Carbon capture decision may come later

For several years, SaskPower and government officials have indicated that a decision whether or not to go ahead with carbon capture units on Boundary Dam Power Station Units 4 and 5 would be made later in 2017. However, in the fast-changing world of carbon dioxide regulation, that timeline may be in flux.

During the Carbon Capture Summit held at Southeast College on May 11, SaskPower officials indicated it may now be several years from now when that decision is made.

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This revelation comes after much change in the regulatory environment which affects these decisions. The federal Liberal government has moved to impose a national carbon tax and to phase out coal production by 2030 across the country. That carbon tax is expected to reach $50 per tonne of CO2 by 2022.

The Saskatchewan government has been working on a fleet-wide equivalency agreement which would recognize our province’s clean coal efforts, including the $1.5 billion Boundary Dam Unit 3 Integrated Carbon Capture and Storage project (BD3). Of that $1.5 billion, approximately 40 per cent was the cost of rebuilding the coal-fired unit, and the remaining 60 per cent was the cost of the carbon capture system.

Just a day before the summit, ATCO Ltd., a large power utility with two major coal-fired power plants in Alberta, indicated it isn’t going to wait until 2030 to phase out coal. Instead, it is going to convert its power plants to the use of natural gas by 2020. TransAlta, another Alberta coal-fired electrical power utility, has indicated its intention to do the same by 2022. These actions, if carried out, will in turn would eliminate the need for the coal mining supplying those plants, while increasing the demand for natural gas. Natural gas is a commodity which has spent much of that past decade at a small fraction of the price it had been in the early 2000s.

Ian Yeates, SaskPower’s director, supply development (Carbon Capture), spoke to the Carbon Capture Summit about the future of carbon capture and storage. His presentation spoke about the high variability in natural gas prices over time and alarming spikes in price, at one point hitting $17 per gigajoule. In comparison, long term pricing for coal is consistent and low. “We know what we’re paying for coal for an extended period of time,” Yeates said.

Federal regulations were enacted July 1, 2015, requiring coal-fired power plants to be as clean as natural gas once individual units reached the age of 50 years, or they must be retired or retrofitted to the standards of a combined cycle natural gas plant.

The Trudeau Liberal government has recently brought in a new requirement, requiring those same units to be retrofitted by 2030. In the case of SaskPower’s Shand Power Station, it would move the deadline up by 12 years.

As a result, the province is sorting out an equivalency agreement which encompasses SaskPower’s complete coal fleet and takes into account the cuts in emissions that came from bringing BD3 online in late 2014. The province would also accrue credits for carbon captured already via BD3. Those negotiations are nearly complete, Yeates said.

“The equivalency agreement will allow us to treat this group (coal-fired power) as a single emitter, and deal with them as we wish.

“We believe there are, for example, some economies of scale. So we may look at a 300 megawatt unit as our next one, as opposed to the 150s, which are Boundary Dam (Units) 4 and 5. Decisions haven’t been taken yet. We’re in the middle of doing the arithmetic,” Yeates said.

He noted SaskPower feels it could save 30 per cent, and aiming for a 40 to 50 per cent, on the cost of new carbon capture units compared to BD3 as a result of numerous lessons learned from that groundbreaking project. “The capital costs have to come down, and come down a lot,” he said.

As a result of all these changes, a future carbon capture project is now expected in the first half of the next decade.

Asked about the decision making timeline, Yeates pointed out that a disclaimer is often made in these types of presentations, warning people about making investment decisions based on what they hear. That said, he responded, “The basic reality is, any future project would be in the first half of the next decade, because we have to make decisions towards the end of this decade for long-lead items. So that would be the rough ballpark, as we go forward. The equivalency agreement with the federal and provincial governments will allow us to do it that way.

“We have more breathing room,” Yeates said.

Saskatchewan Environment Minster Scott Moe, keynote speaker for the summit, was asked about changes to the timeline for a decision on BD4 and BD5. He said he can’t speak specifically to decision timelines. “We have a new federal government. There’s been a host of changes in the regulatory environment, the coal-fired equivalence agreement we’re working through with SaskPower, with the federal government. There’s been a host of other regulatory conversations that have been happening as well. While all that has been happening, through partnerships the CCS Knowledge Centre has, for example, and other opportunities, the whole matrix with regards to power generation is changing. In particular, here in Canada, it’s changing from the regulatory perspective. It’s changing from incorporating new technologies, and new knowledge, and ultimately, the cost, of clean energy as we go forward.

“At the end of the day, I think it’s important to remember that, as we lower our carbon intensity or lower our carbon emissions, in any industry, that takes investment. Whether that investment is carbon capture and storage, or whatever that may be, I think that’s been proven in other jurisdictions in Canada, North America and around the world. As we do that here, in the province, it’s going to take investment here as well,” Moe said.

He noted there’s a lot of moving targets when it comes to the decisions SaskPower makes. Moe pointed out he’s the minister of Environment, not SaskPower, but they work very closely on coming to the best decision.

Touching on the new International CCS Knowledge Centre, based in Regina, Yeates explained that SaskPower’s experience with carbon capture and storage means they have a lot to share. While coal-fired power generation is being shut down in places like Alberta, Yeates noted its prevalence around the world, saying, “Coal is almost a normal source of generation. If anything is going to be done about (greenhouse gases) from these units, carbon capture and sequestration has to happen.”

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