Caledonia Clean Energy Project: is it feasible?

With coal no longer seen as a feasible future option for power generation in many regions of the world, there has been growing interest in the development of carbon capture technologies – previously seen as primarily applicable to coal – for potential use in gas fuelled plants. The Caledonia Clean Energy Project (CCEP), under development by Summit Power for a site in Grangemouth, Scotland – with captured CO2 to be sequestered in a subsea saline formation in the North Sea – started life as a proposed coal fuelled IGCC+CCS facility. But around two years ago the focus shifted to development of a natural gas fuelled power plant with carbon capture and storage. An installed capacity in the range 500 MWe to 1300 MWe has been studied. The final configuration has yet to be decided and will depend on how UK policy evolves, but two options look the most likely: natural gas fuelled CCGT with post combustion capture; and steam methane reforming to produce hydrogen for a hydrogen fuelled CCGT. There is the possibility of implementing more innovative technologies (eg the Allam Cycle) at the site subsequently.

A two year long feasibility study on the natural gas fuelled CCEP, largely funded by the UK and Scottish governments, has recently been completed. This concludes that it should be possible to build a gas fuelled plant that combines operational flexibility (ramp rate up to 88 MW/min) with carbon capture, able to complement intermittent renewables. The plant is seen as a possible “anchor tenant” for a cluster of CCS facilities, and will be able to make use of existing pipeline infrastructure and well defined storage sites, greatly improving the economics and financeability. The project is considered to be deliverable by 2025 and able to produce electricity at a price competitive with offshore wind, as well as providing much needed firm capacity and ancillary services to the grid, within a combined price of 80-90 £/MWh (2012 prices).

Excerpts from the feasibility study:

• CCEP will be capable of ramping its power output up and down within a wide range, whilst still capturing CO2. For global climate and power grid purposes, this is a long-sought Holy Grail. It means the plant – without needing to be base-loaded – can provide firm capacity and flexible dispatch to the power grid, along with other electrical services, thus helping overcome the inherent intermittency of renewable energy such as wind and solar projects, without having to sacrifice carbon dioxide capture.

Until now it has not been possible to take advantage of the desirable flexibility of natural gas fired power plants to support renewables integration – and maintain system resilience – without having to accept significant amounts of undesirable CO2 emissions. CCEP can help resolve this long-standing technical, global climate, and grid conundrum.

• CCEP can also serve as the “anchor tenant” for infrastructure that makes CCS possible for some of Scotland’s largest chemical plants, refineries, and other industrial emitters, protecting valuable parts of the economy in the long term. Creating CCS “industrial clusters” is a top priority of climate policymakers not only in the UK and Europe but also globally.

Worldwide industrial CO2 emissions now nearly match – and will eventually overtake – those from the power sector. However, capturing industrial CO2 emissions without a power plant to anchor the pipeline and storage infrastructure will be difficult and often economically unfeasible.

Around 80% of Scotland’s large-point sources of CO2 emissions are within 40 km of the existing Feeder 10 pipeline that would transport captured CO2. With a multiple- source Grangemouth CCS cluster, there can be an efficient and steady operation to decarbonise industry and generate power. Once created, the Grangemouth industrial cluster and infrastructure can also link up with other clusters on the UK’s East Coast, such as St Fergus, Teesside, and potentially Humber.

• CCEP is unique in the UK – and potentially globally – because the pipelines for CO2 transport, both onshore and offshore, already largely exist. In addition, it can access a North Sea CO2 store that is exceptionally well-studied and understood. Using existing pipelines significantly reduces the cost and risk of development: The cost of building equivalent new onshore (Feeder 10) and offshore pipelines (Atlantic & Cromarty) would be up to £440 million and would take at least five years to permit, design, and build. Retention and reuse of this nationally significant infrastructure makes good business and climate sense and represents the most tangible cost reduction opportunity for the UK in CCS today.
• Four main types of flexibly operating natural gas-fired power plants with CO2 capture are technically feasible. Two use technology that is already available with a commercial warranty from global players in the power sector: natural gas fired combined cycle plant with post-combustion CO2 capture (NGCC/PCC); and a steam methane reformer (SMR) plant that uses natural gas as the feedstock to produce hydrogen to be used as the fuel for a combined cycle power plant, with any excess hydrogen available for alternative heat, transport or industrial uses.

The other two types are the CapSol (formerly Sargas) natural gas fired system with integrated “end of pipe” CO2 capture technology, and NET Power’s innovative Allam Cycle turbine and capture system. First firing has recently been reported at the Allam Cycle demo facility currently under construction in the USA.

Across these four main types, fourteen different technical configurations were analysed, and the results presented in the feasibility report.

• It is technically feasible to use existing pipelines onshore (Feeder 10) and offshore (Atlantic & Cromarty, and potentially Goldeneye) for CO2 transport from CCEP to secure offshore storage in the Captain sandstone formation.

The pipelines have sufficient CO2 transport capacity to accommodate CCEP, plus a Grangemouth industrial CCS cluster, and (with some enhancements) a future link- up with other East Coast industrial clusters such as Teesside. Offshore, the Captain sandstone formation has sufficient capacity to store all these CO2 emissions and a great deal more – an estimated minimum of 360 million tonnes of CO2, at a rate of between 6 and 12 million tonnes per year.

• The notion that CCS, while necessary for climate, is nonetheless “too expensive” for the UK power system – or conversely, too unprofitable to attract private investment – is refuted. CCEP can be delivered at a very attractive power price, particularly given the valuable power system benefits that it will bring and that renewable energy projects cannot. Moreover, at a price attractive to government and the public, CCEP can also attract private investment and can be financially as well as technically feasible.

CCEP can be built and financed with reasonable returns to private sector investors at a competitive power price with suitable commercial arrangements. In fact, thanks in part to the enormous cost savings made possible by use of the existing onshore and offshore pipeline infrastructure for CO2 transport, the price of power from CCEP under a suitable Contract for Difference (CfD) would be only half of that anticipated for the two finalist projects (Peterhead and White Rose) in the UK government’s CCS power plant competition – and significant additional CfD price reductions for CCEP would be possible with reasonable policy decisions.

CCEP can be built and financed with reasonable returns to private sector investors at a power price of £80 - £90 per MWh with suitable commercial arrangements.

Moreover, the competitive price of power from CCEP understates other attractions of the project: unlike other power sources, such as wind projects, CCEP will provide more than just electric energy (MWh). CCEP will provide dispatchable power and firm capacity, supporting the grid through inertia, voltage and frequency regulation, ancillary services, potential battery charging, and – importantly – the ability to “black start” the grid in Scotland if there is a significant system outage.

• Like other UK power projects, CCEP can be developed and financed on the strength of an appropriate CfD. To gain the investor confidence required to fund and commence the next stages of project development – taking the lessons from past UK CCS experience – a CfD needs to be negotiated early in the development process to enable capital to be raised to undertake the development process without undue risk.

Commencing the CfD negotiation process is a pre-requisite of further project development activity, rather than the other way around. That process will also illuminate the most important policy and commercial decisions necessary to make CCEP and UK CCS a success.

Financing large long-term projects requires that all identifiable risks be allocated to specific parties. The CfD and government policy can accomplish this risk allocation task. If project lenders are not required to take sovereign or unusual risks, and if equity investors have a reasonable prospect of risk- appropriate financial returns, then financing for CCEP can be obtained.

• Next steps. CCEP’s sponsors should work collaboratively with Scottish and UK Governments on specific policy matters and commercial arrangements that will reduce the cost and increase the investment- worthiness of a CfD for CCEP. By commencing negotiation of the CfD, such policy matters and commercial arrangements can be identified and addressed with precision and without delay. This offers the quickest route to success for CCEP specifically and for the UK CCS sector in general since it avoids attempting to develop policy and/or commercial approaches in the abstract.

There is also a need to fund a pre-FEED for the CCEP project and to develop a real world business case for UK CCUS clusters.