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How SaskPower’s Boundary Dam Integrated CCS Demonstration Project reached a final investment decision
SaskPower’s Boundary Dam Integrated CCS Demonstration Project in Saskatchewan, Canada, achieved an important milestone earlier this year that puts it ahead of most other CCS projects. In April 2011, the Saskatchewan Government, SaskPower’s sole owner, gave approval for the CAN$1.24 billion project to proceed into the execution stage.
The project entails the rebuilding of Unit #3 at the existing Boundary Dam coal-fired power plant to include post-combustion CO2 capture at one million tonnes per year. The 110 MW net unit is scheduled to commence operations in 2014.
This positions Boundary Dam as one of only two large-scale CCS demonstration projects in the electricity generation sector to have successfully achieved a final investment decision. The other is the Kemper County Integrated Gasification Combined Cycle plant under construction in Mississippi, US. However, SaskPower will be the first based on integrating post-combustion capture technology.
So how has Boundary Dam been able to overcome the challenges that several other large-scale CCS demonstration projects are still dealing with? From a financing perspective, the answer has a lot to do with enhanced oil recovery (EOR) and securing government funding.
SaskPower will sell the captured CO2 for EOR. Saskatchewan already has an established CO2-EOR industry, where Cenovus and Apache are collectively injecting almost 3 million tonnes of source CO2 per year at Weyburn-Midale, delivered to them via pipeline from a gasification facility in North Dakota. Boundary Dam will now provide a Canadian CO2 source for EOR in the region.
While CO2-EOR is relatively capital intensive, and by no means low risk, in Saskatchewan the economics of CO2-EOR are given a boost with oil producers getting a rebate on royalties owing to the government. The current high price and bullish outlook for oil also helps.
EOR not only provides a valuable revenue source to the Boundary Dam Project, but the requisite CO2 off-take agreement with an oil and gas company will enable SaskPower to transfer risk associated with CO2 storage.
Boundary Dam also got a significant boost through CAN$240 million in funding from the Government of Canada. This funding was committed in the 2008 federal budget and transferred that same year to the Government of Saskatchewan. Such funding certainty from the outset of a project is beneficial.
With EOR revenues and federal funding, the net cost of generating electricity at Boundary Dam Unit #3 is equivalent to a natural gas combined cycle (NGCC) plant without CCS. The old Unit #3 had reached the end of its economic life and NGCC (without CCS) was considered the benchmark by the Saskatchewan Government in terms of providing affordable and relatively ‘clean’ electricity. It was not until August 2011 that the federal government has proposed regulated performance standards that will limit new thermal power generating facilities built in Canada to having greenhouse gas emissions equivalent to burning natural gas. (My colleague Ian Hayhow in Canada wrote a blog on the subject - read it here.)
Now the Boundary Dam Integrated CCS Demonstration Projects will emit substantially less CO2 than NGCC, and Saskatchewan’s significant coal resources and industry have taken a step towards a more sustainable future.
Saskatchewan has a CCS demonstration project that can provide learnings for similar aspirations and plans around the world.