle designed to prop up the coal and oil industries in southeast Saskatchewan. It is not about mitigation of climate at all. After all the money is spent, we remain the highest per capita emitters of climate pollution in Canada - among the highest in the world.

While Saskatchewan pursued carbon capture, our neighbours in South Dakota invested in wind. They now get 25.3 per cent of their power from this clean source. North Dakota gets 17.6 per cent from wind. Ontario has shut down coal entirely, and the United States is shuttering 200 coal plants, making deep progress on CO2 emission reductions.

What really gets me is that Saskatchewan is not addressing its greenhouse gas emissions. Carbon capture was the big fix that would put our province in the leadership category. Now we have nothing to show for it except more debt.

---

Shell Sees Carbon Price of $60 to $80 Needed to Justify CCS

Jeremy Van Loon 

Bloomberg

6 November 2015

Carbon capture and storage projects need a $60 to $80 price for carbon dioxide to justify building them, Royal Dutch Shell Plc Chief Executive Officer Ben van Beurden said.

That’s more than five times the current price of C$15 ($11.27) a ton in Alberta, Canada, where the oil company began commercial operations for a CCS project Friday.

The technology is still too expensive for wide-scale use without government support, van Beurden said in a briefing with journalists at the company’s Scotford refinery near Edmonton, Alberta. The price of carbon dioxide varies around the world and is expected to increase to C$20 a ton in Alberta next year.

“We will do this provided there is an economic rationale for doing it,” van Beurden said. “It needs to make economic sense.”

United Nations climate talks that begin in Paris this month are unlikely to result in a carbon price high enough to spur construction of more CCS projects, van Beurden said. With global energy consumption expected to double in the coming decades, the technology is seen as a necessary part of the international effort to keep the planet’s temperature from rising more than 2 degrees Celsius (3.6 degrees Fahrenheit).
Quest CCS

Shell’s Quest carbon capture and storage facility will extract 1 million tons of the gas from its Scotford refinery each year. The carbon dioxide will be injected into an underground saline formation about 80 kilometers (50 miles) from the plant. It’s the first in North America to store CO2 in a deep saline formation.

Among the largest commercially operating CCS projects is the C$1.4 billion ($1.05 billion) Boundary Dam coal station in nearby Saskatchewan that began collecting and transporting CO2 last year for use in oil fields.

Capturing carbon from refineries, electricity generation and cement plants before the gas gets into the atmosphere is one of the few ways to commercially tackle emissions from existing sources.

Eliminating Emissions

Fossil fuels will likely provide about 60 percent of the world’s primary energy consumption by 2040, according the Global CCS Institute. There are 15 large-scale CCS projects operating around the world.

CCS technology is being counted upon to carry 14 percent of the burden of holding greenhouse-gas emissions at bay between now and 2050, according to the International Energy Agency, a Paris-based policy adviser for developed nations. That’s the equivalent of eliminating hundreds of the world’s coal plants.

“If we are serious about tackling this reality, full use of carbon capture and storage is required,” Brad Page, chief executive officer of the Global CCS Institute, said in a report published Nov. 4.

---

 

The fallout from SaskPower’s Boundary Dam CCS debacle

by Bob Burton

http://endcoal.org/2015/11/the-fallout-from-saskpowers-boundary-dam-ccs-debacle/

11 November 2015

The crisis engulfing SaskPower over its troubled Boundary Dam Carbon Capture and Storage (CCS) plant has implications that will reach all the way from the Canadian province of Saskatchewan to the Paris climate conference.

When the coal-fired 140 megawatt (MW) Boundary Dam power station with a CCS plant was officially opened in early October 2014 there was extensive and overwhelmingly credulous media coverage of what was touted as the world’s first “commercial scale” CCS plant.

Pro-coal politicians, coal companies and some utilities pointed to the US$1 billion (C$1.4bn) plant and claimed it was evidence that coal power had a rosy future in a carbon-constrained world. In the year since the plant was commissioned, SaskPower has spent a small fortune hyping the project in the hope of reviving flagging interest in CCS. Earlier this year CBC News revealed the president of SaskPower’s carbon capture and storage division, Mike Monea, had racked up travel-related expenses of over US$299,000 (C$396,000) in just four years.

In the last two weeks, SaskPower’s carefully-crafted illusion of the CCS plant as a success story has been shattered by revelations in a series of leaked internal documents. Instead of capturing 90 per cent of the carbon dioxide from the power station, the plant has captured about half that amount or less. Problems with the plant have meant that it has often been shut down.

SaskPower had counted on the sales of Co2 at US$19 (C$25) a tonne to Cenovus Energy for use in an Enhanced Oil Recovery Project. Without the sales, SaskPower’s income was down. Without the Co2 volume, Cenovus Energy has collected US$9 million (C$12 million) in payments under the penalty provisions in its Co2 supply contract. SaskPower is also embroiled in two separate legal disputes with contractors over payments.

To cap it all off, SaskPower’s deception of the media and public over how the plant has been performing has done serious damage to the utility’s credibility and made the operation of the plant a major political issue. The title of one recent media column – “SaskPower carbon capture project a billion dollar bizarro-world boondoggle” – captures the sour mood towards SaskPower and the plant.

So what are the likely implications of the revelations that Boundary Dam CCS may turn out to be a very expensive dud?

In Saskatchewan, the implications are likely to be huge.

The controversy over the plant is clearly likely to run for years. One consultant who has studied the plant and supports it last week suggested “it’s probably going to take another couple of years to get it running right.” There will be legal actions between SaskPower and contractors, which will absorb the time of senior management and potentially impose significant costs on the utility.

SaskPower will also be hit with multi-million dollar payments to Cenovus Energy for failure to deliver the contracted Co2 in 2015 and perhaps beyond. Inevitably the increased costs of the CCS plant will push up electricity prices, a political hot-button issue for a government which concealed the magnitude of the problems with the plant.

Having misled reporters around the world by spinning the story that all was well at the plant, SaskPower’s PR dream run is over. In all likelihood there will be more leaked documents and more investigative stories revealing far more details about the problems at the plant. For all we know the plant may never work reliably or only at a far higher cost than renewable electricity alternatives.

SaskPower’s ambition to build another CCS unit at double the scale to cater for Co2 from the proposed rebuilding of units 4 and 5 at the Boundary Dam power plant now seems uncertain at best.

One of the leaked SaskPower briefing notes stated the utility had been hoping for a decision on the project by the end of 2016. This week SaskPower flagged the decision has now been pushed back to 2017. Persuading the parliament and public that spending another billion or two on another CCS plant may well be impossible given the debacle at unit 3.

Beyond Saskatchewan, SaskPower’s PR own-goal simply reinforces the perception that the coal industry and political scandals are twin brothers.

The Boundary Dam CCS debacle also poses awkward questions for the global coal lobby.

In February this year the World Coal Association proclaimed that CCS technology is “a reality, as evidenced by the Boundary Dam coal-fired power station in Canada. This pioneering project will reduce greenhouse gas emissions by one million tonnes of CO2 annually, the equivalent to taking more than 250,000 cars off the road each year.”

Now the coal lobby has to acknowledge that the “reality” is the plant doesn’t work reliably and doesn’t yet capture a million tonnes of Co2 a year. (SaskPower’s claim about cars being taken off the road was always nonsensical as it relied on ignoring the additional emissions from the enhanced oil recovery end of the project.)

The Boundary Dam project has also also been embraced by BHP Billiton as a CCS success story. In mid-September BHP Billiton – the world’s largest mining company and one of the largest coal miners and exporters – announced they were planning to fund a SaskPower ‘knowledge centre’ to share “access to the data, information and lessons learned from SaskPower’s Boundary Dam facility.”

The BHP Billiton media release cited Giles Hellyer, the President of BHP Billiton Canada, as stating “the Boundary Dam project offers lessons for all of us.” He’s right, but perhaps not in the way he envisaged back in September.

Even so, it is pertinent to ask whether BHP Billiton knew in mid-September that the project had serious operational and financial problems. If it did, and chose not to let on, then BHP Billiton was a bit-part player in SaskPower’s PR ruse. Or was BHP Billiton too, kept in the dark by SaskPower? (In which case questions need to be asked about the thoroughness of the company’s due diligence investigation on the project.)

A series of questions put to BHP Billiton on their knowledge or lack thereof about problems at the plant elicited a limited response. “We won’t be providing any further on the record comment” beyond the comments in the original media statement and in the company’s most recent annual report, a spokesperson wrote in an email.

Promoting CCS has long been a mainstay of the global coal industry’s PR pitch that it is possible to keep building new coal plants and cut greenhouse gas emissions. As crippling cost overruns and other problems with Mississippi Power’s US$6.4 billion Kemper CCS project have mounted, hyping the Boundary Dam CCS project was the last card left in the coal lobby’s CCS deck.

The revelations about the Boundary Dam CCS project over the last two weeks – with the likelihood of more to come – mean that when it comes to the Paris climate negotiations BHP Billiton and the World Coal Association will have a very hard time convincing anyone that SaskPower’s plant is really a success story.

Bob Burton is the Hobart-based Editor of CoalWire, a weekly bulletin on global coal industry developments.