Presentation at the

1
Economics of CO2 Capture

• Presentation at the
• West Coast Regional Carbon Sequestration
  Partnership
• Kick-Off Meeting
• October 1, 2003
• California Energy Commission
• Sacramento, California
• by
• Dale Simbeck
• Vice President Technology
• SFA Pacific, Inc.
• 444 Castro Street, Suite 720 phone
  1-650-969-8876
• Mountain View fax
  1-650-969-1317
• CA 94041 USA
  Internet www.sfapacific.com

2
Presentation Overview

• Brief background of SFA Pacific
• Why we predict that power generation will be
  forced to meet a disproportionate share of any
  CO2 reductions
• Man-made CO2 emissions options from the Kaya
  Identity
• Population Standard of Living
• Energy Intensity Carbon Intensity
• Reducing energy carbon intensity in first power
  generation and then transportation uses are the
  key CO2 mitigation options
• Power generation CO2 mitigation economics
• Both new especially retrofit of existing
  coal-fired power plants
• Conclusions

3
SFA Pacific Background

• Founded in 1980
• Performs technical, economic market assessments
  for the major international energy engineering
  companies
• Consistently about a third of our work is outside
  the United States
• Principal work involves residual or heavy oil
  upgrading, electric power generation emissions
  control
• Niche is objective outside opinion and
  comparative analysis before companies make major
  decisions or investments
• Unique perspective, as we have no vested interest
  in resources, technologies, RD or project
  development

4
Representative SFA Pacific Clients
UTILITIES Epcor EdF Electrabel EPDC
(Japan) EPRI Eskom (South Africa) National
Power Nova Scotia Power Ontario Power Power
Gen RWE/Rheinbraun Taiwan Power Tokyo Electric
Power TransAlta Vattenfall
INDUSTRIALS BHP Billiton BP (Amoco Arco Veba
Oil) Chevron Texaco Conoco Phillips Dow Chemical
ENI Exxon Mobil PDVSA Rio Tinto (Kennecott
Energy) Saudi Aramco Shell International Sinopec S
tatoil Total Fina Elf Weyerhaeuser
MANUFACTURERS EC ABB/Alstom BW/McDermott Black
Veatch Bechtel Chiyoda Cummins Fluor
Daniel Foster Wheeler General Electric Kellogg
Brown Root JGC MHI Siemens/Westinghouse Snampro
getti Toyo
5
Background of Recent SFA Pacific H2 CO2
Mitigation Related Projects Presentations

• Private industry sponsored analyses
• Major private Multisponsored analysis of CO2
  mitigation options
• Major private Multisponsored analysis of H2
  gas-to-liquids (GTL)
• CO2 capture storage analysis for the CO2
  Capture Project (CCP) the Canadian Clean Power
  Coalition (CCPC)
• H2 production infrastructure costs for the CA
  Fuel Cell Partnership, auto oil companies
  (IHIG) the National Academies H2 Committee
• Presentations
• Analysis of CO2 control options for electric
  power generation for GHGT-4 in 1998, GHGT-5 in
  2000 National Academies in 2002
• Analysis of H2 at GHGT-6 in 2002 National
  Academies in 2003
• Most of our H2 CO2 work is for private energy
  companies

6
United States CO2 Emissions by Sector and Fuels
in 2000
Millions of metric tons per year carbon equivalent
Source U.S. EPA Inventory of Greenhouse Gas
Emissions, April 2002
7
Power Generation Will Be Forced to Meet a
Disproportionate Share of Any CO2 Reductions

• Transportation fuel users have more votes than
  CO2 intensive industries as demonstrated in June
  2000 in the U.S. Europe
• Power plants cannot move to China, as other CO2
  intensive industries in Annex 1 nations will, if
  faced with carbon taxes
• Large potential for improvements in power
  generation
• Increase old coal-boiler power plants efficiency
  - NG/CGCC repowering
• Replace coal with co-firing biomass, natural gas
  or wind turbines
• New NGCC or CGCC - central power plant
  especially cogeneration
• Large CO2 point sources of power generation can
  greatly reduce CO2 capture, transport storage
  costs

8
Energy Intensity

• Energy efficiency is the win-win approach as
  this reduces end-use energy use, costs
  increases economic growth
• Two ideologically opposing approaches to higher
  efficiency
• Advanced central power plants - favored by
  regulated electric utilities
• Cogeneration - favored by deregulation private
  energy companies
• Utilities should upgrade existing old inefficient
  coal plants
• Cogeneration is the big energy efficiency gain
  for new plants
• Clearly favors gas turbines cogeneration once
  deregulated
• Natural gas for new NGCC, GT-repowering
  especially maximum power cogeneration - assuming
  NG is available at moderate prices
• Gasification of coal oil residues for NG
  replacement, stringent emissions, existing coal
  power plant repowering polygeneration

9
Maximum Power in Total Cogeneration Clearly
Favors Gas Turbines Over Steam Turbines For a
given heat host, 3-5 times more power with GT vs
ST This is the key issue as true cogeneration is
heat host limited Power-to-Steam ratio
kWe per ton/hr 150 psig cogen steam (no steam to
condenser)
Source SFA Pacific, Inc.
10
Carbon Intensity - Lower Carbon Fuels

• Replace high carbon fuels with lower carbon fuels
• Natural gas replace coal if cheap NG start
  replacing old coal plants
• Also favors life extension of existing nuclear
  plants
• Co-firing biomass in existing coal boilers when
  economical available
• Nuclear, renewables, reforestation biomass
  great, but limited
• No new nuclear until existing units resolve
  decommissioning wastes
• Wind turbines suffer from low annual capacity
  need for back-up
• Requires gt800 ha (gt 3 sq. miles) of reforestation
  (_at_ 2 tons C per ha/yr until full grown) for only
  1 MWe of coal-based power to be CO2 neutral
• Beyond waste biomass, which is limited, economics
  are poor
• At only 250/acre/yr or 600/ha/yr gross revenues
  for US farmers to consider growing biomass at 5
  tons C per ha/yr 120/ton C in the field

11
Carbon Intensity - Carbon Capture Storage

• Transforming the debate as fossil fuels with CO2
  capture storage has large capacity potential
  reasonable economics
• IPCC recently requested a special report on CO2
  capture storage
• Effective CO2 capture requires large CO2 point
  source, high purity recovery, compression to high
  pressure injection
• First in enhanced oil recovery (EOR), then coal
  bed methane (CBM) recovery, but ultimately old
  oil gas wells then deep saline aquifers
• CO2 sequestering options in order of increasing
  costs
• Use large CO2 vents from existing NG syngas (H2
  CO) purification
• Coal gasification combined cycle repowering of
  existing coal boilers
• New power plants especially large industrial
  polygeneration

12
CO2 EOR Projects Using Anthropogenic CO2
CO2
Plant Type
State/ Province
EOR Fields
Operator
Million t/yr
Texas Gas Processing 1.3
Sharon, Ridge, etc. Exxon/Mobil Color
ado Gas Processing
1.1 Rangely Chevron Oklahoma Fertilizer
0.6 Purdy,
Sho-Ven-Tum Anadarko/Henry Wyoming
Gas Processing 0.5 Lost
Soldier, Wertz Merit Energy Alberta
Ethylene Plant 0.4 Joffre
Viking Numac Energy Saskatchewan Coal
Gasification 1.7 Weyburn EnCana
North Dakota
------ North American
Total 5.6 million tons per year CO2 This
is almost 20 of the total North American EOR of
about 30 million t/y For comparison North Sea
Sleipner Aquifer CO2 injects only 1.0 million t/y
13
Cost of New Power Plants with CO2 Control

• Natural gas combined cycle (NGCC) baseline
• NG price varied to where coal becomes competitive
  without CO2 capture as low NG prices favor NG
  over coal if ignoring the CO2 issue
• Best option is cogeneration or polygeneration vs
  a new central power plant with or without CO2
  capture
• Best options if just new central power plant with
  CO2 capture
• NGCC with amine flue gas scrubber if low NG
  prices or coal gasification to H2 combined cycle
  (CGCC) if higher NG prices
• Overall CGCC CO2 capture costs are about 50 for
  recovery to pure CO2 , 25 for compression 25
  for disposal charge
• Thereby, slight byproduct credit (EOR CBM) or
  incentive for CO2 reduction can significantly
  reduce net CO2 capture/storage costs

14
Polygeneration

• Defined as gasification to synthesis gas (H2
  CO) for GT-based cogen steam/power syngas
  chemicals premium fuels
• Shell Oil Pernis oil refinery in Holland is a
  good example no subsidies high
  availability without a spare gasifier
• Pitch gasification - 3 units total 640 MWth with
  2 gasifiers for oil refinery H2 1 gasifier for
  GCC cogeneration with NG as GT back-up
• Great potential for polygeneration in the future
  due to ongoing deregulation of electric power
  generation
• Low value feedstock, thereby ultra-low marginal
  load dispatch costs
• Offers greater flexibility than traditional power
  plants relative to fuels, products, revenues,
  emissions, efficiency annual load factors
• Low marginal costs for CO2 capture (will likely
  be added at Pernis)

15
Electric Power Costs of Coal Verses Natural Gas
For Various Fuel Prices CO2 Emissions
per MWh Electric Price with capital charges
CO2 disposal charge of 37/ton C
Coal Natural Gas
Fuel Prices - per million Btu (HHV)
Source SFA Pacific, Inc
16
Electricity Costs for New Coal vs New NG Power
Plants at Various CO2 Emissions Carbon Taxes
per MWh Electric Price with capital charges
CO2 disposal charge of 37/ton C

per metric ton carbon emission tax
17
Economics of Existing Coal Power Plants

• Baseline older inefficient existing coal power
  plant with high CO2 emissions _at_1 ton CO2 per MWh
  net power or 3 x NGCC
• Much lower /ton CO2 avoided costs than with a
  new NGCC baseline
• Many cost CO2 mitigation advantages relative to
  a new power plant
• NG repowering no CO2 control if low NG prices
  or CGCC repowering to H2 with CO2 capture if
  higher NG prices
• NG prices will likely be high if a carbon
  constrained world develops
• Options of retrofit O2 combustion or flue gas
  amine CO2 scrubber to existing coal boiler
  suffers from large capacity efficiency losses
• NGOs oppose these CO2 capture options due to
  large efficiency losses
• Gasification repowering increases both capacity
  efficiency while reducing all emissions to near
  zero staying on coal
• Only major CO2 capture application that can make
  this important claim

18
Electricity Costs for Existing Coal Power Plant
Upgrades if Carbon Taxes
per MWh Electric Price with capital charges for
new investments CO2 disposal charge

per metric ton carbon emission tax
19
Electricity Costs for Existing Coal Plant
Upgrades if Combined CO2 Recovery Credit
Emission Tax
per MWh Electricity with capital charges for
new investments CO2 credits or charges

per metric ton carbon credit for captured CO2
carbon charge for CO2 emissions
20
Conclusions

• Electric power generation will be forced to meet
  a disproportionate share of any CO2 reductions as
  SUV owners have more votes power plants cannot
  move to China
• Best options for CO2 reduction in power
  generation improved efficiency, lower carbon
  fuels CO2 capture storage
• However, economics beats technology, every time
• CO2 capture storage increases new power plant
  cost by 20-30/MWh
• However, CO2 in EOR could reduce this cost
  increase by about 25-50
• Cannot beat existing fossil power plants to death
  with a carbon tax
• Will likely require CO2 avoidance subsidies
• Current 18/MWh wind turbine subsidy is
  equivalent to a CO2 avoidance subsidy of 50/ton
  when wind power replaces a NGCC _at_ 0.36 t CO2 /MWh