This webinar discussed capacity charging mechanisms for shared carbon dioxide (CO2) transportation and storage infrastructure. It covered four key parts: 1) Background on third party access and a hypothetical case study. 2) Statement of connection charges methodology with example calculations. 3) Statement of shared system charging methodology including different cost allocation options between charges. 4) Associated topics like allocating costs to multiple users depending on capacity. The webinar explained how capacity charging mechanisms can influence the development of CCUS by affecting investment and use of shared infrastructure. Legal and regulatory frameworks were also noted as major influences on the design of these mechanisms.

1. Capacity charging mechanism for shared CO2
transportation and storage infrastructure
Webinar – 20 November 2013, 1900 AEDT

2. QUESTIONS
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3. Calum Hughes
The first 20 years or so of Calum’s career were spent in
engineering and project management. He graduated in Mechanical
Engineering before entering the upstream oil and gas industry,
starting off in reservoir appraisal and moving on to the engineering
and management of projects designing and building production
plant and associated infrastructure, onshore and offshore, across
Europe and Africa.
Around 10 years ago he took a break from project work to study
law and after a period in legal practice and qualification as a
solicitor he returned to industry as a consultant.
He has worked with National Grid’s CCS team for around 3 years.

4. Dave Bevan
David has spent the majority of his career as a Crude Oil vessel
charterer for numerous large oil companies.
After a 12 month break to travel the world he re-focused his career
in Carbon Capture commercial development.
He has worked for National Grid Carbon for the past 3 years
focusing on a number of projects to enable commercialisation of
CCS.

6. At the centre of the industry



We join everything up
Generators at one end – consumers at the other
Directly or indirectly connecting to our networks

7. Don Valley & White Rose Projects
The Don Valley CCS Project is co-financed by the European Union’s European Energy Programme for Recovery
The sole responsibility of this publication lies with the author.
The European Union is not responsible for any use that may be made of the information contained therein.

8. Disclaimer
This webinar and the report upon which it is based has been prepared by National
Grid Carbon Limited for the Global CCS Institute for the purposes of sharing
National Grid Carbon Limited’s work in developing a conceptual model for a
charging mechanism for application to shared CCS infrastructure systems. The
information contained within the webinar and report is disclosed voluntarily and
without charge to you to facilitate the long-term development of the CCS industry.
All figures, calculations and examples contained within the webinar and report are
for illustration purposes only and are not intended to represent any actual data,
decision making processes or costs related to any project or proposed
development.
Neither National Grid Carbon Limited nor any company within the National Grid
Group of companies provides any warranty as to the quality, accuracy or
completeness of the information or data included in the webinar or report and that
information is not intended to be relied upon by any party.

9. Capacity Charging Mechanism for
Shared CO2 Transportation and Storage
Infrastructure
European Business Development
Part 1 - Background

10. Total System Cost
Part 1 – Background
Total System
Cost
System Capacity (e.g. throughput /time, total capacity)

11. Part 1 – Background
Third Party Access
- EU law - Third-party access should be provided in a transparent and nondiscriminatory manner and that the objectives of fair and open access are
applied.
- English Law – CCS TPA Regs & Guidance – different categories of cost may
be treated differently

12. Part 1 – Case Study - Hypothetical
Compre
s
sor
SU #2
SU #1
m
200m
Dia.
m
15 K
Hub
Dia. 4
00mm
2 Km
SU # 3
200 K
m
Pump
Beach
Cros
(Futu
re
)
SU #4
sing
sio
Exten
Store
e
Futur
SU #
100 K
m
6
SU #5
n

13. Capacity Charging Mechanism for
Shared CO2 Transportation and Storage
Infrastructure
European Business Development
Part 2 – Statement of Connection Charging Methodology

14. Part 2 – Connection Charges
Example charge calculation given, but generically:
Annual Charge over agreed payment period =
- Cap Repay. + RoR (on Capex & Ongoing Capex & Decommex)
- Annual O&M
CCS specific issues:
- Novel nature of fiscal metering
- Design specification – solids
- Control & Safety system integration

15. Capacity Charging Mechanism for
Shared CO2 Transportation and Storage
Infrastructure
European Business Development
Part 3 – Statement of Shared System Charging Methodology

16. Part 3 – Shared System Charging
Costs
-
Capex
-
Fixed opex
-
Variable opex
-
Financial Security
-
Post-closure obligations
-
Decommissioning

17. Part 3 – Shared System Charging
Heads of Charges
-
EPC Charge
-
Capacity Rights Charge
-
Use of System Charge

18. Part 3 – Shared System Charging
Allocation of Costs to Heads of Charges
May be used to affect:
-
Distribution of risk between operator and user
-
Distribution of cost between system users
-
EPC cost loading on state funding
-
Rates of return achievable
-
Fairness of cost allocation in options contracts and other access
agreements.

19. Part 3 – Shared System Charging
Option 1 – The amount of costs allocated to
the EPC Charge is maximised. There is no
Capacity Rights Charge. Only variable opex
directly attributable to each system user is
included in that system user’s Use of System
Charge
Option 1
£m
EPC Charge
1,657
180
Cap Rights Charge
0
0
UoS Charge
7
1
Option 2
Option 2 – This reflects the cost to charges
breakdown suggested in section 5.4 of report
i.e. a mid-range allocation of costs between
charges
£m
EPC Charge
679
73
Cap Rights Charge
874
88
UoS Charge
110
20
Option 3
Option 3 – the amount of cost allocated to the
EPC Charge is minimised and the Use of
System Charge is also kept relatively low. This
loads cost into the Capacity Rights Charge.
£m
EPC Charge
618
67
Cap Rights Charge
964
98
UoS Charge
82
16

20. Capacity Charging Mechanism for
Shared CO2 Transportation and Storage
Infrastructure
European Business Development
Part 4 – Associated Topics

21. Total System Cost
Part 4 – Allocation to Multiple Users
Capacity Dependent
Cost
Total System Cost
Capacity
Independent Cost
System Capacity
System Capacity (e.g. throughput /time, total capacity)

22. Part 4 – Allocation to Multiple Users

23. Part 4 – Allocation to Multiple Users

24. Summary of Key Points
• Correctly sized shared infrastructure could significantly reduce the cost of CCS.
• With regard to the capacity charging mechanism applied to such shared
infrastructure, the way in which:
o costs are allocated between different system use charges; and
o costs are distributed between different system users, might be used to
influence the aggregate investment in and take-up of system capacity and
therefore affect the development of CCS.
• Prevailing legal and regulatory framework will have a major influence on the
design of capacity charging mechanisms for CCS infrastructure.

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27. Please submit any feedback to: webinar@globalccsinstitute.com