LARGE-SCALE CCS PROJECTS REFLECT ON LESSONS LEARNED

Karen Frantz
GHG Monitor
11/15/13

In order to drive advancements in carbon capture and storage technology, there needs to be better knowledge sharing among companies that are undertaking first-of-a-kind CCS projects, according to several industry leaders who spoke on a panel at the Fifth Carbon Sequestration Leadership Forum ministerial meeting in Washington, D.C. last week. Graeme Sweeney, chairman of the Zero Emissions Platform, said that first and foremost the projects currently on course need support to come online. But given that the number of projects in the pipeline are fewer than many hoped, he said the community will “have to share knowledge more intensively than they had imagined if we’re going to maximize cost reduction potential that comes out of that whole experience.”

Secretary of Energy Ernest Moniz, who moderated the discussion at last week’s event, questioned the panel on how to ensure proper collaboration while at the same time protecting intellectual property rights—an issue that Tom Fanning, president and CEO of Southern Company, which heads the Kemper County CCS project in Mississippi, called “critically important.” “We do need well-understood commercial practices with respect to intellectual property, and not just the intellectual property that we deploy but how we continue to innovate in the future,” he said. “It’s going to be critical for our willingness to do business elsewhere.”

But Michiel Kool, EVP of safety, environment and social performance at Royal Dutch Shell, which is leading the Shell Quest Project in Canada and the Peterhead Project in the United Kingdom, said that he doesn’t consider CCS “to be a competitive arena in the way, for instance, we don’t consider safety to be a competitive arena.” He said, baring specific proprietary knowledge, he is “very much in support on climbing the learning curve and sharing.” Kool added, “In the cases where we have public funding, there is often a requirement—and in the case of Quest there is an agreed program for how we will share knowledge gained and data for the benefit of the industry and government in support of the government’s policy.”

SaskPower Working to Set Up Consortium

Michael Monea, vice president of CCS initiatives at SaskPower, which is running the Boundary Dam Project in Canada, detailed his own experience working to set up a consortium with a “slight membership fee” for knowledge exchange. “If you want to learn how to do a post-combustion and do it cheaper and less expensive we can show them how to save 20 or 30 percent,” he said. He said that the consortium membership would do several things, including “generate the millions of dollars of engineering reports that will allow a company to build these plants” and fund “research on CCUS around the world, tying in what we’re doing in Saskatchewan.”

But he also said SaskPower is planning on sharing regulation impacts on the company with the government and collaborating with environmental groups to help generate public acceptance for CCS. “We’re certainly available for many different forms of collaboration,” he said. “To move these projects further down the chain we must collaborate, we must see what the next plant looks like so we can learn from whoever is constructing the next plant.”

Lessons learned

Several panel members also reflected on some of the lessons learned in their first projects and what they might do differently or better in the future. Fanning said that with Kemper, Southern Company has had to write off more than $1 billion of capital costs. “When we entered into a regulatory structure with the state of Mississippi, the economics that I quoted to you before were based on the deal we cut with Mississippi. We had only done 10 percent of the engineering and we only had about 6 or 7 percent contingency associated with building that out,” he said. “We have been right on the money in terms of the electricity side of this and in terms of the gasification side of this, but we missed badly on the gas handling systems. So I guess, lessons learned. Make sure you do more engineering. … Make sure you do your homework. Make sure you’ve got the right support.”

He also added that it is important to have the right regulatory regimes in place, saying that in the United States CCS will only be in an “integrated-regulated” market. “Here in the U.S. there’s really two kinds of electricity markets, one is integrated-regulated where the functions make, move and sell are all captured under one jurisdiction: these would be the states,” he said. “And then there’s another jurisdiction in the United States, which are largely merchant markets, where you have kind of short term revenue markets supporting big capital. … If you have a short-term revenue market the risk premium required to finance long-term liabilities—and therefore high capital-intensive projects—is prohibitive. And so you won’t build capital intensive projects—as CCS projects are—in merchant markets here in the United States. They’re going to be done in an integrated-regulated fashion. So you need the right regulatory regime.”

Looking forward

Sweeney said that in order to keep a global momentum building for CCS after the first projects are finished, that the community needs to have proper storage plans. “We’re going to have to have characterized and prospective reservoirs available before we’re actually going to capture and store the CO2 and we’re going to have to have a proper infrastructure plan,” he said.

He also said that a key learning is putting in place investment-grade policy. “What is that investment grade policy?” he said. “What does it look like? Everybody will have a favorite. There’s no doubt that policy makers will have views that may be at variance with investors. And we have to take account of both the ‘investability’ and at the same time the business of the political feasibility of the kind of mechanisms that can be put in place. But we have to settle what it is. It’s more important to settle it—and its fine if it’s different in different places—than it is to have purity over exactly what it is that we would most like.”