09/07/12
The following interview with Mike Monea, president of Carbon Capture and Storage Initiatives at SaskPower, was conducted by GHG Monitor Reporter Tamar Hallerman in Regina, Saskatchewan.
What is the current status of SaskPower’s retrofit of Boundary Dam Unit 3 (BD3)?
The Boundary Dam capture unit is roughly 65 percent complete. It has to be done by March of 2013, which will happen. We have 95 percent of the procurement done on the capture unit, which is great and means that our budget is intact. The plant will be shut down in March of 2013 in order to do the rebuild, so in 150 days we have to completely find out what needs to be fixed, make it as good as new and bolt on the new capture unit that we’ve been working on since May of last year and flip the switch. It will probably be up and running at the end of 2013 in order to do a hot test. It should be commercially ready by the end of first quarter 2014.
In terms of offtake agreements for our CO2, we’re very fortunate. We have a few offtakers that are very interested in buying our CO2, and we’re working through different term sheets. I’d say that by the 15th of September we should have a contract awarded to one or several offtakers for the full amount of CO2 captured at BD3.
All eyes are on your project as you move forward with construction and operations. How are you handling the weight of everybody’s expectations?
It’s an exciting program and project. We never did want to be first to build and to have a post-combustion capture plant, but we had a plan and we were on schedule getting our approvals through the executive and the president and the board of directors at SaskPower, and then ultimately we got approval from our provincial government. We never thought about being in a race at all, but all these other projects around the world were dropping off because of lack of regulations or project economics. So here we are. We’re the first post-combustion project to capture emissions off a coal plant, first one built in the world that will give you a million tons of CO2, as well as capture SO2, NOx and mercury. The thing that impacts me the most is that this plant’s got to work. It has to work. We can’t have the first plant in the world not work. We have an excellent team here, wonderful engineers that will make sure that this plant doesn’t have any hiccups. When it’s turned on, it will collect CO2 and it will run.
The Canadian government issued an emissions performance standard that would require coal plants to emit no more CO2 than an unmitigated natural gas combined cycle unit. SaskPower President and CEO Robert Watson said that the rulemaking would have a large impact on your coal fleet. How have the standards affected your company’s view of CCS? Is it driving you towards or away from the technology?
We knew we had to answer the question ourselves at SaskPower about whether we can maintain coal as a fuel source to generate electricity. Some people said it was very forward-thinking or crazy to start building this carbon capture unit when there weren’t any regulations because of its price tag. But for us, we have a unit that is getting to be at the end of its serviceable life in 2014, and we knew we had to replace those 139 megawatts with something. We could have used something else, the obvious answer being natural gas, or we could retrofit the unit with capture carbon capture technology and then find out what the costs are and see if we can apply it to the rest of our fleet.
Looking at the draft regulations right now, the emissions from BD3 will be so underneath the proposed levels that the standards won’t affect our plants. As a matter of fact, we’ll be the first ones to know what the parasitic load of carbon capture is, what the efficiency of our plant will be and we’ll be able to apply that to our future plants if we so choose. That’s what we hope to share with the rest of the world.
Under the regulations, in addition to BD3, several of the other coal units at Boundary Dam will also be reaching the end of their serviceable lives in the coming years. With that in mind, how committed are you to CCS moving forward?
SaskPower is a power company, but we’re becoming very environmentally conscious right now and doing the right thing in terms of cleaning up what we are emitting. If we shut down our coal plants and put in a bunch of gas plants, what would happen is our greenhouse gas footprint would actually increase down the road, and that’s unacceptable. We are a crown company, the only one that generates power for the province. We have independent power producers that feed into our grid, but we have to start reducing the greenhouse gases, which are being directed by our federal government. So I think we’re on the leading edge of figuring out what this technology can deliver.
On the other hand, this technology has to be proven. One of our other units, BD4, is going to reach the end of its life in 2015, BD5 in 2018. These plants are getting old, so we need to do something with our plants—either shut them down or fix them. If we have the success that we believe we will have with BD3, it would be advantageous to apply that to our next plants. But I can’t say we’re committed until we find out the efficiency of this plant. But if the performance is aligned with what we expect, we certainly should apply it to other plants.
We’re very lucky here in Saskatchewan because our coal plants are on top of oil fields, and that gives us a place to put the CO2 in enhanced oil recovery and we have companies that will actually buy the CO2. We’re lucky because it’s such a unique situation. What we’re also finding at BD3 is that we have discovered significant cost savings that we would use if we built our next plant. That’s a great thing because that drives the price of carbon down. The objective would be to have a low capture cost of carbon so companies can put on these capture units on their coal plants and reduce their emissions. It needs to be applied around the world.
There are a lot of people who would argue that investing in CCS at this point is risky. How do you plan to rhetorically sell this technology to your customers and convince them that this was a smart investment?
What companies and people do are make assumptions, even if you don’t have real data. Boundary Dam 3 will generate that real data that for the first time that will help people get an idea about the cost of capturing carbon and the cost of construction. What we’re doing right now is studying what our next plant would look like based on all of the findings, because if you’re making these assumptions in the beginning, you’re guessing. That’s all we can do at the moment. Those estimates often have so much error in them, but that error is reduced when you start building the plant.
But as a public utility, most people would argue that your mission should be to provide power to your ratepayers at the lowest cost possible. How do you justify a relatively expensive technology like CCS?
The cost for our plant is $1.242 billion. If you’re going to build a plant that generates 140 MW of electricity, you can either build a natural gas unit or generate electricity from a retrofitted coal unit. The difference is that a coal plant has roughly two-thirds of its costs in capital and one-third in fuel. A gas plant has the opposite, so it’s one-third capital, two-thirds fuel. If you want to build the least expensive plant, and you don’t want to spend much money on capital, then build a gas plant. But just remember you got two-thirds of your future price for the next 35 years on natural gas, and you try and tell me what your gas price is going to be for 35 years.
I’ve been in the oil business all my life and I’ve never been right predicting any gas or oil prices. All I know is that it will fluctuate and usually go up. We have a very low gas price right now and it makes it look like, well, maybe we should have gone with natural gas instead of coal. But we’ve got a 300-year’s supply of very inexpensive coal, because nobody wants it for anything else, and I know exactly what the price is going to be for the next 100 years and I’ve got a fixed predictable rate of my fuel for coal and I’ve got a volatile fuel for my gas plant.
And so if you were my consumer and I said to you, okay, I just put in a gas plant and for every dollar and Mcf that goes up, I’ve got to increase your electricity bill, you’re going to say that you don’t like that. If that price doubles, you’re really not going to like us. Whereas in the other scenario with coal, you have a flat rate for the rest of that plant’s life and you have the added benefit of collecting CO2 on your coal plant.
Aside from the Weyburn-Midale project, EOR is largely in its infancy in Saskatchewan compared to the west Permian Basin and Wyoming. What do you think the effect of Boundary Dam will be in terms of elevating the industry in the province?
Saskatchewan has a great geology for enhanced oil recovery. Some of it is even better than in Alberta because our fields are smaller, and when you have a smaller containment of vessel, you can control where the CO2 is going and make the CO2 a bit more effective. The other thing that’s happening is that we have this new Bakken play in North Dakota, Montana and southern Saskatchewan, and there’s a lot of research going on right now to actually use CO2 as a flood mechanism for the Bakken. We’re actively involved in encouraging companies to use some of our CO2 for a pilot test and we think that there are new markets that will develop on these oil fields.
It’s very difficult to find oil these days. This Bakken play was a great gift to United States and Canada. We’ve known about the Bakken in the oil and gas industry since 1950, but we didn’t have a technology to exploit this reservoir. Now with the technology of CO2-EOR, we think that can be applied to these tight reservoirs, and I think there will be more demand for CO2 in the future.
SaskPower is building a carbon capture test facility with Hitachi at your Shand Power Station. Is this the North American answer to Mongstad? What are you hoping to accomplish here?
My colleagues at Mongstad were kind enough to show me their facility in Norway and it’s pretty impressive. Our test facility is a different design. We have built in flexibility in our test facility so that we can have multiple post-combustion tests. We have built in a more generic scenario with two different diameter vessels that can give us two data points to extrapolate the performance of a test, and can ultimately put it into the big model of BD3. Companies would be able to come here and very quickly test their performance on a slipstream from an actual coal plant, not from a refinery like Mongstad. We think it’s got a tremendous potential, and I wish we had this three or four years ago when we were making decisions about Boundary Dam.
I hope there’s multiple test facilities around the world that are built so that companies can test their capture technologies and we can network and all learn what the next product should be. At SaskPower we don’t commercialize anything—we buy or pay a royalty or license fee. We just want the best product that drives costs down, and we hope that we find that in a test facility and that we can share that with the other party utilities so that we keep driving that cost curve down for carbon capture.
