Tamar Hallerman
GHG Monitor
08/24/12
AT TCEP: CHINESE OIL GIANT LOOKS TO INVEST IN CCS PROJECT
A group that includes Chinese energy behemoth Sinopec Group is in talks to invest up to $1 billion in Summit Power Group’s Texas Clean Energy Project, the Wall Street Journal reported Aug. 15. According to the newspaper, the oil and gas company—one of the world’s 10 largest in terms of revenue—is potentially interested in an equity stake in the project. If the deal moves forward, it would become one of the largest investments ever made by a Chinese company into the U.S. power sector, according to the newspaper. It said that while little is finalized, an agreement could be announced as early as September. Laura Miller, director of Texas projects for Summit, would not comment on the information. “It’s a really important time for us as we try to secure financing,” she told GHG Monitor. Sinopec did not respond to a request for comment.
Summit has been in the process of securing investors for $2.5 billion TCEP for the better part of this year. The project developer would benefit greatly from a large Sinopec investment that could help take a bite out of project costs. The Journal said that Summit, which is also in the process of talking to others interested, is looking to carve out a role for Sinopec that would not change engineering and construction agreements already in place for the project. Over the last several years, Chinese industry has ramped up investment in American energy projects, according to reports, hoping to gain on-the-ground experience using technologies and techniques that can be brought back to China like enhanced oil recovery. Particularly in the ‘clean coal’ industry, American utilities like American Electric Power and Duke Energy have also stepped up investments in China.
Summit Aims to Secure Investors, Close Tax Loophole
Earlier this summer, Miller told GHG Monitor that securing investors is currently the biggest hurdle Summit faces in terms of TCEP, but that most other project components are already in place. “We’re just out in the marketplace right now. We have all of our contracts signed and our permits in place and everything ready to go, we’re just putting the money together to break ground,” she said last month. “We’re very optimistic right now.”
Miller said Summit is also making a considerable effort to close a loophole in the tax code that requires limited liability companies (LLCs) to pay taxes on Department of Energy grants but exempts corporations, as the law was written before LLC company structures existed. She said that because of the loophole, Summi would be required to pay roughly $150 million in taxes on the $450 million Clean Coal Power Initiative grant the project received in 2009. Miller said that Summit has been lobbying members of Congress to tweak the provision, and has received support from Rep. Mike Conaway (R-Texas) and Sens. John Coryn (R-Texas) and Maria Cantwell (D-Wash.). “We work on it everyday. We’re just waiting for a vehicle to present itself, most likely a tax bill that will come around at the end of the year,” Miller told GHG Monitor earlier this year. “It’s at zero cost to the government to fix our problem, and it helps our finances by $150 million, which we have to pay unless this gets fixed, so it’s very important.”
Otherwise, Miller said that all contracts for TCEP are in place and that Summit hopes to break ground by the end of the year on the new-build 400 MW Integrated Gasification Combined Cycle plant. Last year, Summit and CPS Energy, a utility owned by the city of San Antonio, signed a power purchase agreement for the utility to buy roughly 200 MW of the 340 MW of electricity generated annually at the poly-generation plant for 25 years. The developer also signed engineering, procurement and construction (EPC) contracts with Siemens Energy Inc., the Linde Group and SK Engineering & Construction. Miller added that CO2 offtake agreements for the 3 million tons of CO2 captured annually for enhanced oil recovery and urea fertilizer production operations are also in place.
AT SECARB: INJECTION BEGINS AT CITRONELLE
CO2 injection and monitoring work began earlier this week at Alabama’s Citronelle oilfield as part of a key Department of Energy-sponsored storage project, developers announced. Researchers began the fully-integrated process of capturing CO2 at a pilot unit owned by Southern Company, piping it 12 miles away and injecting it deep underground into a saline aquifer this week, kicking off the operations phase for the Southeast Regional Carbon Sequestration Partnership’s (SECARB) monitoring, verification and accounting effort. In a speech at the National Energy Technology Laboratory’s carbon storage R&D project review meeting in Pittsburgh this week, Southern Company Principal Research Geologist Richard Esposito said that injection began on Aug. 20. “I’m excited to announce that the injection of this project started yesterday,” he said Aug. 21. “It only lasted for about five or six hours, and then we had some problems with [a valve], but that’s been repaired and we’re now up-and-running again.”
Billed as the world’s first fully-integrated CCS project using anthropogenic CO2 from a coal-fired power plant, the monitoring effort is being undertaken by one of DOE’s seven regional partnerships. Once fully up-and-running, researchers will be taking CO2 captured from a 25 MW slipstream from Alabama Power’s 2,657 MW Barry Electric Generating Plant. Denbury Resources then has an offtake agreement for the CO2 and will transport it through its new 12 mile CO2 pipeline to the Citronelle Dome within the deep saline Paluxy formation for storage. Esposito said that injection will occur at a rate of up to 550 metric tons of CO2 per day for two years and SECARB will be doing the monitoring, verification and accounting work. He said the site will be closed in 2017 following three years of post-injection monitoring. “This may very well be the type of business model that electrical utilities look at in the future where we produce CO2 at our power plants and we have an offtake agreement with someone at the plant gate and they take it for enhanced oil recovery or carbon sequestration,” he said.
Alabama Power, a subsidiary of Southern Company, has been operating the Mitsubishi Heavy Industries 25 MW post-combustion advanced amine capture unit since June 2011 and has been venting that CO2 into the atmosphere. Esposito said the unit so far has captured 70,000 tons to date. The test is SECARB’s second Phase III project under DOE’s regional partnership program. Work continues at the partnership’s Cranfield, Miss. site, which is injecting 1.5 million tons of CO2 captured from the nearby Jackson Dome, a naturally occurring source of CO2, into the oilfield via a Denbury Resources pipeline.
AT WA PARISH: NRG TO BUILD TURBINE TO POWER CAPTURE UNIT EARLY
NRG Energy Inc. said Aug. 8 that it will break ground next month on a new natural gas combustion turbine generating unit which will eventually supply the electricity needed to power a post-combustion carbon capture system to be installed on a portion of its massive WA Parish Generating Station southwest of Houston. The power producer said that the turbine, which is expected to be completed and come online in time for peak demand season next summer, will temporarily generate 75 MW of electricity for a state grid that has faced electricity shortages in recent high seasons due to increased demand. NRG said that the unit will provide electricity to the grid during peak hours until 2015, when the CCS retrofit at WA Parish is expected to come online. At that point the turbine will be used to power the carbon capture unit only. “The new unit will bring additional power to the grid very quickly, cleanly and efficiently,” said John Ragan, President of NRG’s Gulf Coast operations, in a company statement. “While we expect that it will ultimately be used for a carbon capture system, by leveraging the planned construction of the carbon capture system and building the combustion turbine now, ahead of the economic price signals that would allow us to build new generation on its own, we can help the State of Texas meet its needs over the next two summers.”
The news indicates that the turbine will come online two years earlier than planned. Company spokesman David Knox told GHG Monitor that pushing up construction made sense in this case. “Because we know that the carbon capture system is going to have to have this 75 MW co-generation unit, we’ve decided to speed up the construction of the combustion turbine and generator aspect of that co-generation unit and use it to generate power for at least a couple years while we build the actual carbon capture system,” he said. “This is basically just a way to take an expense that we know we’re going to make within the next two years, make it now, put power on the grid, and then, when the unit is ready to go online, then we integrate the heat recovery steam generator to get the thermal power side of it and glue it all into the entire carbon capture system.”
Project Has Multiplied in Size
The turbine will help support the operation of a carbon capture project that has more than tripled in size compared to initial plans. The project initially received a $167 million grant from the Department of Energy’s Clean Coal Power Initiative in 2009 to capture CO2 from a 60 MW slipstream off of one of WA Parish’s coal units using Fluor’s Econamine FG PlusSM post-combustion capture technology. But NRG officials spent the better part of a year reviewing the project’s Phase I front-end engineering and design (FEED) work to assess the possibility of a scale-up at the generating station, one of the nation’s largest polluters, after it became clear that it was feasible at the facility. Especially after American Electric Power pulled the plug on its Mountaineer CCS project in West Virginia last summer, anticipation mounted for NRG’s decision given that WA Parish remained the only remaining post-combustion capture project in DOE’s CCS demonstration project portfolio.
Knox said the project has now been scaled up to a 200 MW slipstream and that emissions will still be stored in depleted oil wells near the Gulf Coast for enhanced oil recovery operations. However, it is now unclear who will be supplying the capture technology or which contractors will be used to build the project. Knox said that the turbine will be secured via the company’s own financing, and that the CCPI grant will only be able to kick in for the construction of the carbon capture system itself. He added that NRG will not be applying for any additional DOE funding for the project.
AT KEMPER: MISS. POWER RESHUFFLES CONTRACTORS
Mississippi Power has “realigned” the duties of the three major onsite contractors working on its Kemper County Integrated Gasification Combined Cycle carbon capture and storage project in eastern Mississippi, the utility confirmed Aug. 9. Mississippi Power CEO Ed Day said in a media statement that the reshuffling for the 582 MW project currently under construction is meant to “optimize” each company’s strength to help reduce future costs for its customers. “Our partnership with our construction contractors is stronger than ever,” he said.
The statement came in response to a series of local media reports that surfaced earlier that week that said Mississippi Power had fired its two main onsite contractors—KBR Inc. and Yates Construction—and expanded the role of Performance Contractors, Inc. as a way to help save money for the financially-scrapped project. The state chapter of the Sierra Club—which has sued and is actively campaigning against the project—also said at the time that Mississippi Power had “effectively terminated” the contracts. “Today’s news that Mississippi Power has fired KBR and Yates Construction indicates a monumental meltdown at the Kemper plant job site,” Louie Miller, director of the Mississippi Sierra Club, said in an Aug. 7 statement. “If the reports are accurate, for Mississippi Power to fire the co-owner and co-developer of their design technology is absolutely astounding. This will only lead to further delays, more cost overruns and likely litigation between aggrieved parties; all costs that Mississippi Power will try and pin on the ratepayer. This shocking development is one more reason it’s past time to pull the plug on the Kemper plant.”
But Day refuted the claims, saying that all three contractors will stay involved in the project, but will take on somewhat altered roles. He clarified that KBR, which co-developed the TRIG integrated gasification pre-combustion capture technology with Southern Company that will be used at Kemper, will continue to work on engineering and plant start-up.
Project Sees Slew of Cost Increases
The announcement comes as Mississippi Power continues to face pressure to manage spiraling construction costs at Kemper, which at roughly 30 percent complete and nearing peak construction, is already pushing up against its $2.88 billion rate recovery cap set by the Mississippi Public Service Commission (PSC), $484 million above its previous cost estimate. The utility was put under more financial stress earlier this summer, when the PSC denied Mississippi Power the ability to raise rates on its nearly 200,000 customers to help pay for the construction costs. As a result, two credit rating agencies, Moody’s Investors Service and Fitch Ratings, have announced downgrades for the utility’s credit rating, subsequently making it more expensive for the company to borrow money.
The IGCC project—also known as Plant Ratcliffe—has been under construction in eastern Mississippi for the last two years and is expected to capture 65 percent of its CO2 emissions. It is the furthest-along large-scale carbon capture and storage project for power generation in the Department of Energy’s demonstration project portfolio. Mississippi Power said that it has spent more than $1.1 billion on construction to date and confirmed contracts for an extra $1.5 billion, and that the rate increase is necessary to keep the project moving forward. The Kemper County project has garnered nearly $700 million in government grants, tax incentives and loan guarantees—including $270 million in funding under the Department of Energy’s Clean Coal Power Initiative and $133 million in federal investment tax credits. It plans on selling its captured CO2 for enhanced oil recovery operations in the area. Mississippi Power said it expects the project to come online in 2014.
