Regina – There was some kerfuffle after SaskPower president and CEO Mike Marsh spoke to an editorial panel with CBC Saskatchewan on Nov.3, with one of the topics of discussion being the future of carbon capture and storage (CCS) with SaskPower’s coal-fired power plants.
To clarify what he meant, Pipeline News spoke to Marsh by phone on Nov. 7.
Marsh said he spoke to an editorial board with three CBC editorial reporters in Regina and another three, via conference call, in Saskatoon. “We talked about a number of things. Carbon capture was one of them,” he said, adding renewables, rate application and Global Transportation Hub land were also discussed.
“In the conversation, talking about where things are, I was explaining when we built CCS, Boundary Dam 3, it was the right decision. We have worked hard to make that plant work. But I said the big thing that has changed in the business today, and you know this very well, the price of natural gas is so low today, it makes the alternative, of course, much more attractive, just when you look at the generation cost perspective,” Marsh said.
“Natural gas combined-cycle is displacing conventional coal across North America, and has been for the last five years. So, with that, my comment that it makes that more attractive, (it) makes carbon capture a more difficult business case to meet that hurdle. The comments came out that we were never recommending building CCS again, and I never said anything like that. We are working on the decision for 4 and 5. I was simply trying to put the shift in the natural gas industry today into perspective, to let them know that this is a very complex decision.
“Just on generation cost alone, it’s going to be difficult. But there’s many layers of approval we have to go through before it reaches cabinet. We’ve got four layers of approvals, between the executive team at SaskPower, SaskPower’s board of directors, Crown Investment Corp.’s board of directors, and finally, ultimately, cabinet.”
With many Saskatchewan party candidates speaking in support of CCS, what happens if the new premier wants to go ahead with it?
“In saying they favour CCS, I favour CCS. But, simply looking at the business case, we have to be mindful of the economics, here. That’s all I’m saying here. As we compare the only two baseload options we have to look at, when we look at the retirement of BD4 and 5, which we’re doing because of the federal emissions regulations.”
He said they have to make a decision before the end of 2019 on those units, as those units were built before 1974.
“As we look at replacing baseload, we have to options. One is to retrofit BD4 and 5 with carbon capturea and storage. Option 2 is a combined-cycle gas plant. The economics of the fuel choice have a big factor in any final decision we’ll make, and we’re working through that analysis today. On the plus side, CCS can give us two to three times the emissions reductions that a combined-cycle plant would be able to offer, so there’s certainly pluses there.”
He noted it’s premature, because the decision process hasn’t worked its way through the various channels.
Marsh pointed out the SaskPower and the province have been working, behind the scenes, on the equivalency agreement regarding carbon dioxide emissions, under federal regulations. This would allow SaskPower to apply emissions reduction targets across its fleet, instead of individual power generating units.
“Getting an understanding of what that equivalency agreement is, and how it will allow us to operate that fleet differently going forward, because we still have to meet those emissions reduction targets by the federal government. An equivalency agreement will allow us potentially to operate those units, beyond their retirement dates, in a different mode, as long as we’re able to meet those emissions targets,” Marsh said. ‘That’s a fundamental piece that is not totally completed.”
Discussions are underway between the province and federal government, he noted.
Options they are exploring include including leaging Units 4 and 5 operating as they are and putting carbon capture plants at either Poplar River Power Station (Coronach), Shand Power Station (Estevan) or Boundary Dam (Estevan).
“Those are the options we’re exploring,” he said. “There’s pros and cons to each one.”
Boundary Dam’s site is congested, but there’s lots of space at Poplar River and Shand, for instance.
It may mean changing the operations profile. “We do not believe we would be able to operate it 24/7, 365 like we do today, because we would exceed our emissions targets,” he said of the Boundary Dam Units 4 and 5.
One option would turn them into winter/summer plants, for usage during peak season. Another option would be to use them during daylight hours, as a one or two shift operation instead of a three-shift operation.
“It’s important that no decisions have been made,” he stressed.
Asked about carbon tax and carbon strategy, he responded that was a provincial government responsibility. “As a Crown, we would comply with any carbon tax or carbon strategy that is in place provincially. Those negotiations are ongoing between the provincial and federal government,” he said.
If SaskPower chooses to not go ahead with further CCS projects, would that make the BD3 project a white elephant?
“Absolutely not. It was the right decision at the time. It continues to operate. We just came off a record October. We had the best production month in the last three years in the month of October. We continue to make that plant perform better, all the time.
“The reality is it is more expensive than a conventional coal plant. We are going to continue to operate that unit over the next 30 years. That’s the plan. No, I wouldn’t call it a white elephant at all. The politicians may have different words for it, as you well know. But it’s part of our fleet, and we’re going to continue to operate it and improve its performance and share that knowledge around the world,” Marsh said.
With a new premier and new cabinet in the New Year, the next decision could be well into 2018.
Converting Units 4 and 5 to natural gas could be an option, but it’s not a simple thing to do. It is an option being considered in Alberta, but they burn sub-bituminous, not lignite, coal. They would be simple-cycle, not combined-cycle. Simple-cycle natural gas plants are not as efficient as combined cycle, and have higher emissions than combined cycle. One of the key elements that brought CCS into play in the first place was the federal requirements that coal plants meet or be lower than the emissions level of a combined-cycle natural gas plant. .
“The generator would remain the same, you would be just creating the steam using gas instead of coal, and the rest of the cycle would remain the same,” he said, if a coal plant were to be converted to natural gas.
In recent years SaskPower has gone to new baseload combined-cycle natural gas plants at North Battleford (contracted) and, soon, Swift Current (SaskPower). By locating next to load centres, they reduce the loss of power via line loss.
“If you can locate it next to your load centres, your economics look even better, because you don’t have that line loss,” he said.
Right now, any decision made will just be for Boundary Dam Units 4 and 5. Unit 6 isn’t due to retire until 2027. Poplar River has two more years. Shand could operate until its retirement date until 2042. All the economic factors, gas and coal prices would all be considered at those times.
Without additional CCS, there would be no additional carbon dioxide for enhanced oil recovery. Additional royalties would not show up on SaskPower’s revenue, but would have an impact on the provincial government’s. These are things that would be part of the Crown Investment Corp.’s consideration, he explained.
Fundamentally, any new baseload power generation for SaskPower comes down to either CCS-coal or natural gas combined cycle. While there are ongoing power purchases from Manitoba Hydro, the amount of power available is limited.
