Jeffrey Brown, Vice-President, Project Finance, Summit Power Group, presented on the Texas Clean Energy Project’s coal feedstock poly-generation plant with CCUS at the Global CCS Institute's Japanese Members' Meeting held in Tokyo on 8 June 2012
UiPath Solutions Management Preview - Northern CA Chapter - March 22.pdf
Jeffrey Brown – Summit Power Group – Texas Clean Energy Project: coal feedstock poly-generation plant with CCUS
1. Texas Clean Energy Project:
Coal Feedstock Poly-generation Plant
with CCUS
Presentation To:
Japan Meeting, Global CCS Institute
June 8, 2012
2. Disclaimer
This presentation contains confidential information, the use and disclosure of which is governed by a
nondisclosure agreement between Summit Power Group, LLC (“Summit”) and the recipient. No other use
or distribution is permitted.
This presentation is not intended to form the basis of any investment decision and does not contain any
recommendation by Summit, or any of its shareholders, subsidiaries, directors, employees, agents, or
advisors (“Summit Parties”). This presentation does not constitute an offer to sell or a solicitation of an
offer to buy any securities in the United States or any other jurisdiction.
Although the information contained in this presentation is believed to be accurate as of the date
presented, Summit and the Summit Parties make no representations or warranties (express or implied)
regarding its contents.
Some information contained in this presentation is based on forecasts and projections that may change
or prove to be incomplete or inaccurate. Summit and the Summit Parties do not undertake any obligation
to provide the recipient with additional information, to update this presentation, or to correct any
inaccuracies that may become apparent.
Nothing in this presentation should be considered to be legal, tax, or investment advice. Recipients
considering any involvement with TCEP should consult their own professional advisors prior to making
any business decisions relating to the project.
2
3. Introductions:
Summit Power Group, LLC
Founded twenty-one years ago by former U.S. Secretary of Energy Donald Paul Hodel &
Chief Operating Officer of Department of Energy Earl Gjelde
Summit’s Traditional Business is Power Project Development
• Developed over 7,000 MW of large, clean energy projects
• Over 1,000 MW in development or under construction
Summit’s Principal Business Lines/Live Projects Previous SPG Power Projects
• Wind power—Cedar Creek 120MW, Fire Island 20MW
• Solar power—NorthStar Solar 90MW PV
• Natural Gas-fired Power Plants--Encino
• Carbon Capture including from Coal Gasification—TCEP 400MW
We don’t have a particular technology favorite or bias. But we sure don’t pick permitting
fights!
These remarks are my personal views and are not Summit Power’s positions.
3
4. Main Points
•Conventional pulverized coal plants are dead or dying in U.S. Cheap, but
an environmental nightmare
•Conventional IGCC does not feature carbon capture, though it is clean as
to conventional pollutants
•Gasification of the type typically used in chemical plants (with a shift reactor
and Rectisol or Selexol system) can create a high-hydrogen feedstock for
either power or chemicals, plus a pure CO2 stream
•If the pure CO2 stream can be used for Enhanced Oil Recovery:
• The space created by removing oil is perfect for permanent storage of CO2
• The highly profitable extraction of oil makes the CO2 valuable, creating a non-mandated
commercial CO2 market
• Proven, technically and commercially, with 40+ years of experience in West Texas
•Our project is getting a variety of government incentives, tax and cash,
upfront and ongoing. Some of these work better than others
4
5. By Any Measure TCEP will Save a Lot of CO2 Emissions
TCEP CO2 Emissions vs. (i) Gas-based Power and Urea Plants Making Same
Output or (ii) Conventional Coal Power Plant Using Same Inputs
Case Examined Annual short tons of CO2 emitted
TCEP annual CO2 emissions (no coal is 300,000 tons
burned; it is turned into clean gases and almost all
the CO2 is captured)
Power and Fertilizer, same product quantities 1,200,000 tons—4x TECP
as TCEP, made with natural gas
Conventional coal plant, burning same 3,600,000 tons—12x TCEP
amount of coal feedstock as TCEP
5
6. Emissions for Alternative Plants Making Same Product
TCEP’s annual CO2 emissions are about 300,000 tons. So having TCEP running saves about
900,000 tons of CO2 emissions per year. Actual capture and sequestration is 2.5 mm tpy.
Product Process TCEP Annual Industry Industry
Output to the Alternative CO2 Alternative
Grid Emissions per Annual
unit output Emissions tons
CO2
Power Combined Cycle 1.5 x 106 MWh 1,100 lbs / 0.55 825,000 tons
Gas Turbine ton*
Granular H2->NH3, CO2 400,000 tpy 1 ton CO2 per 400,000 tons
Urea added to get Urea NH3-> 700,000 ton** NH3 used
tpy Urea in urea
1,225,000 tons
*NREL—includes direct emissions at plant and fugitive wellhead and pipeline methane (converted to GWP)
**Natural Resources Canada—average for seven Canadian ammonia/urea plants
6
8. The Physical Volume of CO2 Created by Pulverized Coal
(“PC”) Plants is Staggering
100 Watt Light 876 kWh 950 pounds 1 ton CO2
Bulb coal (bituminous coal or about ½
(i.e. about 1 like PRB) million liters—
Running for 1 MWh) around 225
year scuba tanks
worth
8
9. Old PC Plants are Really Big Sources of CO2 and
Conventional Air Pollutants
One1970s era PC plant (~1,000 MW) running one year
@ 90% base load:
• Burns 10 million tons coal a year
• Emits annually:
• 120,000 tons sulfur dioxide
• 22 million tons CO2
• 4,000 pounds mercury= ½ million toxic doses
9
10. Why “Cleaning” Conventional Coal so Hard
Massive flow of
exhaust gases
(~10,000 tph in
1,000MW plant)
130 foot high
wall of flame
with some
metal tubes
around it.
Diagram: Tennessee Valley Authority
10
11. Another Picture of a
Conventional Coal Boiler
There have been many
proposals for doing “post-
combustion capture” at
new-build (Trailblazer,
USA) or retro-fit
(Longannet, UK) pulverized
coal plants. No one yet has
overcome (at scale*) the
fundamental challenge of
sweeping a small amount
of CO2 out of a giant hot
gas flow. That is, fast-
moving flue gas is mostly
comprised of N2 (i.e., 3
tons a second of hot gas
that is only 1/8th comprised
of CO2). ~130 feet
*For example, the Aker CleanCarbon amine capture system that
was supposed to be used at Longannet retro-fit is just now being
tested at a capture rate of 80k tpy. It would have needed to work
at rate of ~3mm tpy (about 40 x bigger) to be full-scale.
11
12. Old Style IGCC is Probably Also Dead
• “Old Style” IGCC made no attempt to capture CO2.
• Basically most of the carbon molecules contained in the original coal input
end up as carbon monoxide in the raw syngas that ultimately feeds the
power turbine. As example, raw syngas from one common technology is
34% H2, 45% CO, 16% CO2)*
• Hence, old style IGCC’s CO2 emissions profile is not much different than
the best pulverized coal plants. Some existing old style IGCC plants are
now attempting to retrofit (see box below).
“Pilot with CO2 capture -- Nuon has started a pilot at the Willem Alexander power plant in
Buggenum to capture CO2.
Because the Willem-Alexander Power Plant uses gasification technology, it is the ideal location to
test pre-combustion CO2 capture. Coal gasification enables CO2 to be captured before the
combustion process. This enables a better environmental performance, meaning coal can be used
in a cleaner and more efficient way.”
*Source: SAIC, NETL paper on IGCC citing example of Conoco Phillips gasifier. Remaining components 2% methane, 3% nitrogen.
12
13. Tightening U.S. Federal Regulation and State Laws
Pressure Old and New Coal Plants
• New Years 2011 USEPA added CO2 as regulated pollutant for future air
permits, with recent April 12, 2012 proposed limit of 1,000 lbs CO2/MWh.
• July 2011 Cross-State Air Pollution Rule—applies to states east of
Dakotas/New Mexico; basically creates limits and allowance trading
markets for:
• NOX
• SOX
• Small Particulates (PM10)
• December 2011 Mercury and Air Toxics Standards (MATS)/National
Emission Standards for Hazardous Air Pollutants—existing and future
plants
• States (for instance California and Oregon) passed laws limiting new
thermal plant to 1,100 pounds/ MWh—far better than pulverized coal or
conventional IGCC capabilities.
13
15. Coal Gasification with CCUS Will Succeed
•Gasify. Clean small, pressurized gas volume. Then burn.
•Five standardized “modules”. Rare in U.S., but basis of much of
China’s chemical industry.
•TCEP’s big difference is the last step—selling the CO2 to users who
will permanently sequester
•Use every single chemical constituent of coal to make money
•As consequence, emit negligible air pollution
•As a consequence, can get permitted without fatal opposition
15
16. What is Coal Gasification with CCUS?
PC: Grind-> Break -> Burn -> Clean
Gasification: Grind-> Break -> Clean ->Burn
Pulverized Coal Gasification w/ CCUS
Grind coal Grind Coal
Break carbon bonds by adding heat—
Break carbon bonds by adding heat, but only a bit of oxygen, so can’t burn
& completely. (Gasifier and CO Shift)
Burn simultaneously, adding Clean the dirty gas (which is
atmospheric air in four story high pressurized in a small pipe)—easy to
fireball in a box. grab CO2 and H2S
Clean: Then try to grab sulfur, ash, Then burn the clean gas (mostly H2 &
SOx and NOx out of the massive little CO in ~20:1 ratio) in a
volume flowing through stacks. combustion turbine
16
17. Air Pollutants: Gasification vs. “Incinerate and Clean Up Later”
2007 Permitted 2010 Permitted
Pulverized Coal TCEP TCEP /
(1,720 MW) (400 MW) Pulverized Coal
SO2 (lb/MWh) 2.01 0.14 7%
NOx (lb/MWh) 0.84 0.13 16%
PM10 (lb/MWh) 0.42 0.22 52%
Hg (millionths of 96 7 7%
lb/MWh)
CO2 (lb/MWh) 2,203 228 10%
17
19. Newer Gasification Plants Have Five Typical Major
Subcomponents, and We Add One New Revenue
1. Air Separation Unit (need pure oxygen for controlled gasification)—typical
providers Linde, AirLiquide, Airproducts, etc.
2. Gasifiers to gasify coal or pet coke—typical providers Siemens,
ConocoPhillips, Mitsubishi Heavy, GE, Chevron. Output is mixed gases,
heavily weighted towards CO.
3. CO Shift Reaction*—add steam and eliminate most CO, while raising CO2
and H2. (CO+H20CO2+H2)
4. Acid Gas Removal including Carbon Capture (take H2S and CO2 out of
gas stream to concentrate high BTU syngas)—typical providers Linde or
AirLiquide (Rectisol), UOP (Selexol)
5. Syngas Users “Inside the Fence”
6. Commercial Sale of Captured Carbon
*Gas components (ex nitrogen and water) out of gasifier are 65% CO, 30% H2, 5% CO2. After shift reaction 3% CO, 57% H2, 40% CO2.
19
20. TCEP Gasification CCS Schematic: Same 5 CCGT
“Modules” plus a New Revenue Source
2/3
#2 Gasifiers
Coal #3 CO Shift #5
1.8mm
tpy
& #4 Acid Syngas
Gas Removal Users
1/3
[Brackish Water Purified
via Reverse Osmosis]
H2O NH3/Urea
1/6
#6 5/6
Raw
#1 ASU CO2 EOR
Syngas
O2
H2SO4
* Remaining 5% of revenue from other byproduct sales
20
21. Key: Using, not Venting, Industrial Quality CO2
Korean Gasification Plant (same Acid Gas Treatment as TCEP from Linde),
label numbers correspond to steps in prior slide
#1
#2
#6
Yellow box says
“Vented CO2”—to
OSBL. OSBL means
#3 #4 #5 “Outside Battery
Limits”, which is nice
way to say “into
atmosphere”.
21
22. A Few Recent Asian Coal Gasification Plants
Total Capacity Last Decade is ~20x TCEP
Feed Syngas
Plant Name Year Country Technology Name Class Product Output
Inner Mongolia Chemical Plant 2011 China Shell Gasification Process Coal Methanol 3373
Ningxia Coal to Polypropylene 2010 China Siemens SFG Gasification Coal Polypropelene 1912
Project (NCPP) Process
Perdaman 2013 Australia Shell Gasification Process Coal Chemicals 1283
Tianjin Chemical Plant 2010 China Shell Gasification Process Coal Ammonia 1124
Jincheng Project 2012 China Siemens SFG Gasification Coal Ammonia 874
Process
Coal to UREA Project 2013 Australia Siemens SFG Gasification Coal Ammonia 765
Process
Guizhou Chemical Plant 2010 China Shell Gasification Process Coal Ammonia 562
Hebi 2012 China Shell Gasification Process Coal Chemicals 546
Datong 2013 China Shell Gasification Process Coal Chemicals 546
Sinopec, Anqing 2006 China Shell Gasification Process Coal Ammonia 509
Dong Ting Ammonia Plant 2006 China Shell Gasification Process Coal Ammonia 466.2
Hubei Ammonia Plant 2006 China Shell Gasification Process Coal Ammonia 466.2
Yuntianhua Chemicals, Anning 2007 China Shell Gasification Process Coal Ammonia 465
Yunzhanhua Chemicals, Huashan 2007 China Shell Gasification Process Coal Ammonia 465
Puyang Plant 2008 China Shell Gasification Process Coal Methanol 463
22
24. Emitting Less Pollution, Emitting More Revenue
Process Product Use
Air Separation Unit Argon Gas, Nitrogen Gas Trucked to industrial gas users (We
only need O2 and some N2)
Gasifiers Inert, vitrified, non-leachable Environmentally friendly component
slag for Cement
Gas Cleanup Hydrogen Sulfide Gas Make Sulfuric Acid to Sell
Gas Cleanup CO2 EOR and Urea, both
Gas Cleanup Syngas Power and Urea
Plant Wide Water Zero Discharge
24
25. Revenue components
• 710k tons / year
Components of External Sales Revenues (after eliminating all intra-
• US 2010 demand 12mm tons / year plant transfer pricing) – 2020
Urea1 • US 2010 imports 7mm tons / year 8%
• 97% capacity utilization
• Contracted under a 15-year offtake agreement 18%
with a price floor
• 400 MW gross output
• On-site power use includes ASU, ammonia 53%
production and CO2 compression
Power • ~195 MW net to CPS Energy
• ERCOT 2011 peak demand 68,379 MWs 21%
• Fully contracted under a 25-year Tolling
Agreement with a ‘AA’ rated counterparty Urea Electricity CO2 Other
• 2.5mm tons / year captured and sold
• 90%+ capture rate
• Market in Permian Basin is massive in
CO2
comparison – and short of supplies
• 37mm tons / year market for new CO2
• Will qualify for carbon credits (VERs) on
American Carbon Registry and other registries (1) Source: Fertecon
25
25
26. Key Profit Drivers (Spot/Indicative Prices)
Item Volumes/Units Price Revenue mm$/yr
(spot)
Coal Consumed 1.8mm tpa $50/ton ($90)
delivered
Natural Gas 4 mm MCF/yr ~$3 ($12)
Consumed
Urea Produced 710,000 tpa $400 $284
Power Produced for ~1.5 mm MWh/yr $80 $120
External Sale
CO2 Produced 2.5mm tpa $30 $75
$377
26
27. CO2 for Enhanced Oil Recovery: Inject, Extract, Re-cycle, Cap
Closed loop for valuable CO2
When done, cap
well, and CO2
stays in the space
where the oil used One ton CO2
to be. pushes up about
2-3 barrels of oil!
Not “fracking.”
More analogous to
CO2 dry cleaning.
27
28. In Oilfields CO2 is a Scarce Product, Not a Disposal Problem
• Texas’ Permian Basin is
40-year old CO2
market for Enhanced Oil
Recovery
• 3,000 miles of CO2
pipelines (Cortez pipeline
in red/top left = 500 miles)
• TCEP within 100 miles
or less of 72% of all
existing EOR-using fields
• We are ~7% of 37mm
TPY market
• CO2 demand 3x supply
--all existing sources of
supply (geologic and man-
made)
28
30. U.S. Government Support:
TCEP Received $450 Million Grant From U.S. Department of Energy
Largest single award under President Obama & U.S. Energy Secretary Steven Chu
Only IGCC project & “new start” in this round of the DOE’s Clean Coal Power Initiative
• On December 4, 2009, Secretary Stephen Chu of the U.S. Department of Energy announced
that TCEP would receive a $350 million award
• The award is basically “equity” that does not require a dividend or receive tax benefits
• This award is the largest yet made under the Department of Energy’s Clean Coal Power
Initiative, enacted and funded by Congress.
• The U.S. DOE made an additional $100 million award to TCEP in August 2010
• The funding does not require any further Congressional action—it is already appropriated and
committed, subject to project fulfilling its contractual commitments under the executed
Cooperative Agreement.
At a 2009 hearing of a key Congressional committee, witnesses unanimously agreed that the United
States and the world cannot meet current climate goals without the implementation of carbon
capture and sequestration (CCS) technology.
In July 2010, the then U.S. DOE Assistant Secretary for Fossil Energy James Markowsky said of
TCEP: “It is one of the key carbon capture and storage projects essential to gaining the integration
and operating experience necessary for commercial CCS deployment.”
30
31. Tax Benefits are a Significant Factor in Returns
• TCEP benefits from three separate Federal tax incentives, the combined benefit of which is
worth approximately $1.35 billion. The ITC had to be applied for and competitively selected.
The other two benefits are available to any similarly situated taxpayer.
• $313 mm Advanced Coal Program investment tax credit (“ITC”) at or before COD (awarded)
• $195 mm Carbon Sequestration tax credits possible over first 10 years
• $757 mm MACRS accelerated depreciation tax benefits over first 5 years
~$1.265 bn undiscounted total
• If DOE Award is taxed (likely to change), taxes on that are about $157mm. So net
undiscounted tax benefit is about $1.1bn
• $1.1bn is about NPV of $700 million1 at COD
• Sadly, only a big taxpaying corporation that invests as a partner in TCEP can benefit from these tax
programs. That restriction leaves out all pension funds, non-profits, foreign companies, sovereign
wealth funds, most U.S. energy companies, U.S. corporations with existing tax losses, etc.
Wonderful support, but financially complex to use.
1 at 15% discount rate from date of project completion
31
32. TCEP Capitalization
Operating/Project Company funding (as of 10/14/2011 in USD)
• DOE Award $ 0.45 billion
• Senior Secured Debt $ 1.30
• Investment from Holding Company $ 1.10
• Total estimated project costs: $ 2.85 billion
Grants
16%
Value of tax
Sr. Secured
benefits @ Debt
~$700mm = 46%
about 2/3 of
Holdco
needed equity. Investment
38%
32
33. TCEP Gets Large incentives (in Absolute $$) — Highly Efficient in
$$/ton CO2 not Emitted
Wind Project Wind Project w/ TCEP vs. Gas TCEP vs. Coal
Solar Project Grant PTC CCGT Plant
Size MW (Nameplate) 100 100 100 400 400
Cost $mm $ 300.00 $ 200.00 $ 200.00 $ 2,900.00 $ 2,900.00
Annual Operating Ratio 20% 30% 30% 90% 90%
Annual Energy 175,200 262,800 262,800 3,153,600 3,153,600
20 year Energy 3,504,000 5,256,000 5,256,000 63,072,000 63,072,000
Carbon Out lb per MWh 0 0 0 200 200
Gas Plant or Coal (Last Column) 800 800 800 800 2200
Tons CO2 Saved 1,401,600 2,102,400 2,102,400 18,921,600 63,072,000
Cash Grant $ 90.00 $ 60.00 $ 450.00 $ 450.00
Tax On Grant $ - $ (157.50) $ (157.50)
Production /Sequestration Tax Credit $ 52.56 $ 100.00 $ 100.00
Investment Tax Credit $ 313.00 $ 313.00
Basis Reduction for ITC /Grant (%) 50% 50% 0 100% 100%
Basis Reduction for ITC /Grant ($) $ (16) $ (11) $ - $ (110) $ (110)
Total incentives $ 74.25 $ 49.50 $ 52.56 $ 595.95 $ 595.95
incentive per Ton CO2 Not Emitted 52.98 23.54 25.00 31.50 9.45
33
34. Key Success Factors and Challenges
• Success Factors
• Low emissions profile meant no environmental opposition and community support. Also no
local fresh water use was important in this arid region of the USA.
• Flexibility of uses for high hydrogen syngas—multiple possible power and chemical
applications
• Basically zero investment in CO2 pipeline infrastructure, combined with large and profitable
CO2 sales market
• Low technology risk because we use well-tested components and because “integration” has
been proven in multiple Asian plants (i.e., Shenhua’s)
• Strong US government support, especially the cash grant
• Settled legal framework relating to underground CO2 injection for EOR in Texas.
• Challenges
• Impossible to get fixed price long term contracts for urea and CO2
• Difficulty of efficiently using tax incentives provided by U.S. government
• No government mandate: neither national Renewable Portfolio Standards (for power
generation) nor carbon tax on emissions of CO2.
34