National EnergyTechnology Laboratory

1 Project Financing & Technology Deployment Division, Office of Major Demonstrations, Strategic Center for

Coal 2 Benefits Division, Office of Program Performance & Benefits

July 2014

ECONOMIC IMPACT OF CCUS DEPLOYMENT

International Workshop on Public Education, Training, and Community Outreach For Carbon Capture, Utilization, and Storage

Venkat K. Venkataraman1, Thomas Sarkus1 and Charles Zelek2

• CCUS will provide another option to help mitigate the impacts of climate change cost effectively.

• We performed an assessment of the potential role of CCUS technologies in alternate future energy-economy scenarios.

• Objective of this Analysis: Evaluate the potential role and economic impacts of carbon capture, utilization and storage (CCUS) in the U.S. energy economy under three alternative future scenarios– Performed this assessment using two energy-economic

models• The National Energy Modeling System (NEMS)• The National Energy Technology Laboratory/West Virginia

University Econometric Input-Output Model (NETL/WVU ECIO Model)

Question: How Might CCUS Impact the Future Energy Economy?

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What is NEMS?

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• NEMS is an acronym for the National Energy Modeling System, the custom made software developed by the Energy Information Administration (EIA) for nationwide energy market forecasting.

• The results from NEMS are published yearly by EIA in its Annual Energy Outlook (AEO) reports.

• NEMS is also used to study Congressionally directed scenarios, like the implementation of a Clean Energy Standard in service reports for Congress.

• NEMS results are also often used to perform regulatory impact analyses by federal and state agencies.

• Although NEMS is publically available, it is not generally run by outside entities. Still, its outputs provide valuable information for other models.

• All scenarios use AEO 2014 final release as their basis– EIA assumptions for research and development assumed

• This includes 840 MW of carbon capture demonstration projects• It also assumes CCUS technology cost reductions over time due to

domestic and international RD&D

Scenarios:• Reference Case (Reference)

– EIA AEO 2014 reference case – No modifications made

• $10 Carbon Price Case ($10 Tax)– EIA Greenhouse Gas $10 Carbon Tax Side Case (GHG10)– $10 Carbon tax introduced in 2015– Carbon tax escalates at 5% (real) per year

• $15 Carbon Price Case ($15 Tax)– $15 carbon price begins in 2020, escalated at 5% per year– No new nuclear builds until 2025– EIA low resource (low natural gas and oil) side case incorporated

Scenarios Evaluated

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• In the $10 tax case, slightly over 20 GW of CCUS deploys

• In the $15 tax case, over 40 GW of CCUS capacity deploys

• Capture from natural gas power plants dominates the $10 tax case

• In the $15 tax case, where natural gas is constrained (via the low resource case), coal retrofits dominate

NEMS Results: Capacity Additions

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Source: OnLocation, Inc. for NETL

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10 15 20 25 30 35 40 45

Total Capacity with CO2 Capture

Reference$10 Tax$15 Tax

Gig

awatt

s

Reference $10 Tax

$15 Tax

Reference $10 Tax

$15 Tax05

1015202530354045

Capacity With CO2 Captured

New Gas CCS

Coal Retrofits

New Coal CCS

Gig

awatt

s

2025 2040

• Nearly 225 million metric tons of CO2 is captured per year by power plants in the $15 tax case, and nearly all captured CO2 is used for enhanced oil recovery

• Captured CO2 comprises approximately 18% of the total reductions in CO2 emissions (relative to the reference case CO2 emissions) from the power sector in 2040

NEMS Results: Carbon Captured

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Source: OnLocation, Inc. for NETL

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• EOR enabled oil production doubles by 2040 in the $15 GHG tax case

• And the overwhelming majority of CO2 for EOR is sourced from power plants

NEMS Results: Enhanced Oil Recovery

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Source: OnLocation, Inc. for NETL

Reference$10 Tax

$15 Tax

Reference$10 Tax

$15 Tax0.00.20.40.60.81.01.21.41.61.8

CO2 Enhanced Oil Recovery

Power Plants

Industrial Sources

Natural Sources

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per d

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0.00.20.40.60.81.01.21.41.61.8

CO2 Enhanced Oil Recovery

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day

What is the NETL/WVU ECIO Model?

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• Designed to estimate the national and regional economic and employment impacts of energy technology deployment and operation over a corresponding NEMS forecast period

• An ECIO model combines the capabilities of econometric (EC) modeling with the strengths of input-output (IO) modeling.– The IO component is used to determine industry supply

requirements and in some cases primary factor demands. – The EC component determines final demands, primary factor

demands, factor prices, primary factor supplies, and their relationships within the U.S.

– There are feedback effects between the two models that ultimately lead to a convergent result.

• Directly measures the economic impacts of the following:– Construction of coal-fired power generation plants

• Scrubbed pulverized coal• Integrated Gasification Combined Cycle (IGCC) without CCS • IGCC with CCS

– Construction and O&M of CO2 pipelines and saline storage sites

• Reflects the economic impacts of the following:– O&M associated with coal-fired power generation plants– Retrofits of existing coal-fired power generation plants for CCS– Increased production of oil via EOR sites– Technical substitution effects of electricity price changes and their

influence on prices of other commodities as well as the consequent representations of inter-industry structure

• Does NOT measure (directly or indirectly) the economic impacts of:– EOR site construction and O&M (we are working on adding that

capability)– Construction of non-coal power generation plants

What Impacts Does the NETL/WVU ECIO Model Consider in These Cases?

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Economic Impacts of CCUS in the $15 Tax Case

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For Relative Comparison:Total Employment in Illinois (2012): 7,492,570Total Compensation of Employees in Illinois (2012): $391 billionTotal GDP in Illinois (2012): $704 billion

• Employment Impact: 2.0 million job years (cumulative)

• Income Impact: $150 billion (2010$)

• GDP Impact: $684 billion (2010$)

How Do We Overcome the Barriers to CCUS to Enable These Impacts to Become Reality?

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Major Demonstrations are a key part of an integrated research, development and demonstration (RD&D) program that contribute to DOE's strategic theme of

"Promoting America's energy security through reliable, clean, and affordable energy."

NETL Demonstration Projects

DOE’s Major Demonstrations ProgramCurrent Program Objectives and Targets

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• Clean Coal Power Initiative (CCPI-3)– Demonstrate next generation technologies from coal-based electric power generating

facilities that capture/sequester, or put to beneficial reuse, minimum of 300,000 tons per year of CO2 emissions

– Minimum coal or coal refuse energy input: 75% (Closing 1); 55% (Closing 2)

– Attain 90% CO2 capture efficiency in treated flue gas (Closing 1); 50% (Closing 2)

– COE increase < 10% for gasification; < 35% for combustion & oxy-combustion (targets)

• Industrial Carbon Capture and Sequestration (ICCS-Area 1)– Demonstrate advanced CCUS technologies, at industrial sources, that may produce

heat, fuels, chemicals, H2 or other useful products with or without electricity production

– Demonstrate sequestration with 1,000,000 tons per year of CO2 emissions

• FutureGen 2.0– Demonstrate oxy-combustion repowering with >1,000,000 tons per year of CO2

emissions sequestered in a saline aquifer

Major CCS Demonstration ProjectsProject Locations and Cost Share

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CCPI

ICCS Area 1

FutureGen 2.0

Southern CompanyKemper County IGCC Project

Transport Gasifier w/ Carbon Capture~$2.01B – Total, $270M – -DOEEOR – ~3.0 MM TPY 2014 start

Southern CompanyKemper County IGCC Project

Transport Gasifier w/ Carbon Capture~$2.01B – Total, $270M – -DOEEOR – ~3.0 MM TPY 2014 start

NRGW.A. Parish Generating Station

Post Combustion CO2 Capture$775 M – Total$167M – DOE

EOR – ~1.4 MM TPY 2016 start

NRGW.A. Parish Generating Station

Post Combustion CO2 Capture$775 M – Total$167M – DOE

EOR – ~1.4 MM TPY 2016 start

Summit TX Clean EnergyCommercial Demo of Advanced

IGCC w/ Full Carbon Capture~$1.7B – Total, $450M – DOEEOR – ~2.2 MMTPY 2017 start

Summit TX Clean EnergyCommercial Demo of Advanced

IGCC w/ Full Carbon Capture~$1.7B – Total, $450M – DOEEOR – ~2.2 MMTPY 2017 start

HECACommercial Demo of Advanced

IGCC w/ Full Carbon Capture~$4B – Total, $408M – DOE

EOR – ~2.6 MM TPY 2019 start

HECACommercial Demo of Advanced

IGCC w/ Full Carbon Capture~$4B – Total, $408M – DOE

EOR – ~2.6 MM TPY 2019 start

Leucadia EnergyCO2 Capture from Methanol Plant

EOR in Eastern TX Oilfields $436M - Total, $261M – DOE

EOR – ~4.5 MM TPY 2017 start

Air Products and Chemicals, Inc.CO2 Capture from Steam Methane Reformers

EOR in Eastern TX Oilfields$431M – Total, $284M – DOE

EOR – ~0.93 MM TPY 2012 start

FutureGen 2.0Large-scale Testing of Oxy-Combustion w/ CO2 Capture

and Sequestration in Saline FormationProject: ~$1.78B – Total; ~$1.05B – DOE

SALINE – 1 MM TPY 2017 start

FutureGen 2.0Large-scale Testing of Oxy-Combustion w/ CO2 Capture

and Sequestration in Saline FormationProject: ~$1.78B – Total; ~$1.05B – DOE

SALINE – 1 MM TPY 2017 start

Archer Daniels MidlandCO2 Capture from Ethanol PlantCO2 Stored in Saline Reservoir$208M – Total, $141M – DOE

SALINE – ~0.9 MM TPY 2015 start

CO2 Capture from Industrial SourcesLow Hanging Fruit

• Globally, industry accounts for 40% of energy-related CO2 emissions — mostly in developing countries*

• Many industrial facilities are large point sources

• In some plants, CO2 is already being captured in order to produce the desired product (e.g., H2/NH3), and additional capture cost is not incurred

• CO2 concentration in treated stream may be high or nearly pure

• Often located near potentialstorage sites

• Demonstration of capture and compression technology, as well as CO2 storage experience,is applicable to coal-fired powergeneration

Hanson Permanente Cement Kiln, Los Altos, CA, 2008

* Global CCS Institute, Klaas van Alphen, 2010, http://www.ieaghg.org/docs/General_Docs/Summer_School/VAN_ALPHEN_-_Industrial_Sources_-_secured.pdf Photo Source: kqedquest on flickr - http://www.flickr.com/photos/kqedquest/2388352316/

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ICCS Demonstration Project Summary

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Air Products Industrial Capture; EORPort Arthur, TX (Hydrogen plant at Valero Refinery)90%+ CO2 capture (Vacuum Swing Adsorption); ~925,000 tonnes CO2/year

EOR: Denbury West Hastings oil filedTotal Project: $431 million; DOE share: $284 millionOperations: December 2012 (Project executed under budget)1,200,000 metric tons delivered as of 7/14/14

Leucadia Petccoke to Methanol & Hydrogen; EORLake Charles, LA700 MM gal/yr methanol, 110 MMscfd Hydrogen89% CO2 capture (Rectisol®); 4,500,000 tonnes CO2/year

EOR: Denbury West Hastings oil fieldTotal Project: $436 million; DOE share: $261 million

Archer Daniels Midland (ADM) Biofuel; Geologic StorageDecatur, ILCO2 >99% purity from fermentation reactors (dehydration & compression); ~900,000 tonnes CO2/year

Geologic Storage: Mt. Simon saline reservoirPlant ~53% completeOperations: February 2015Total Project: $208 million; DOE share: $141 million

Archer Daniels Midland

Leucadia

Air Products Industrial Capture to EOR

Knowledge Sharing Products

ARRA Regional Training Worldwide CCS Project Database

Visit our website: www.NETL.DOE.GOV

• Geological and Infrastructure• Monitoring, Verification, Accounting• Simulation and Risk Assessment• Capture and Transportation• GIS and Database• Water• Public Outreach and Education

RCSP Working Groups

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Knowledge Sharing ProductsCarbon Storage Best Practices Manuals

Best Practices Manual Version 1(Phase II)

Version 2

(Phase III)

Final Version

(Post-Injection)

Monitoring, Verification and Accounting

2009/2012 2016 2020

Public Outreach and Education 2009 2016 2020

Site Characterization 2010 2016 2020

Geologic Storage Formation Classification

2010 2016 2020

**Simulation and Risk Assessment

2010 2016 2020

**Carbon Storage Systems and Well Management Activities

2011 2016 2020

Terrestrial 2010

http://www.netl.doe.gov/technologies/carbon_seq/refshelf/refshelf.html

**Regulatory issues will be addressed within various BPMs

• Barriers to CCS exist, but can be addressed through NETL RD&D

• The economic impacts of CCUS technologies can be significant

• NETL has ongoing projects to address issues of:– Cost of capture and energy penalty– Storage capacity, permanence & consequences– Infrastructure development– Data and knowledge sharing

• Major demonstration projects will help validate and provide confidence

• International partnerships are important in leveraging experience, expertise, and knowledge

Conclusions

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For More Information

Office of Fossil Energywww.fe.doe.gov

NETLwww.netl.doe.gov

@NETL_News

Venkat K. Venkataraman304-285-4105

Venkat.Venkataraman@netl.doe.gov

National Energy Technology Laboratory

http://www.netl.doe.gov/research/coal/carbon-storage19

Questions?

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