Cogeneration & Carbon Management Key Issues in the Design of Carbon Management Policies and Regulations in Alberta

Transcription

1 Cogeneration & Carbon Management Key Issues in the Design of Carbon Management Policies and Regulations in Alberta Paula McGarrigle Managing Director Solas Energy Consulting Inc. Suite 119, Avenue S.W. Calgary Alberta T2T 1Z7 T: (403) E: January 28 th and 29 th, Calgary, Alberta, Canada

2 Overview History of Cogeneration in Alberta Drivers behind Cogeneration development in Alberta Economics of Cogeneration The future of Cogeneration in Alberta Solas Energy Consulting 2

3 Defining Cogeneration Integrated Standalone TransCanda Carseland Cogeneration produce electricity and steam Facilities often integrate waste energy into the production of power or steam. Facilities are built to either match steam or match power requirements. Solas Energy Consulting 3

4 Cogeneration In Alberta Alberta has experienced significant growth in Cogeneration 4,588 MW of installed capacity ~ 30% of total generation capacity Oil Sands development & Cogen Represents 67% of total installed Cogen capacity Other applications for Cogen in AB Chemical industry, conventional oil and gas, pulp and paper as well as hospitals, educational institutions Solas Energy Consulting 4

5 Ownership & Location of Cogen Suncor ATCO Syncrude TransCanada Dow Chemicals Nexen Medicine Hat CNRL MEG Imperial Oil Air Liquide Cenovus University of Alberta Shell AltaGas Southern Pacific Connacher Talisman University of Calgary Penn West SAIT Alberta s Cogen focused on Oil Sands in the North East Geographic Area 1000 Cogeneration Capacity (MW) by Owner NW 2% South 7% Central 12% Edmont on 1% owners NE 78% 0 REF: AESO REF: AESO Solas Energy Consulting 5

6 Drivers for Cogen Cogen driven by 3 main factors 1. Regulatory changes, 2. Improved economics, and 3. Demand growth requiring reliable power sources Solas Energy Consulting 6

7 Deregulation #1 Changing Regulatory Landscape Alberta Upgrading Capacity (MBPD) Alberta SAGD Production (MBPD) Electricity market deregulation, and industrial site designation were major drivers Alberta Cogeneration (MW) Class 43.2 Additions (MW) SGER

8 #2 Improved Economics Federal Tax Changes Accelerated capital cost depreciation; Class depreciation rate increased to 50% until High Heat Rates Alberta s market heat rates have been above cogeneration physical heat rate and therefore cogeneration facilities have generated positive cash flow. Industrial Site Designation Reduction in the ancillary service costs associated with power generation or load Alberta Specified Gas Emitters Regulation (SGER) Emissions Performance Credits SGER compares stand alone cogeneration to a reference technology. The use of the reference technology method has resulted in EPCs for cogeneration facilities. Combined Cycle electricity plant is compared to a target of tonnes CO 2 e/mwh. No reduction target is placed on the emissions associated with the electricity generated. The baseline for heat calculation assumes an 80% efficient boiler. ATCO - Muskeg River Plant Solas Energy Consulting 8

9 #3 Demand Growth & Reliability ATCO Scotford Cogeneration Facility Cogen concentrated in industries with high power demand Oil Sands upgrading, Steam Assisted Gravity Drainage (SAGD) and the chemical industry in Alberta have significant requirements for steam and power. SAGD has experienced exponential growth CAGR of 34.2% Oil Sands upgrading has more than doubled since 2001 Solas Energy Consulting 9

10 Economics of Cogeneration Levelized Cost ($/MWh) $200 $180 $160 Levelized Cost First Year Cost of Power LEVELIZED COST OF POWER $157 $163 $172 $140 $127 $132 $139 $120 $114 $100 $80 $84 $68 $92 $74 $92 $60 $40 $55 $44 $20 $0 Cogen Wind Coal CCGT SCGT Coal with CCS Hydro Solas Energy Consulting Wind Vision Technical Overview Report Cogeneration has the lowest levelized costs compared to alternatives in Alberta. (2016) Levelized cost of energy from a new cogeneration facility is higher than the Alberta forward power pool price. Solas Energy Consulting 10

11 Economics of Cogeneration Levelized Cost ($/MWh) Wind - CF =40% Simple C. Comb. C. - CF =20% - CF =50% Levelized Cost of Power (2016) LEVELIZED COST OF POWER - Components Cogen - CF =95% Solas Energy Consulting Wind Vision Technical Overview Report Coal - CF =93% Coal w CCS - CF =90% Hydro - CF =50% Taxes Repower Cost Capex CO2 Compliance Costs Generator Losses Fixed and Variable O&M Fuel Costs Offset Revenue Carbon revenue is positive (reducing levelized costs) however is not a significant factor. ISD s calculate their tariff using net generation and this creates savings compared to a standalone generation facility. Solas Energy Consulting 11

12 Future of Cogen in AB Oil Sands Growth Alberta s cogeneration development is indirectly dependent on Canada s climate change regulatory regime, because Oil sands growth is dependent on market access that is linked to climate policy. Transmission Availability/Reliability/Cost Northern AB could be susceptible to transmission contingencies. Delay in the Fort McMurray to Edmonton 500 kv Transmission line may increase the interest in self-generation, with cogen preferred. Transmission costs and therefore DTS charges are on the rise. This may stimulate additional cogeneration ISDs to reduce the cost of delivered power. Regulatory Treatment Potential changes in the treatment of cogeneration at the Provincial or Federal level may have profound impacts on size and continued investment in cogeneration. Air Quality Regional air shed limitations (Lower Athabasca) may impede extensive cogeneration development. Additional cogeneration in the region may tax the currently strained air shed. Solas Energy Consulting 12

13 Future of Cogeneration in AB AESO Long Term Outlook (2012) AESO Long Term Outlook (2012) Cogeneration capacity additions by 2022 are expected to total 6,200 MW or 29 per cent of supply mix. Same as current mix Addi ons (MW) Alberta Cogeneration (MW) The Oil Sands Developers Group 2011 Co- Gen Survey resulted in an estimate of 3,500 MW of additional cogeneration by (Estimate is higher than the AESO) 603 Solas Energy Consulting 13

14 Cogen & Carbon Compliance ALL FACILITIES COMPLIANCE Alberta s Carbon Compliance Cogeneration treatment under SGER is critical for Alberta compliance Cogeneration represents approximately 40 per cent (14,850 kt/39,930 kt) of the total avoided emissions since the SGER program was created. Solas Energy Consulting 14

15 Cogen & Carbon Compliance Future AB SGER Treatment Current treatment uses the following as baseline tonnes CO2e/MWh (Assumption for Electricity) 80% boiler efficiency Discussion on changing the assumptions tonnes CO2e/MWh 85% boiler efficiency Impact Reduced compliance or avoided emissions Reduction in economics of cogeneration. Solas Energy Consulting 15

16 Cogen & Carbon Compliance Nexen Balzac Power Station Federal Greenhouse Gas Emissions Regulations Cogeneration is considered a cross cutting issue since the technology is applied in multiple sectors. Treatment, or reduction required may vary by the type of industry that cogeneration is a part of. May result in cogeneration facilities also having an obligation to reduce emissions. Solas Energy Consulting 16

17 Key Questions to Consider Are EPC s critical for incenting cogeneration in the Oil Sands industry? Is cogeneration business as usual? If cogeneration is considered business as usual what are the implications for SGER and cascading ramifications such as oil sands economics and Alberta s greenhouse gas emission reduction plan? Does the new Lower Athabasca Regional Plan ( LARP ) and pending federal air quality regulations restrict CCGT facilities as viable alternatives for oil sands upgrading and SAGD? Should Alberta policy makers consider emphasizing higher efficiency heat and power generation technology? - Fuel cells? Should renewable energy integration in oil sands be incented through policies directed at further reducing air quality and GHG emissions? Solas Energy Consulting 17

18 Key Questions to Consider Recommendations Integrity of the system is paramount. Evaluate if cogeneration meets business as usual. If so, look to include cogeneration into the baseline. If not, ensure baseline used for cogen is representative. Solas Energy Consulting 18