The crisis engulfing SaskPower over its troubled Boundary Dam Carbon Capture and Storage (CCS) plant has implications that will reach all the way from the Canadian province of Saskatchewan to the Paris climate conference.
When the coal-fired 140 megawatt (MW) Boundary Dam power station with a CCS plant was officially opened in early October 2014 there was extensive and overwhelmingly credulous media coverage of what was touted as the world’s first “commercial scale” CCS plant.
Pro-coal politicians, coal companies and some utilities pointed to the US$1 billion (C$1.4bn) plant and claimed it was evidence that coal power had a rosy future in a carbon-constrained world. In the year since the plant was commissioned, SaskPower has spent a small fortune hyping the project in the hope of reviving flagging interest in CCS. Earlier this year CBC News revealed the president of SaskPower’s carbon capture and storage division, Mike Monea, had racked up travel-related expenses of over US$299,000 (C$396,000 in just four years.
In the last two weeks, SaskPower’s carefully-crafted illusion of the CCS plant as a success story has been shattered by revelations in a series of leaked internal documents. Instead of capturing 90 per cent of the carbon dioxide from the power station, the plant has captured about half that amount or less. Problems with the plant have meant that it has often been shut down.
SaskPower had counted on the sales of Co2 at US$19 (C$25) a tonne to Cenovus Energy for use in an Enhanced Oil Recovery Project. Without the sales, SaskPower’s income was down. Without the Co2 volume, Cenovus Energy has collected US$9 million (C$12 million) in payments under the penalty provisions in its Co2 supply contract. SaskPower is also embroiled in two separate legal disputes with contractors over payments.
To cap it all off, SaskPower’s deception of the media and public over how the plant has been performing has done serious damage to the utility’s credibility and made the operation of the plant a major political issue. The title of one recent media column – “SaskPower carbon capture project a billion dollar bizarro-world boondoggle” – captures the sour mood towards SaskPower and the plant.
So what are the likely implications of the revelations that Boundary Dam CCS may turn out to be a very expensive dud?
In Saskatchewan, the implications are likely to be huge.
The controversy over the plant is clearly likely to run for years. One consultant who has studied the plant and supports it last week suggested “it’s probably going to take another couple of years to get it running right.” There will be legal actions between SaskPower and contractors, which will absorb the time of senior management and potentially impose significant costs on the utility.
SaskPower will also be hit with multi-million dollar payments to Cenovus Energy for failure to deliver the contracted Co2 in 2015 and perhaps beyond. Inevitably the increased costs of the CCS plant will push up electricity prices, a political hot-button issue for a government which concealed the magnitude of the problems with the plant.
Having misled reporters around the world by spinning the story that all was well at the plant, SaskPower’s PR dream run is over. In all likelihood there will be more leaked documents and more investigative stories revealing far more details about the problems at the plant. For all we know the plant may never work reliably or only at a far higher cost than renewable electricity alternatives.
Having misled the media and the public as to how the plant was operating, SaskPower’s public standing is seriously damaged. SaskPower’s ambition to build another CCS unit at double the scale to cater for Co2 from the proposed rebuilding of units 4 and 5 at the Boundary Dam power plant now seems uncertain at best.
One of the leaked SaskPower briefing notes stated the utility had been hoping for a decision on the project by the end of 2016. This week SaskPower flagged the decision has now been pushed back to 2017. Persuading the parliament and public that spending another billion or two on another CCS plant may well be impossible given the debacle at unit 3.
Beyond Saskatchewan, SaskPower’s PR own-goal simply reinforces the perception that the coal industry and political scandals are twin brothers.
The Boundary Dam CCS debacle also poses awkward questions for the global coal lobby.
In February this year the World Coal Association proclaimed that CCS technology is “a reality, as evidenced by the Boundary Dam coal-fired power station in Canada. This pioneering project will reduce greenhouse gas emissions by one million tonnes of CO2 annually, the equivalent to taking more than 250,000 cars off the road each year.”
Now the coal lobby has to acknowledge that the “reality” is the plant doesn’t work reliably and doesn’t yet capture a million tonnes of Co2 a year. (SaskPower’s claim about cars being taken off the road was always nonsensical as it relied on ignoring the additional emissions from the enhanced oil recovery end of the project.)
The Boundary Dam project has also been embraced by BHP Billiton as a CCS success story. In mid-September BHP Billiton – the world’s largest mining company and one of the largest coal miners and exporters – announced they were planning to fund a SaskPower ‘knowledge centre’ to share “access to the data, information and lessons learned from SaskPower’s Boundary Dam facility.”
The BHP Billiton media release cited Giles Hellyer, the President of BHP Billiton Canada, as stating “the Boundary Dam project offers lessons for all of us.” He’s right, but perhaps not in the way he envisaged back in September.
Even so, it is pertinent to ask whether BHP Billiton knew in mid-September that the project had serious operational and financial problems. If it did, and chose not to let on, then BHP Billiton was a bit-part player in SaskPower’s PR ruse. Or was BHP Billiton too, kept in the dark by SaskPower? (In which case questions need to be asked about the thoroughness of the company’s due diligence investigation on the project.)
A series of questions put to BHP Billiton on their knowledge or lack thereof about problems at the plant elicited a limited response. “We won’t be providing any further on the record comment” beyond the comments in the original media statement and in the company’s most recent annual report, a spokesperson wrote in an email.
Promoting CCS has long been a mainstay of the global coal industry’s PR pitch that it is possible to keep building new coal plants and cut greenhouse gas emissions. As crippling cost overruns and other problems with Mississippi Power’s US$6.4 billion Kemper CCS project have mounted, hyping the Boundary Dam CCS project was the last card left in the coal lobby’s CCS deck.
The revelations about the Boundary Dam CCS project over the last two weeks – with the likelihood of more to come – mean that when it comes to the Paris climate negotiations BHP Billiton and the World Coal Association will have a very hard time convincing anyone that SaskPower’s plant is really a success story.