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The New Economics of Carbon Capture: Lower Costs, More Revenue

November 20, 2018 Work Area: Carbon Capture, Power Plants

*November 28, 2018 Update: The Shand study has been released and can be downloaded here.

A soon-to-be-released engineering report on the costs of retrofitting SaskPower’s Shand plant shows a 67% cost decline compared to the world’s first large-scale CCS retrofit, the company’s Boundary Dam 3 unit.

The former head of SaskPower’s Boundary Dam plant, Mike Monea, now of International CCS Knowledge Centre gave a preview of the upcoming report in Melbourne Australia at the GHGT-14 conference last month. The report estimates that the cost of capture at Shand would be $45/tonne in US dollars. That cost is similar to NRG’s projections of around $47 /tonne for their next plant.

Why is the $45/tonne to $47/tonne cost range for carbon capture significant? With the Congress’s changes to 45Q carbon capture incentives that were enacted into law last February, projects that capture and store CO2 deep underground can get more revenue- $35/tonne for sequestration in enhanced oil recovery (EOR) and $50/tonne for using saline formations. EOR projects also have a revenue stream from payment for the CO2 provided to flood depleted oil fields and produce more oil.

At that these new costs, 45Q revenue, and for EOR projects, revenue from EOR, Monea stated during his presentation that “CCS makes sense.” NRG’s calculations reach a similar conclusion. With the cost reductions of 20% and with 45Q, the economics for the next project some company builds could go online as early as 2023.

Here’s a simple illustration of the economics of the new cost/more revenue world. Transportation to an EOR field might be in the $3-$4 per tonne range. With $45/tonne costs of capture, the total is around $50/tonne. EOR can supply anywhere from $15/tonne to $30/tonne of revenue for the sale of CO2 depending on oil price. With $35/tonne received in tax credits and $15/tonne in EOR revenue, the costs and revenue are equal.

Keep an eye toward Canada in the coming weeks for the release of the Shand Plant retrofit report. When our friends at the International CCS Knowledge Centre release this report, the details concerning these deep cost reductions will make for great, and very encouraging, reading.

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