Source: 'Integrated Carbon Capture and Storage Project at SaskPower's Boundary Dam Power Station'. 

Source: 'Integrated Carbon Capture and Storage Project at SaskPower's Boundary Dam Power Station'. 

Three just-released reports all touched, in varying degrees, on the $1.5-billion carbon capture and sequestration (CCS) scheme at Boundary Dam (BD3). The reports were compiled for SaskPower, the Global CCS Institute and the Conference Board of Canada.

It would be hard to claim that any of that lot are hippies/environmentalists/biased against coal, oil or carbon capture.  It is that fact which makes 4 of the 5 main takeaways from the reports all the more amazing. (Number 3 is to be expected).

1  A surprising admission that all is not well
2  The unfeasibly high cost of CCS
3  No justification for out-of-hand dismissal of wind
4  No business case to support BD3
5  The real reason SaskPower proceeded with BD3

The reports;

'Integrated Carbon Capture and Storage Project at SaskPower's Boundary Dam Power Station'. SaskPower (61 pages) 
The report “summarizes the experience and learnings of SaskPower in a way that will hopefully provide insight to other clean-coal initiatives.” It has lots of nice photos of shiny pipes, big trucks and smiling folk in hard hats. It is however short on specifics. It was prepared for SaskPower by a Calgary-based consultant. Funding was provided by the US Department of Energy (go figure) while the IEAGHG "facilitated production" - whatever that means.

'Finding the Mix - The Choice of Generation Technologies in Canada' The Conference Board of Canada. (98 pages)
This report provides a novel assessment of Canada’s power generation options. It uses a tool, widely employed in financial portfolio analysis, which is increasingly being applied to power generation: Mean-Variance Portfolio Theory (MVPT).  We refer to one quote from this paper but otherwise do not consider it further. The application of MVPT to power generation significantly improves risk/return trade-offs. Nonetheless some of the underlying assumptions are flawed and this has led to erroneous conclusions. We'll return to this one in a separate post at a later date.

'The Costs of CCS and Other Low-Carbon Technologies in the United States'. The Global CCS Institute. (19 pages)
This paper takes a look at cost and performance data from a wide range of power generation technologies and compares this with the cost of coal with carbon capture.

 

 

..and what they said.
 

1. A surprising admission that all is not well.

After discussing the rationale behind its decision to proceed with CCS at Boundary Dam Unit #3 (BD3) (more on that in Point 4 below), SaskPower makes this surprising admission (page 32);  

 
By the time a power plant is operational, the economic and technical conditions for the project will most likely have changed and can potentially make its choice look poor relative to newer information. Almost certainly, the comparative cost of various fuel sources will have changed.
This proved to be the case for BD3.
 

Wow - that's pretty amazing. Recap: "...and can potentially make its choice look poor relative to newer information...This proved to be the case for BD3".

Finally an acknowledgement that all is not sweetness and light at BD3. 

 

2. The unfeasibly high cost of CCS  

All three reports note that CCS is expensive and significantly more so than wind energy. The SaskPower report does not have any specifics however the Global CCS paper does and the following chart is taken from it. 

Levelised Cost of Electricity for Plant in the US (2014 US$)

Source'The Costs of CCS and Other Low Carbon Technologies in the United States - 2015 Update.' Figure 5.1

Since the data is from the Global CCS Institute, one may question the accuracy of some of the numbers shown for competing technologies. Specifically: electricity from both wind and solar is now being sold under long-term offtake contracts at less than $60/MWh in the US. Also the solar PV prices shown in the previous graphic are for Commercial and Residential fixtures and not Utility-scale installations. Hardly a fair comparison, but we would expect nothing less. 
FYI: US Utility solar PV prices now are regularly coming in below $100/MWh. 

Nonetheless the fundamental point is unmistakable: CCS is costly.

SaskPower and the GlobalCCS Institute believe that, despite the high cost, additional investment is justified. No surprises there. The Conference Board of Canada is however decidedly less bullish (Page V of the Executive Summary);

 
All scenarios examined for Saskatchewan included the existing post-combustion BD3 carbon capture unit. … The finding is that capital cost reductions will be required to improve the competitiveness of carbon capture. Given that this is the first such unit built, the design, construction and operating experience will provide opportunities to achieve significant, albeit less than needed, cost reductions moving forward.
 

The key phrase is the last bit: cost reductions will be "less than needed". This confirms the same point we made in our March report on BD3 where we noted (page 73)  that even if the capital cost is reduced to zero (obviously impossible), the plant would still struggle to turn a profit due to the high cost of the parasitic electrical load needed to run the CCS facility. 
 

3. No justification for out-of-hand dismissal of wind

 Wind energy does not even make it as far as a business assessment and is instead dismissed at the beginning of the SaskPower report (page 12);

Hence, wind power ... cannot be relied upon to provide stable base load power

It is truly pathetic that SaskPower is still talking like this. 

Over the last three years our organization, and many others, have spent significant time and effort trying to educate SaskPower about how wind energy works in power systems. Here are some key points: ten US states, with a combined population of 67 million people, already generate 10 per cent or more of their electricity using wind and solar power (see the chart below which includes Saskatchewan for comparison). It shows that two US States already get more than one quarter of all their electricity from wind.  

Source: US Energy Information Administration: Electric Power Monthly. March 2014. Tables 1.6B, 1.17B & 1.20B. For more info

Texas, population 30 million, expects to be generating 17 percent of their electricity from the wind in only two years (by 2017).

Just last week California, population 39 million, passed a Senate bill in accordance with which the state will source fully half of all its electricity from renewables by 2030. That's only 15 years from now! By comparison SaskPower forecasts that wind will be generating only 12 percent of Saskatchewan's electricity by 2030. SaskPower has no forecast for solar.

Multiple very detailed electro-technical studies by reputable bodies such as GE, the US Government and the International Energy Agency, state that it is technically and economically feasible for wind and solar to generate 30 percent and more of all electricity on a modern, well run, power system.
 

4. Absence of a business case to justify BD3

The SaskPower paper discusses the ‘Business Case’, behind BD3, in pages 27 to 32. It is not clear what sort of business case SaskPower is using since the discussion is almost completely devoid of any numbers. Maybe this has something to do with it;

 
It is important to note that as a publicly-owned utility, SaskPower is not a profit-driven organization.
 

Oh. Well that explains it. 

It continues;

 
[SaskPower] is an electricity-rate-driven enterprise that considers the lowest cost next option to supply its customers with power, reliably and sustainably.
 

That looks like a typo and should probably read "the next lowest cost option": regardless the report identifies that option as being Natural Gas Combined Cycle (NGCC). It then compares the cost of coal + CCS with NGCC. Believe it or not, that comparison is made without reference to any numbers.

No kidding – here it is (from page 31);

Comparing the Cost of NGCC with Clean Coal and CCS (2009-2010)

Source:  'Integrated Carbon Capture and Storage Project at SaskPower's Boundary Dam Power Station'. Figure 14.

That's it. Study complete and decision made: CCS is the only option. On the back of this irrefutable logic SaskPower, in 2005, "authorized engineering work to assemble commercial pricing for a clean coal power unit as a future generation option". (page 22).

 

5. The real reason for Boundary Dam

In the face of all this evidence a rational observer might reasonably wonder, why SaskPower /the Government would funnel $1.5-billion of public funds into a project which creates losses of about $1-billion for electricity consumers.

In our March report we proposed (page 31) that the real reason was that the oil industry needs below-cost CO2 so that it can continue to extract crude from aging oil fields in Western Canada. As it happens that is exactly what has been happening. In a surprising admission the SaskPower report came right out and admitted that this was the underlying rationale for the project.  

The oil industry’s efforts to secure a cheap source of CO2 for enhanced oil recovery extend back to the 1980s (Page 14) and 20+ years later SaskPower had been convinced;

 
By 2004…SaskPower was gradually becoming convinced by EnCana, Apache and other oil operators to become a CO2 supplier to the industry in southeastern Saskatchewan.
 

In other words the oil industry did not ride in at the eleventh hour and offer to buy the CO2 in order to ‘improve’ the project economics. Rather the entire scheme only came about after a concerted 30+ year oil industry lobbying campaign.

This may be a little concerning to Saskatchewan electricity ratepayers who might rightfully be surprised to learn that their electricity company has now entered into the CO2 production business. Worse - it is doing so on a massively loss-making basis.   

 

 

 

There are a number of conclusions which may be drawn from this. They are no different from those in our March report nonetheless and in the hope that someone is listening, we repeat them here. 

1. Halt further investigation of more CCS units at Boundary Dam. Given the high cost of CCS and the demonstrably weak business case underpinning BD3, Government/SaskPower should call a halt to additional investigation of the two further CCS units currently contemplated for Boundary Dam Units 4 & 5. 

2. Engage with the wind and solar communities. Given the practical and technical evidence which indicates the commercial feasibility of integrating large amounts of variable renewables on well managed power systems; Government/SaskPower should re-direct the investigative effort, currently being directed to Boundary Dam Units 4 & 5, towards a genuine dialogue with the renewable energy industry and the general public, about future generation options for Saskatchewan.

3. Public consultation over SaskPower's new, non-electric, business line. It is not clear that the general public is aware that SaskPower has adopted a new, loss making, business line into its overall corporate strategy: the supply of CO2 to the oil industry. Government may therefore wish to gain public sanction before wasting further funds on additional CCS units.

 

The layoff of tens of thousands of oil sector workers in Western Canada in the last year in combination with continued weakness in global oil prices, should have demonstrated that over-dependence on the hydrocarbon sector is not a smart move. The public might therefore reasonably expect SaskPower to be diversifying away from hydrocarbons. Wait no more...

It is to his credit that the new CEO of SaskPower, Mike Marsh, seems to be trying to introduce a more economic and balanced power generation portfolio. Quite a bit has changed in the five short months since he was appointed in April and that will be the subject of our next post.