Defining CCS Ready: An Approach to An International Definition

Defining CCS Ready: AnApproach to AnInternational Definition23 February 2010Prepared by:ICF InternationalPrepared for:The Global Carbon Capture and StorageInstituteSubmitted by:ICF International9300 Lee HighwayFairfax, VA 22031USA

DisclaimerDisclaimerThis report was prepared by ICF International for the exclusive use of the Global CCSInstitute. It is subject to and issued in accordance with the agreement between the GlobalCCS Institute and ICF International. ICF International accepts no liability or responsibility inrespect of any use or reliance upon this report by any third party. Copying this reportwithout the permissions of the Global CCS Institute or ICF International is not permitted.23 February 2010 ii

PrefacePrefaceThe Global CCS Institute engaged ICF International and its partners: Aurecon; BradshawGeoscience Consultants (BGC); Energy Research Centre of Netherlands (ECN); IanMurray & Company (IMC); Howard Herzog; and Bill Senior to develop and propose aninternationally recognized definition of Carbon Dioxide Capture and Storage Ready (CCSReady), and provide considerations and recommended practices for policymakers todevelop and implement CCS Ready policy and programs (see CCS Ready Policy:Considerations and Recommended Practices for Policymakers). In the process of developing thedefinition and Considerations and Recommended Practices, ICF solicited worldwide peerinput through a series of international roundtable discussions. This document entitledDefining CCS Ready: An Approach to An International Definition provides the basis for thedefinition. Along with the Considerations and Recommended Practices, this report will feedinto a workshop to be held by the Global CCS Institute and the Carbon SequestrationLeadership Forum (CSLF) in 2010.23 February 2010 iii

Acknowledgements and CitationsAcknowledgements and CitationsDevelopment of this report was supported by the Global CCS Institute. This report wasprepared by:ICF International9300 Lee HighwayFairfax, VA 22031USATeaming Partners with ICF International for this work were:Aurecon116 Military RoadPO Box 538Neutral BayNew South Wales 2089AustraliaBradshaw Geoscience Consultants (BGC)PO Box 7691st Floor - 69 Tennant StFyshwick ACT 2609AustraliaEnergy Research Centre of Netherlands(ECN)PO Box 1, 1755 ZGPettenThe NetherlandsIan Murray & Company (IMC)1400, 10025 - 106 StreetEdmontonAlberta T5J 1G4CanadaHoward Herzog (Consultant)MIT Energy InitiativeRoom E19-370L77 Massachusetts AvenueCambridge, MA 02139USABill Senior (Consultant)Senior CCS Solutions LtdMount Pleasant CottageSly CornerLee CommonBucksHP16 9LDUKThe Global CCS Institute Project Managers for the report were:Angus Henderson and Martin BurkeThe principal researchers were:• Paul Bailey, ICF International, USA• Ananth Chikkatur, ICF International,USA• Diana Pape, ICF International, USA• Harry Vidas, ICF International, USA• Amir Tadros, Aurecon, Australia• John Bradshaw, BGC, Australia• Heleen de Coninck, ECN, TheNetherlands• Bruce Herdman, IMC, Canada• Howard Herzog, Consultant, USA• Bill Senior, Consultant, UK23 February 2010 iv

Acknowledgements and CitationsThe contributing researchers were:• Allan Amey, ICF International, Canada• Rubab Bhangu, ICF International, USA• Joel Bluestein, ICF International, USA• Rodney Boyd, Aurecon, Australia• Caroline Cochran, ICF International, USA• David Gerhardt, ICF International, USA• Elizabeth Gormsen, ICF International,USA• Hal Gunardson, IMC, Canada• Deborah Harris, ICF International, USA• Dermot Lane, IMC, Canada• John Venezia, ICF International, USA• Tom Mikunda, ECN, The Netherlands• Steven Kluiters, ECN, The Netherlands• Ruud van den Brink, ECN, TheNetherland23 February 2010 v

Executive SummaryExecutive SummaryCarbon dioxide capture and storage (CCS) technology provides an option for powergenerators and industries that are reliant on fossil fuels to continue to use these fuels in acarbon-constrained future. For this reason, CCS is expected to play a large role in futureglobal greenhouse gas (GHG) mitigation from power plants and other industrial facilities.CCS has not yet been widely deployed on the commercial scale, because there existtechnical, economic, regulatory, and policy barriers to its widespread deployment.Governments and industry have been working to reduce these barriers, but in the meantimenew fossil-fuel power plants and industrial plants continue to be designed and builtworldwide. Long-term operation of these new plants could result in a carbon “lock-in,” asituation in which plants continue to emit large amounts of carbon dioxide (CO 2 ) ifmitigation through CCS is technically and economically infeasible due to equipment and siteconstraints. Another potential adverse result is the emergence of “stranded assets,” inwhich plants may be closed before the end of their planned period of operation if they areuneconomic to retrofit to CCS.The desire to avoid these risks has led to a concept known as “CCS Ready,” in whichcarbon-emissions-intensive plants prepare for CCS during their design and planning phases.CCS Ready policy can facilitate a smooth transition to CCS. However, there is currently nooperational and internationally standardised definition of a CCS Ready plant. Such adefinition would increase the ability of countries to efficiently develop and implement policyframeworks to deploy CCS Ready plants by providing a thorough, widely recognizedfoundation for CCS Ready plant requirements.This document aims to fill this void by proposing a definition of CCS Ready that could beinternationally recognised. The proposed definition (presented in the Exhibit ES-1) reflectsthe key principles listed below. These principles and the definition are based on an analysisof existing CCS Ready literature and legislation, and informed by CCS Ready stakeholderperceptions gleaned from a series of international CCS Ready roundtables held by theGlobal CCS Institute.Key Principles for CCS Ready• Capture, transport, and storage are best addressed holistically in order to increase thefeasibility of a smooth transition to retrofitting CCS;• A degree of flexibility (in terms of stringency) is advisable to allow jurisdictions to adaptthe definition according to their own regional-specific issues;• The initial cost of building a CCS Ready plant is most easily justified when the cost isoffset by the future cost savings for a CCS retrofit; and• Identifying and addressing early the potential barriers for a future retrofit to the extentpossible is good practice.The definition identifies various CCS Ready requirements for a plant, such that satisfyingthese requirements could deem a plant as being CCS Ready. Some components of thedefinition are specific to only one element of a CCS Ready plant (e.g., pertaining only tocapture, transport, or storage of CO 2 ), whereas other components are common to allelements of CCS Ready.23 February 2010 1

Executive SummaryThe components specific to defining a Capture Ready plant include plant site selection,technology selection, design for capture facilities, space allowance, and equipment preinvestment.Site selection for a Capture Ready plant is critical, as an appropriate location canmake transportation and storage of the captured CO 2 technically feasible withoutcompromising other commercial requirements of the plant (e.g., access to fuel, water supply).Selecting at least one technology for a Capture Ready plant and conducting studies to assesswhether the capture facilities can be constructed at the time of the retrofit is necessary for asmooth transition to CCS retrofit in the future. A Capture Ready plant design could bedifferent from a business-as-usual plant, due to the additional facilities and equipment neededfor retrofitting power or industrial plants. Allowing sufficient space for future capture facilitieswill ensure that a retrofit to CCS is indeed feasible. Lastly, potential pre-investment ofequipment may be useful, as it may result in reduced lead time for retrofitting and increase thelikelihood of eventual CCS retrofit by reducing money-forward costs.For a Transport Ready plant, the key components are transport method selection, transportcorridor selection, and design for transport facilities. Identifying and selecting a transportmethod(s) is necessary for developers to begin the process of determining the technical andeconomical feasibility of CO 2 transport between the Capture Ready plant and the potentialstorage site. CO 2 transport corridor selection is essential to identify and reduce potentialbarriers and minimise delays at the time of CCS retrofit. For instance, by initially identifyingwaterways, roads, and shorelines that a potential CO 2 pipeline may traverse, developers canchoose the most appropriate corridor. While there are no significant technologicalchallenges or gaps in knowledge associated with the design of transport facilities (e.g., CO 2pipelines and ships), the inclusion of this component in the Transport Ready plant definitionis aimed to confirm the technical and economic feasibility of the identified or selectedtransport method(s) along the specified corridor.Components of a Storage Ready Plant are storage site selection; verification of injectivity,capacity, and integrity of a storage site; and design of storage sites. Identifying a potentialstorage site(s) is critical, as the choice of a storage site will affect both the location of theCCS Ready plant as well as the options for transportation corridors. Verifying injectivity,capacity, and integrity of a storage site is necessary to ensure that required amounts of CO 2can indeed be safely stored for the long term. Developing initial designs for injectionfacilities includes an assessment of plans for monitoring and verification of the storage site.This would reduce the technical and cost uncertainties and ensure that storage facilities arerealistic and feasible.There are certain components of the CCS Ready definition that are common to everyelement (e.g., Capture Ready, Transport Ready, and Storage Ready). These commoncomponents include identification of conflicting uses and rights; costs estimates for CCSfacilities; assurance of environmental, safety, and other approvals; enhancement of publicawareness and engagement; identification for sources for equipment materials and services;and fulfilment of ongoing obligations.Identifying and potentially resolving conflicting uses and rights of way for a Transport ReadyPlant and a Storage Ready Plant could reduce delays to the future deployment of CCS. Anassessment of the costs associated with making a plant CCS Ready, as well as economicfeasibility assessments for future retrofit, can reduce the risk that a CCS Ready plant willnot be economic to operate before the end of its normal lifetime. While different issues forenvironmental, safety, and other approvals must be considered for each element of CCS23 February 2010 2

Executive SummaryExhibit ES-2: Illustration of Graduated Levels of Requirements Specific to a CO 2Capture Ready Plant, a Transport Ready Plant, and a Storage Ready PlantCapture Ready PlantTransport Ready PlantStorage Ready PlantComponent CCS Ready Level 1 CCS Ready Level 2 CCS Ready Level 3Plant site selectionLocate plant in a site where transportation to storage sites is potentially feasible.Technology SelectionDesign for CaptureFacilitiesSpace AllowanceEquipment PreinvestmentTransport MethodCO2 Transport CorridorSelectionDesign of TransportFacilitiesStorage Site SelectionVerifying Injectivity,Capacity, and Integrity ofStorage SiteDesign of StorageFacilityIdentify one or morepotential capturetechnologies.Prepare a preliminarydesign for capturefacilities and theirintegration into the plant.Identify preferred capturetechnologies.Prepare technical feasibilitystudy for capture facilities andtheir integration.Identify chosen capturetechnology.In additional to Level 2requirement, prepare a DesignBasis Memorandum (DBM) forcapture facilities and theirintegration.Allow sufficient space, as determined by design studies, for needed equipment andconstruction zone.Make little or noequipment preinvestment.Identify one or morefeasible pipeline and/orshipping routes.Prepare preliminarydesign options forfeasible transportmethod(s).Estimate total amount ofCO2 to be captured andstored for all years of CCSoperation of the plant, andidentify one or morefeasible storage sitesexpected to accommodatethe captured CO2.Review existing regionalprospectivity studies andshow that the requiredcapacity is theoreticallyavailable; conductpreliminary assessmentof storage integrity andrisks; and submit anoverall plan for siteassessment.Prepare preliminarydesign for storage facility.Make modest level of equipmentpre-investment.Make high level of equipmentpre-investment.Identify and select one or more potential transport method(s).Obtain contractual options torights of way.Prepare technical feasibilitystudy for the transportmethod(s) includingcoordination of pipeline corridoruse and/or shipping routes withother capture plants.In addition to Level 1 requirement,obtain contractual options to oneor more appropriate storage sites.In addition to Level 1requirement, conduct desktopstudy of injectivity, capacity, andintegrity of storage location(s),and show that “effective”capacity is available.Prepare technical feasibility studyfor storage facility, includingpreliminary monitoring andverification plan.Obtain rights of way to assessthe pipeline corridor or shippingroute.In addition to Level 2requirement, prepare a DesignBasis Memorandum (DBM) forthe chosen transport method(s).In addition to Level 2requirement, obtain rights to oneor more appropriate storagesites.In addition to Level 2requirement, conduct geologicalexploration to screen and selectspecific site(s) for more detailedcharacterization of aquifers, ordetailed assessment of oil/gasoptions; estimate “practical”capacity and conduct initialmodeling of long-term reservoirbehavior; and prepare DetailedStorage Integrity RiskAssessment.In additional to Level 2requirement, prepare a DesignBasis Memorandum (DBM) forstorage site facility, includingmonitoring and verification plan.23 February 2010 5

Executive SummaryExhibit ES-3: Illustration of Graduated Levels of Requirements Common to aCO 2 Capture Ready Plant, a Transport Ready Plant, and a Storage Ready PlantComponent CCS Ready Level 1 CCS Ready Level 2 CCS Ready Level 3Conflicting Usesand RightsCost Estimate forCCS FacilitiesEnvironmental,Safety, and OtherApprovalsPublic Awarenessand EngagementSources forEquipment,Materials, andServicesOngoingObligationsTransport: Identify any conflicting land use activity, as well as feasibility of land/portaccess.Storage: Identify any conflicting surface and subsurface uses, as well as feasibility ofaccess to site(s).Capture: Prepare preliminary economicanalysis of capture facilities.Transport: Prepare preliminary economicanalysis for transport facilities, andestimate the cost of transportation for thecapture plant.Storage: Prepare preliminary economicanalysis for storage facility includingcapital and operation and maintenancecosts, and estimate the cost of storagefor the capture plantCapture: Identify all approvals that willneed to be obtained for retrofitting capturefacilities.Transport: Identify all approvals that willneed to be obtained for transporting CO2.Storage: Identify all approvals that willneed to be obtained for storage site.Capture: Notify public of eventual capturefacilities retrofit via web site and otheractions.Transport: Notify public of chosentransport method(s) and corridor(s) viaweb site and other actions.Storage: Notify public of eventual storagesite via web site and other actionsNoneCapture: Prepare preliminary economicfeasibility study based on technicalfeasibility study.Transport: Conduct preliminary economicfeasibility study, based on technicalfeasibility study, including cost oftransportation for the capture plant.Storage: Conduct preliminary economicfeasibility study based on technicalfeasibility study, including the cost ofstorage for the capture plantCapture: Conduct feasibility studies forobtaining all approvals for retrofitting.Transport: Conduct feasibility studies forobtaining all approvals for transportationfacilities.Storage: Conduct feasibility studies forobtaining all approvals for storage site.Capture: Seek public engagement inplanning of capture facilitiesTransport: Seek public engagement intransportation planning.Storage: Seek public engagement instorage site planning.Capture: Compile list of companies whocan supply construction and operationservices to capture facilities.Transport: Compile list of companies whocan supply equipment, materials andservices needed for construction andoperation of CO2 transportation.Storage: Compile list of companies whocan supply equipment, materials andservices needed for construction andoperation of storage siteCapture: File periodic reports with regulators on status of Capture Ready.Transport: File periodic reports with regulators on status of Transport Ready.Storage: File periodic reports with regulators on status of Storage Ready.Transport: Resolve any issueswith conflicting surface and subsurfaceuses, and land/port access.Storage: Resolve any issues withconflicting surface and sub-surfaceuses, and site access.In addition to Level 2 requirement,prepare follow-on economicfeasibility study based on technicalinformation provided in DBM.Capture: Prepare key documentsfor obtaining all approvals.Transport: Prepare keydocuments for obtaining allapprovals for transportationfacilities.Storage: Prepare key documentsfor obtaining all approvals forstorage site.Capture: In addition to Level 2requirement, encourage publicengagement in approval process.Transport: In addition to Level 2requirement, encourage publicengagement in transportationapproval process.Storage: In addition to Level 2requirement, encourage publicengagement in storage siteapproval process.Contact companies and negotiatenonbinding letters of intent to bidon project.Capture: In addition to Level 2requirement, respond to mandatorytrigger mechanism to retrofitcapture facilities.Transport: In addition to Level 2requirement, respond to mandatorytrigger mechanism to developtransport facilities.Storage: In addition to Level 2requirement, respond to mandatorytrigger mechanism to developstorage site for injection.23 February 2010 6

Chapter 1: Introduction1. IntroductionThe International Energy Agency (IEA) projects that the world’s primary energyconsumption will increase by 40% above 2007 levels by the year 2030, driven primarily byincreased demand for electricity. 1 Globally, coal fuels the generation of 42% of electricitytoday, and is expected to remain a significant source for power generation in the future. 1Other fossil fuels, such as oil and natural gas, are also widely used in the power andindustrial sectors and their demand is expected to rise as well in the future. 1Counterbalanced against this rising demand for fossil fuel energy is a growing internationalrecognition of climate change and an increasing aspiration to control greenhouse gas (GHG)emissions. The burning of fossil fuels accounts for nearly 57% of global greenhouse gasemissions. 2 Governments may impose GHG emissions limits on power plants and otherlarge emitters to control emissions.While improvements in energy efficiency and greater use of renewable energy will help toreduce the carbon intensity of energy consumption, the IEA projects a high demand for thetechnology to geologically store carbon dioxide (CO 2 ) emissions that may be captured fromfossil-fuel based plants. CO 2 capture, transport, and storage (CCS) technology allows forglobal CO 2 emissions to be reduced even as consumption of fossil fuels increases.IEA’s Energy Technology Perspectives 2008 states that the application of CCS in powergeneration and industry is “the most important single new technology for CO 2 savings.” TheIEA defines CCS as a process whereby CO 2 is captured from gases produced by fossil fuelcombustion, compressed, transported and injected into deep geologic formations for permanentstorage. 3 The IEA estimates that CCS used in the power and industrial sectors will accountfor 19% of total CO 2 savings needed to achieve a 50% reduction in emissions by 2050. 4Need for CCS Ready PlantsAlthough CCS will likely be a key component of a future portfolio of technologies in majorenergy-consuming nations, CCS has not yet been widely deployed on a commercial scale.The technology is currently not fully mature, as there are still technical, economic,regulatory, and policy barriers to its deployment. Governments and industry have beenworking together and have invested heavily to resolve these barriers.While these barriers are gradually being reduced, new fossil-fuel based power plants andother industrial facilities continue to be designed and built worldwide. In a carbonconstrainedfuture, unless these new plants are designed with eventual CCS in mind, theymay incur a high cost of retrofitting to CCS or may have to shut down before their usefuleconomic life. The absence of CCS Ready plants could result in a carbon “lock-in,” asituation in which plants continue to emit large amounts of carbon dioxide (CO 2 ) ifmitigation through CCS is technically and economically infeasible due to equipment and site1 International Energy Agency (IEA). (2009b). World Energy Outlook 2009.2 Intergovernmental Panel on Climate Change (IPCC). (2007). Climate change 2007: Synthesis report. Contribution ofWorking Groups I, 11, and III to the Fourth Assessment Report of the IPCC. Geneva, Switzerland: Author.3 International Energy Agency (IEA). (2010). Carbon dioxide (CO2) capture and storage (CCS).4 Based on the BLUE Map scenario presented in International Energy Agency (IEA). (2008). Energy technology perspectives2008: Scenarios and strategies to 2050. Paris, France: Author.23 February 2010 7

Chapter 1: IntroductionDevelopers of capture-ready plants should take responsibility for ensuring that all known factors intheir control that would prevent installation and operation of CO 2 capture have been eliminated.This might include:• A study of options for CO2 capture retrofit and potential pre-investments• Inclusion of sufficient space and access for the additional facilities that would be required• Identification of reasonable route(s) to storage of CO 2Competent authorities involved in permitting power plants should be provided with sufficientinformation to be able to judge whether the developer has met these criteria. 7In addition to the IEA GHG’s definition, other reports and publications have also addressedaspects of CCS Ready plants. Exhibit 1-1 summarizes the key concepts associated with CCSReady plants that are discussed in each document. Further detail on CCS Ready definitionsin the existing literature is provided in Appendix A.Exhibit 1-1: Summary of Documents with Concepts Includedin the CCS Ready DefinitionAuthor (Year)Type of PlantConcept Included in the CCS Ready DefinitionBlankinship, S. (2008). PC; IGCC; NGCC Bohm, M.C. (2007). PC; IGCC EPPSA.. (2006). Power Gibbins, J. (2006). PC; IGCC; NGCC IEA GHG. (2007b). PC; IGCC Irons, R. (2007). IGCC; NGCC Lucquiaud, M.. (2009). PC Markusson N. & Haszeldine, S. (2008). PC; IGCC; NGCC Minchener, A. (2007). PC; IGCC; NGCC Mott MacDonald Group. (2008). UMPPs Sekar, R.C. (2005). PC; IGCC Stephens, J.C. (2005). IGCC PC = Pulverized Coal; IGCC = Integrated Gasification Combined Cycle; NGCC = Natural Gas Combined Cycle; UMPP =Ultra-Mega Power PlantIn general, the existing literature mostly focuses on a Capture Ready plant and defines it asone that can retrofit and eventually capture CO 2 emissions once the appropriate drivers arein place. Some of the literature also mentions the need for identifying appropriate storagesites and transportation routes, but does not discuss these issues in detail.SpaceDesignEconomicPre-investmentCaptureTransportStorage7 International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2007a). CO2 capture ready plants (Reportno. 2007/4). Cheltenham, UK: Author.23 February 2010 9

Chapter 1: IntroductionOther common issues in the existing Capture Ready literature include:• Type of Plant. Capture definitions and considerations span across all types of capturetechnologies, including post-combustion and oxy-fuel based capture for pulverised coal(PC) and natural gas combined cycle (NGCC) plants, and pre-combustion based capturefor Integrated Gasification Combined Cycle (IGCC) plants. It is commonly understoodthat costs and capture technology selection for being “ready” will be dependent on thetype of plant (i.e., PC, IGCC, or NGCC).• Space. The existing CCS Ready literature indicates that plant developers need to allowfor additional space to accommodate additional capture equipment and expandedconstruction zones.• Design. A common element in most of the literature is the modification of the BAUplant design to accommodate the additional capture facilities in the future. Changes indesign can make future CCS retrofits more efficient as compared to retrofitting a plantbuilt with BAU design.• Economic Assessment. An economic assessment can be performed to ensure that aCapture Ready plant does not have prohibitive initial costs and that the plant could stillbe economically viable when the plant is retrofitted to CCS in the future.• Pre-investment. There is no consensus on the level of pre-investment of equipmentthat is needed for a Capture Ready plant, but most documents note that economicallyattractive pre-investments are limited. The time value of money, associated risks anduncertainties needs to be balanced against potential benefits in determining the level ofpre-investment.1.2 Existing CCS Ready LegislationCCS Ready legislation, while very limited to date, offers insight into interpretations of CCSReady. If defined as an official enactment, promulgation, issuance, decision, or guidance of agovernmental body, existing CCS Ready legislation includes the following:1) European Union Directive 2009/31/EC on geological storage of CO2 (EU Directive); 8and2) United Kingdom’s Department of Energy and Climate Change, Carbon Capture Readiness(CCR): A guidance note for Section 36 Electricity Act 1989 consent applications(November 2009) (UK Guidance). 9EU DirectiveThe EU Directive focuses primarily on geological storage of CO 2 , while also providing someguidance on Capture Ready plants. The first 28 Articles in the Directive focus on geologicalstorage, and Article 33 amends a previous directive 2001/80/EC on requirements for largecombustion plants suggesting that large plants are ready for CCS. The new provisionrequires that operators of all combustion plants with a rated electrical output of 300 MW8 European Parliament and the Council of the European Union. (2009). Directive 2009/31/EC of the European Parliamentand of the Council of the European Union. Official Journal of the European Union, 140.9 U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capture readiness (CCR): A guidance notefor Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810). London, UK: Author.23 February 2010 10

Chapter 1: Introductionor more, licensed after the effective date of the EU Directive, must assess whether thefollowing conditions are met:1) suitable CO 2 storage sites are available;2) transport facilities are technically and economically feasible; and3) retrofit for CO 2 capture is technically and economically feasible.If the conditions are met, the competent authority shall ensure that suitable space on theinstallation site is set aside for the equipment necessary to capture and compress CO 2 .Note that although the EU Directive does not use the phrase “CCS Ready,” the provisionsare consistent with the CCS Ready concept.UK GuidanceFollowing on the EU Directive, the United Kingdom (UK) developed a guidance documentindicating how aspects of the EU directive will be implemented in England and Wales. Thedocument focuses on new applications for power stations at or over 300 MW in Englandand Wales, wherein the developers have to demonstrate that their plant is carbon captureready in order to be granted consent for construction.Applicants are asked to demonstrate that there are no known technical or economicbarriers that would prevent the installation and operation of chosen CCS technologies (“nobarriers” approach). At the same time, applicants are directed to apply for HazardousSubstances Consent if CCS will involve the use of hazardous substances.The Guidance requires developers to consider suitable means of CO 2 transport to a selectedoffshore storage site, in addition to specific planning requirements for retrofitting capture andcompression equipment at the plant site. Specifically, the applicant must demonstrate:• that sufficient space is available on or near the site to accommodate carbon captureequipment in the future;• the technical feasibility of retrofitting the chosen carbon capture technology;• that a suitable area of deep geological storage offshore exists for the storage of capturedCO 2 from the proposed power station;• the technical feasibility of transporting the captured CO 2 to the proposed storage area;and• the likelihood that within the power station's lifetime it will be economically feasible tolink it to a full CCS chain covering retrofitting of capture equipment, transport, andstorage.The UK Guidance defines how all of these points are to be achieved through alist of key criteria and requirements that must be met by applicants. The UKGuidance is detailed and its provisions are well reasoned. The “no barriers” approach of theUK guidance ensures that potential future barriers have been considered and accounted for,thereby minimising the risk of future time delays to the deployment of CCS.23 February 2010 11

Chapter 1: Introduction1.3 Perceptions of CCS ReadyDifferent stakeholders hold various views on CCS Ready, and these views were consideredin the formulation of the proposed CCS Ready definition below. Insight about the variousstakeholder perceptions was developed through a review of existing literature (seereferences in text box below), as well as from a series of regional CCS Ready roundtables.These roundtable discussions, held by the Global CCS Institute, were focused on solicitinginput from various stakeholders about CCS Ready concepts. 10 The key perceptions relevantfor the proposed definition of CCS Ready are summarized below in Exhibit 1-2.The perceptions of CCS Ready from government officials varied greatly, and depended inpart on jurisdictional issues such as whether there were already existing GHG policies or ifsuch polices were anticipated in the future, the sources and volumes of GHG emissions, andlocal economics of installing CCS on various plants. In general, governments are mostinterested in a stringent enough definition for CCS Ready such that plants will be able toinstall CCS in the future, as necessary.Chief among the concerns of power plant developers and owners of industrial facilities werethe potential high costs of becoming CCS Ready and of eventually capturing and storingCO 2 . More stringent requirements such as conducting a front-end engineering and designstudy (FEED) or a detailed geological characterization of a potential storage site wereconsidered to provide little to no immediate benefits to the developer. Hence, the industryis most interested in least cost options. Industry is also concerned about the highuncertainties around future capture technologies. Without knowing which capturetechnologies will be available when CCS is required, firms raised concerns over makinginvestments that may lock them into more expensive technologies, or may force them toover-design plants to accommodate a wide range of potential capture technologies.The general public opinion about CCS is not yet fully formed, given that CCS is still aReferences Used for Identifying Stakeholders’ Perceptions• Acceptance of CO2 Capture and Storage, Economics, Policy and Technology (ACCSEPT) Project. (2007). TheACCSEPT project: Summary of the main findings and key recommendations (DNV-BRINO912GSIG2007-2078).• Intergovernmental Panel on Climate Change (IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture andStorage. New York, NY: Cambridge University Press.• Shackley, S., Reiner, D., Upham, P., deConink, H., Sigurthorsson, G., & Anderson, J.. (2009). The acceptability ofCO2 capture and storage (CCS) in Europe: An assessment of the key determining factors: Part 2. The socialacceptability of CCS and the wider impacts and repercussions of its implementation. International Journal ofGreenhouse Gas Control, 3, 344-356. doi:10.1016/j.ijggc.2008.09.004.• U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2009). Public outreach andeducation for carbon storage projects. (DOE/NETL-2009/1391).• U.S. Government Accountability Office (U.S. GAO). (2008). Climate change: Federal actions will greatly affect theviability of carbon capture and storage as a key mitigation option (Publication no. GAO-08-1080). Report to theChairman of the Select Committee on Energy Independence and Global Warming, House of Representatives.Washington, DC: Author.• World Resources Institute (WRI). (2009). Guidelines for community engagement regarding carbon dioxide captureand storage (CCS) projects. August 2009 draft for stakeholder review.10 Four workshops were held in: Washington DC, U.S. (19 October 2009); Amsterdam, Netherlands (22 October 2009);Beijing, China (26 October 2009); and Tokyo, Japan (20 November 2009). In attendance were representatives from industry,the environmental community, non- governmental organizations, academics, and governments.23 February 2010 12

Chapter 1: Introductionrelatively new technology. However, this situation may change quickly once CCS Ready andCCS policies are actively being considered at the national or provincial level, and once CCSrelatedprojects become more commonplace. Public perception and support for CCS Readywill also be linked to any resulting high prices on commodities, as industry may pass alongthe costs of being CCS Ready to consumers. 11The environmental community is divided in its perceptions of CCS Ready. Nongovernmentalorganizations (NGOs) that are opposed to CCS Ready often believe that CCSand continued use of coal would endanger people or natural resources and delayimplementation of energy efficiency and renewable energy. Some NGOs oppose CCS Readyas they are concerned that it may delay the adoption of CCS. CCS Ready concepts are alsoviewed as “greenwashing”, as being CCS Ready by itself does not immediately reduce GHGemissions, and there is no guarantee that a CCS Ready plant will retrofit CCS in the future.Exhibit 1-2: Summary of Interest of Various CCS Ready StakeholdersCCS Ready Stakeholder InterestsGovernments• Selecting a definition for CCS Ready plants that is stringent enough to ensure that plants will be able to install CCS when driversare in place or when made mandatory;• Preventing carbon lock-in (and rising emissions);• Defining a specific date or timeline for some or all new and significantly modified plants to be CCS Ready;• Defining provisions to address interrelated issues like long-term liability and CO2 and pore space ownership;• Ensuring that there is continued economic growth and sufficient power to meet future societal needs (avoiding regulatory lock-in);• Early demonstration of CCS Ready plants so that lessons from these plants can be incorporated into CCS Ready policy;• Ensuring that commitments to install CCS at CCS Ready plants are met in a timely manner, so that a government’s GHGreduction responsibilities can be met;• Ensuring that high upfront costs for CCS Ready can be offset by a reduction in future retrofitting or compliance costs;• Ensuring that CCS Ready facilities are developed as part of a coordinated infrastructure plan; and• Continuing to support CCS technological innovation and application.Industry• A flexible definition that recognizes the uncertainty surrounding future technologies;• Reducing uncertainty in future carbon regulations;• High cost of meeting CCS Ready requirements;• Ensuring that investments in CCS Ready minimize overall lifecycle costs;• Continued government financial support for CCS technology research and early demonstration projects;• Ensuring that capture ready investments allow for inclusion of potential advancements in technology so that CCS Ready plants donot end up being limited to using outdated technologies; and• Identifying actions that can be taken to minimize down time for conversion to capture.The Public and Local Communities• Potential benefits, such as job creation, stimulating the local economy, and decreasing local air pollution;• Keeping electricity rates at or near current levels;• Access to information about projects;• Better understanding of the risks to local communities and natural resources;• Laws and requirements in place to minimize risks; and• Early and ongoing engagement by project developers.Environmental Community• Adoption of higher levels of CCS Ready requirements;• Ensuring that CCS Ready facilities implement CCS as soon as possible;• Stringent regulatory criteria to enforce early conversion to full capture, transport, and storage; e.g., by setting a mandated date foradoption of CCS or by implementing a schedule of emissions performance standards that tighten over time; and• Ensuring that regulations for CO2 injection minimize public safety concerns.11 Alternatively a portion of the cost could be borne by the government or the power providers.23 February 2010 13

Chapter 1: Introduction1.4 Proposed CCS Ready DefinitionThe proposed international CCS Ready definition was developed from an analysis of existingCCS Ready literature and legislation, and informed by CCS Ready perceptions discussedabove. The key principles for the proposed definition are:• Integration of All Aspects of CCS. Addressing capture, transport, and storageholistically increases the feasibility of a smooth transition to eventual CCS retrofit.Integration is of particular importance when considering plant site location.• Proactive Identification of Potential Future Barriers. The risk of time delays forthe eventual CCS retrofit would be reduced by identifying potential barriers for a futureretrofit, and by avoiding or preparing to resolve these barriers.• Flexibility. A definition of CCS Ready needs to be flexible, in terms of levels ofstringency, in order to allow jurisdictions across the world to adapt the proposeddefinition based on specific issues applicable in a jurisdiction. An evaluation of advantagesand disadvantages of different levels of CCS Ready requirements can provide a basis forpolicymakers in a jurisdiction to determine the appropriate level of stringency for theirspecific CCS Ready policy.• Economically Acceptable. A CCS Ready definition selected by a jurisdiction mayinclude a requirement to show the economic viability of a retrofit to CCS. 12 This mightmean for example that, during the operating life of the plant, a reasonable probabilityexists that the plant can be retrofitted and operated with CCS at a total costcomparable to the GHG mitigation costs expected to be borne by other plants in thejurisdiction. The plant’s total estimated cost for eventual capture, transport, and storagewould include costs for planning, construction capital, and operating costs, including thetime value of money. 13Exhibit 1-3 summarizes how the research presented in the previous sections was used toformulate the above principles.12 Appendix C presents an approach for policymakers to use to evaluate the economics of a CCS Ready policy.13 The time value of money is the value of money adjusted for the interest earned or paid over the relevant amount of time. Adollar paid in the future must be discounted for interest cost to calculate what it is worth today.23 February 2010 14

Chapter 1: IntroductionExhibit 1-3: Key Principles for CCS Ready Definition and Related ResearchPrincipleIntegration of All Aspects of CCSProactive Identification ofPotential Future BarriersFlexibilityEconomically AcceptableRelated ResearchThe IEA GHG 2007/4 report noted that a part of the “Essential Capture-ReadyRequirements” includes the consideration of “CO2 transport via pipelines to thestorage location, including safe transportability and considerations on shared CO2pipelines (or) ship transport for coastal sites”. 14 The aspect of integrating allelements of CCS Ready to ensure a smooth transition to CCS was also discussedin the EU Directive and the UK Guidance.This principle is based on the “no barriers” approach of the UK Guidance. The UKGuidance takes this approach to ensure that applicants have considered potentialsituations that would hinder the deployment of CCS. This precautionary principleensures that an analysis is conducted to minimize future time delays and potentiallyprohibitive costs to the deployment of CCS.The varied perceptions of CCS Ready among different stakeholders led to theconsideration of flexibility in two ways: 1) a flexible definition allows policymakers toconsider the different views of stakeholders in their policy formulation; and 2) thereare different region-specific issues related to CCS Ready. Thus, flexibility in thedefinition is necessary in order to be applicable internationally.A common theme in existing CCS Ready literature and legislation is that unless theeconomic viability of a plant can be demonstrated, it is unlikely that CCS Ready willbe adopted by developers. Economic analysis to determine whether building CCSReady plants is “economically acceptable” was considered as essential indetermining the extent of economic barriers for CCS retrofits.The proposed definition of a CCS Ready plant based on the key principles is shown in thetext box below. This definition is comprised of various components that are either specificto each a Capture Ready plant, a Transport Ready plant, or a Storage Ready plant, orcommon among all types of plants.14 International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2007a). CO2 capture ready plants (Reportno. 2007/4). Cheltenham, UK: Author.23 February 2010 15

Chapter 1: IntroductionProposed International Definition of CCS ReadyA CCS Ready plant is one that is Capture Ready, Transport Ready, and Storage Ready.Capture Ready PlantA CO 2 Capture Ready plant satisfies all or some of the following criteria:8) Sited such that transport and storage of captured volumes are technically feasible;9) Technically capable of being retrofitted for CO 2 capture using one or more reasonable choices oftechnology at an acceptable economic cost;10) Adequate space allowance has been made for the future addition of CO 2 capture-related equipment,retrofit construction, and delivery to a CO 2 pipeline or other transportation system;11) All required environmental, safety, and other approvals have been identified;12) Public awareness and engagement activities related to potential future capture facilities have beenperformed;13) Sources for equipment, materials, and services for future plant retrofit and capture operations have beenidentified; and14) Capture Readiness is maintained or improved over time as documented in reports and records.Transport Ready PlantA CO 2 Transport Ready plant satisfies all or some of the following criteria:1) Potential transport methods are technically capable of transporting captured CO 2 from the source(s) togeologic storage ready site(s) at an acceptable economic cost;2) Transport routes are feasible, rights of way can be obtained, and any conflicting surface and subsurfaceland uses have been identified and/or resolved;3) All required environmental, safety, and other approvals for transport have been identified;4) Public awareness and engagement activities related to potential future transportation have beenperformed;5) Sources for equipment, materials, and services for future transport operations have been identified; and6) Transport Readiness is maintained or improved over time as documented in reports and records.Storage Ready PlantA CO 2 Storage Ready plant satisfies all or some of the following criteria:1) One or more storage sites have been identified that are technically capable of, and commerciallyaccessible for, geological storage of full volumes of captured CO 2 , at an acceptable economic cost;2) Adequate capacity, injectivity, and storage integrity have been shown to exist at the storage site(s);3) Any conflicting surface and subsurface land uses at the storage site(s) have been identified and/orresolved;4) All required environmental, safety, and other approvals have been identified;5) Public awareness and engagement activities related to potential future storage have been performed;6) Sources for equipment, materials, and services for future injection and storage operations have beenidentified; and7) Storage Readiness is maintained or improved over time as documented in reports and records.Notes: “Technically feasible” or “technically capable” means that technologies exist that can be applied to capture, transportand store a significant portion of the CO2 emitted from the plant, while substantially preserving the original functionality of theplant.The phrase “all or some of the following criteria” gives policymakers the flexibility in deciding the components that are mostuseful for their jurisdictions. Once requirements are set, the project developers will have to meet all relevant requirements.23 February 2010 16

Chapter 1: IntroductionJustification for the Proposed DefinitionThe proposed definition of a CCS Ready plant is more definitive than the EU Directive,while not being as prescriptive as the requirements in the UK Guidance. The notioncontained in the recommended definition that a CCS Ready plant can satisfy “all or some” ofthe criteria listed gives policymakers the flexibility in deciding which components are mostuseful for their jurisdictions. Once requirements are set through policy and regulations, theproject developers will have to meet all relevant requirements to the satisfaction of theirrelevant regulators.The recommended definition aims to proactively identify potential barriers to reduce therisk of delays and cost overruns for the eventual CCS retrofit. This completeness impliesthat the proposed definition can be immediately utilised by policymakers as a basis for adesigning a CCS Ready policy framework, and implementing such a policy in a jurisdiction.This application is demonstrated in the report: CCS Ready: Considerations and RecommendedPractices for Policymakers.Requirements for CCS Ready ComponentsThe specific components of CCS Ready definitions can be used to develop a more detailedset of requirements. The stringency of each of these components of CCS Readyrequirements can vary, and such varied levels of stringency will provide additional flexibilityfor policymakers and regulators. Exhibits 1-4, 1-5 and 1-6 present an illustrative set of CCSReady requirements for three levels of stringency:• Level 1 has the lowest cost and time expenditures for compliance by projectdevelopers and allows for the greatest amount of flexibility;• Level 2 increases requirements through a greater level of design development for thecapture facility, selection of transport corridors and enhanced modelling of storagelocation including desktop study of injectivity, capacity and integrity; and• Level 3 identifies the specific capture technologies to be retrofitted, requires acquisitionof transport rights of way and planning requirements and geological exploration.With increasing stringency, there is an associated increase in cost. However, higher levels ofstringency can allow greater benefits as more barriers to CCS retrofits are identified andthese barriers are either avoided or reduced. Hence, the potential future benefits mayoutweigh the added initial cost. More discussion on the advantages and disadvantages on thedifferent levels of stringency for CCS Ready requirements can be found in the report: CCSReady: Considerations and Recommended Practices for Policymakers.The remainder of this document provides further rationale, justification and discussion for theCCS Ready definition.23 February 2010 17

Chapter 1: IntroductionCO2 Capture Ready PlantExhibit 1-4: Illustration of Graduated Levels of Requirementsfor a CO 2 Capture Ready PlantComponent CCS Ready Level 1 CCS Ready Level 2 CCS Ready Level 3Plant site selectionTechnology SelectionDesign for CaptureFacilitiesSpace AllowanceEquipment Pre-investmentCost Estimate for CaptureFacilitiesEnvironmental, Safety, andOther Approvals forCapture FacilitiesPublic Awareness andEngagement Related toCapture FacilitiesSources for Equipment,Materials, and Services forCapture FacilitiesOngoing ObligationsLocate plant in a site where transportation to storage sites is potentially feasible.Identify one or more potentialcapture technologies.Prepare a preliminary design forcapture facilities and theirintegration into the plant.Identify preferred capturetechnologies.Prepare technical feasibilitystudy for capture facilities andtheir integration.Identify chosen capturetechnology.In additional to Level 2requirement, prepare a DesignBasis Memorandum (DBM) forcapture facilities and theirintegration.Allow sufficient space, as determined by design studies, for needed equipment and constructionzone.Make little or no equipmentpre-investment.Prepare preliminary economicanalysis of capture facilities.Identify all approvals that willneed to be obtained forretrofitting capture facilities.Notify public of eventualcapture facilities retrofit viaweb site and other actions.None.Make modest level of equipmentpre-investment.Prepare preliminary economicfeasibility study based on technicalfeasibility study.Conduct feasibility studies forobtaining all approvals forretrofitting.Seek public engagement inplanning of capture facilities.Compile list of companies who cansupply construction and operationservices to capture facilities.File periodic reports with regulators on status of capture ready.Make high level of equipmentpre-investment.In addition to Level 2requirement, prepare follow-oneconomic feasibility studybased on technicalinformation provided in DBM.Prepare key documents forobtaining all approvals.In addition to Level 2requirement, encourage publicengagement in approvalprocess.Contact companies andnegotiate nonbinding letters ofintent to bid on project.In addition to Level 2requirement, respond tomandatory trigger mechanismto retrofit capture facilities.Source: ICF International23 February 2010 18

CO2 Transport Ready PlantExhibit 1-5: Illustration of Graduated Levels of Requirementsfor a CO 2 Transport Ready PlantChapter 1: IntroductionComponent CCS Ready Level 1 CCS Ready Level 2 CCS Ready Level 3Transport MethodCO2 Transport CorridorSelectionConflicting Uses andRightsDesign of TransportFacilitiesCost Estimate forTransport FacilitiesEnvironmental, Safety,and Other Approvals forTransport FacilitiesPublic Awareness andEngagement Related toCO2 TransportSources for Equipment,Materials, and Servicesfor Transport FacilitiesOngoing ObligationsIdentify and select one or more potential transport method(s).Identify one or more feasiblepipeline and/or shipping routes.Obtain contractual options torights of way.Identify any conflicting land use activity, as well as feasibility ofland/port access.Prepare preliminary designoptions for feasible transportmethod(s).Prepare preliminary economicanalysis for transport facilities, andestimate the cost of transportationfor the capture plant.Identify all approvals that willneed to be obtained fortransporting CO2.Notify public of chosen transportmethod(s) and corridor(s) viaweb site and other actions.NonePrepare technical feasibilitystudy for the transportmethod(s) includingcoordination of pipeline corridoruse and/or shipping routes withother capture plants.Conduct preliminary economicfeasibility study, based ontechnical feasibility study,including cost of transportationfor the capture plant.Conduct feasibility studies forobtaining all approvals fortransportation facilities.Seek public engagement intransportation planning.Compile list of companies whocan supply equipment,materials and services neededfor construction and operationof CO2 transportation.File periodic reports with regulators on status of transport ready.Obtain rights of way to assess thepipeline corridor or shipping route.Resolve any issues with conflictingsurface and sub-surface uses, andland/port access.In addition to Level 2 requirement,prepare a Design BasisMemorandum (DBM) for thechosen transport method(s).In addition to Level 2 requirement,prepare follow-on economicfeasibility study based ontechnical information providedin DBM.Prepare key documents forobtaining all approvals fortransportation facilities.In addition to Level 2 requirement,encourage public engagement intransportation approval process.Contact companies and negotiatenonbinding letters of intent to bidon project.In addition to Level 2 requirement,respond to mandatory triggermechanism to develop transportfacilities.Source: ICF International23 February 2010 19

CO2 Storage Ready PlantExhibit 1-6: Illustration of Graduated Levels of Requirementsfor a CO 2 Storage Ready PlantChapter 1: IntroductionComponent CCS Ready Level 1 CCS Ready Level 2 CCS Ready Level 3Storage Site SelectionVerifying Injectivity,Capacity, and Integrityof Storage SiteDesign of StorageFacilityConflicting Uses andRightsCost Estimate forStorage FacilityEnvironmental, Safety,and Other Approvalsfor Storage SitePublic Awareness andEngagement Relatedto CO2 Storage SiteSources forEquipment, Materials,and Services forStorage SiteOngoing ObligationsEstimate total amount of CO2 to becaptured and stored for all years ofCCS operation of the plant, andidentify one or more feasiblestorage sites expected toaccommodate the captured CO2.Review existing regionalprospectivity studies and showthat the required capacity istheoretically available; conductpreliminary assessment of storageintegrity and risks; and submit anoverall plan for site assessment.Prepare preliminary design forstorage facility.In addition to Level 1requirement, obtain contractualoptions to one or moreappropriate storage sites.In addition to Level 1requirement, conduct desktopstudy of injectivity, capacity,and integrity of storagelocation(s), and show that“effective” capacity isavailable.Identify any conflicting surface and subsurface uses, as well asfeasibility of access to site(s).Prepare preliminary economicanalysis for storage facility includingcapital and operation andmaintenance costs, and estimate thecost of storage for the capture plant.Identify all approvals that will needto be obtained for storage site.Notify public of eventual storagesite via web site and other actions.None.In addition to Level 2 requirement,obtain rights to one or moreappropriate storage sites.In addition to Level 2 requirement,conduct geological exploration toscreen and select specific site(s) formore detailed characterization ofaquifers, or detailed assessment ofoil/gas options; estimate “practical”capacity and conduct initial modelingof long-term reservoir behavior; andprepare Detailed Storage IntegrityRisk Assessment.Prepare technical feasibility In additional to Level 2 requirement,study for storage facility, prepare a Design Basis Memorandumincluding preliminary monitoring (DBM) for storage site facility, includingand verification plan. monitoring and verification plan.Conduct preliminaryeconomic feasibility studybased on technical feasibilitystudy, including the cost ofstorage for the capture plant.Conduct feasibility studies forobtaining all approvals forstorage site.Seek public engagement instorage site planning.Compile list of companies whocan supply equipment,materials and servicesneeded for construction andoperation of storage site.File periodic reports with regulators on status of storage ready.Resolve any issues with conflictingsurface and sub-surface uses, andsite access.In addition to Level 2 requirement,prepare follow-on economic feasibilitystudy based on technicalinformation provided in DBM.Prepare key documents for obtainingall approvals for storage site.In addition to Level 2 requirement,encourage public engagement instorage site approval process.Contact companies and negotiatenonbinding letters of intent to bid onproject.In addition to Level 2 requirement,respond to mandatory triggermechanism to develop storage sitefor injection.Source: ICF International23 February 2010 20

Chapter 2: Capture Ready Plant Definition2. Capture Ready Plant DefinitionThe definition of a Capture Ready plant focuses on identifying an appropriate location forthe plant, developing a plant design that is technically capable of retrofit, allowing sufficientspace for capture facilities, potentially pre-investing in some capture-related equipment, andensuring that any potential roadblocks (conflicting land use, environmental and otherpermits, public awareness, and identification of service providers) are recognized andaddressed. The key reason for including these elements in the definition is to allowpolicymakers, industry, and other stakeholders to avoid barriers that may prevent aneconomic transition to CCS retrofits within a reasonable timeframe. Not every jurisdictionwill have the same level of emphasis on each of these elements, but all of these issues areimportant considerations for an international definition of a Capture Ready plant. Moredetails on the proposed definition are presented below.2.1 Plant SitingThe location of a new plant is often decided early in the plant development and planningphase. The choice of the plant’s location will affect the overall technical feasibility and costof transportation and storage of the captured CO 2 . For siting a BAU plant, the issue ofCO 2 transport and storage is not a decision criterion; however, this criterion is crucial fora Capture Ready plant. The need to identify “reasonable route(s) to storage of CO 2 ” ismentioned in the IEA GHG definition, 15 although the report does not specifically addressthe issue of siting the capture plant appropriately in the first place.The need for appropriate siting is especially important for countries that are expected tohave a large number of new CO 2 -emitting facilities and a wide range of onshore andoffshore storage options. In contrast, siting of plants may be less important in jurisdictionswith small geographical area and limited or mostly offshore storage options. In these cases,pipelines to transport the captured CO 2 from plant sites to appropriate offshore locationswill go short distances to trunkline transporting CO 2 to offshore storage sites.2.2 Technical Capability of RetrofitIn addition to locating the plant appropriately, an assessment of the technical feasiblity ofconstructing the future capture facilities and integrating them with the existing plant isimportant for ensuring that the current plant being built is technically capable of futureretrofit. Without such an assessment, it is possible that the retrofit will be either infeasibleor very expensive.The types of capture technologies will be a key factor in the technical assessments.Currently, there are three major CO 2 capture technology systems:• Post-combustion capture (relevant for all fossil fuel and biomass-based plants, includingindustrial facilities such as natural gas processing, hydrogen production, and ammoniaproduction);15 Page ii of International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2007a). CO2 capture ready plants(Report no. 2007/4). Cheltenham, UK: Author.23 February 2010 21

Chapter 2: Capture Ready Plant Definition• Oxy-fuel combustion (relevant for all fossil fuel and biomass plant types, includingpulverized coal (PC), fluidized bed combustion (FBC), natural gas combined cycles(NGCC), and cement & lime kilns); and• Pre-combustion capture (greatest interest for Integrated Gasification Combined Cycle(IGCC) power plants, and possibly NGCC, but technically relevant for all fossil fuels).Selecting at least one of the capture technologies and conducting studies to assess whetherthe capture facilities can indeed be constructed at the time of the retrofit will help ensurethat the technology is technically feasible and commercially available at the time of retrofit.The proposed Capture Ready definition does not impose a condition that the technologyselected for technical feasibility assessment at the initial stage of planning for a CaptureReady plant be the same as the one that is eventually retrofitted. This approach encouragesthe project developer to take advantage of technological improvements over time, yetensures that at least one feasible technology exists during the planning phase.Such technical assessments are also considered in several key studies. The IEA GHG’sdefinition includes this concept where it suggests a “study of options for CO 2 captureretrofit and potential pre-investments.” 16 Gibbins has noted that feasibility study is requiredto assess how capture facilities will be added later as a retrofit. 17 The UK CCR Guidancealso requires that applicants demonstrate “the technical feasibility of retrofitting theirchosen carbon capture technology.” 18 The UK Guidance goes further and provides achecklist of items in annexes A-C that developers need to consider as they demonstratetechnical feasibility. The UK CCR Guidance also expects that developers will chosewhatever the most appropriate available technology is at the time of retrofit.Assessing the technical capability of a retrofit will include consideration of the design of boththe plant that will be built now, as well as the plant after the capture retrofit. A number ofdifferent facilities are needed for retrofitting capture plants, depending on the choice of thecapture technologies. The inclusion of these new facilities will modify the design of the plantsignificantly and may also reduce the plant’s efficiency. Indeed, the design of a capture plantcould be very different from its non-capture counterpart, such that significant modificationsmay be needed during the retrofit stage. Capture Ready plant designs could considerincorporating some of the features of a plant with capture facilities, in order to assure thetechnical feasibility of the eventual capture retrofit.Given that the amount of space required depends on what equipment and facilities areneeded, the preliminary design for the retrofitted plant could include:• Capture plant, and associated equipment;• Waste handling and processing from the capture plant;• Additional equipment for flue gas cleanup needed for capture plant;16 Page ii of International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2007a). CO2 capture ready plants(Report no. 2007/4). Cheltenham, UK: Author.17 Gibbins, J.. (2006). Making New Power Plants ‘Capture Ready.’ Presentation to the 9th International CO2 CaptureNetwork, London, England.18 Page 8 of U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capture readiness (CCR): Aguidance note for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810). London, UK: Author.23 February 2010 22

Chapter 2: Capture Ready Plant Definition• Additional boiler and heat exchanger units, if needed;• Additional cooling water units, if needed;• Equipment for integrating capture plant with the existing plant;• Staging of construction activities; and• CO 2 compressors and dehydration units, and connections with CO 2 pipeline.Technical capability of retrofit can also be improved by investing in some capture-relatedequipment as part of a plant being Capture Ready, as these investments will result in reducedlead time for retrofitting and make the adoption of capture facilities more likely by reducingmoney-forward costs. 19 Exhibit 2-1 lists potential types of equipment for pre-investment.Such equipment pre-investment is also considered in the literature. For example, the IEAGHG 2007/4 report notes that potential pre-investments could be part of a Capture Readydefinition, and that specific pre-investments, such as oversizing pipes, making provision forexpansion of control systems, and on-site electrical distribution, can be quite helpful ineasing the retrofit. 20 Bohm has also noted that a Capture Ready plant involves a “spectrumof investments and design decisions,” but large capital investments are not justified due tothe time value of money. 21, 22 Thus, there is a trade-off between equipment-relatedexpenditure at the initial plant construction stage (compared with no such expenditures)and the necessary expenditure required at a later date to fully incorporate capture facilities(compared with retrofitting a non-Capture Ready facility).Exhibit 2-1: Key Types of Equipment for Consideration of Pre-investment 23• Throttle valves• Clutch between low-pressure steam turbines• Ducting• Additional coal handling equipment• Oversized boiler• Modified steam turbine generator• Additional flue gas cleanup• Additional feed water equipment• Additional wastewater treatment• Equipment for increasing internal electricity consumption• Other balance of plant systems, including controls2.3 Adequate Space AllowanceAdequate space at the plant site is required for installing the major CO 2 capture,compression, and transport equipment, plus area for construction staging. Having sufficient19 “Money-forward costs” refers to all moneys that will have to be paid after and because a specific investment decision ismade. It excludes “sunk costs” which are any related amount paid before that specific investment decision is made.20 International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2007a). CO2 capture ready plants (Reportno. 2007/4). Cheltenham, UK: Author.21 Page 114, paragraph 2 of Bohm, M., Herzog, H., Parsons, J.E., Sekar, R.C.. (2007). Capture-ready coal plants - options,technologies and economics. International Journal of Greenhouse Gas Control, 1, 113-120. doi:10.1016/S1750-5836(07)00033-3.22 The time value of money is the value of money adjusted for the interest earned or paid over the relevant amount of time. Adollar paid in the future must be discounted for interest cost to calculate what it is worth today.23 For more details, see U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2008b).CO2 capture ready coal power plants (DOE/NETL Publication no. 2007/1301).23 February 2010 23

Chapter 2: Capture Ready Plant Definitionspace is essential to ensure that the capture retrofit is technically feasible and cost-effective.The amount of space required is dependent on several factors, including: 24• the type of capture technology declared as likely to be chosen (the key variable);• the size/number of the power generating units;• the input fuel for the power units;• decisions about whether the necessary CO 2 processing would be on- or off-site;• ensuring the safe storage of chemicals;• avoiding congestion on-site for safety both during construction and operation; and• future progress in developing the capture technologies, which may reduce the spacerequired for the related equipment.The need to allow for additional space is acknowledged in nearly all existing Capture Readydefinitions. In particular, the IEA GHG Capture Ready Report notes that developers ofCapture Ready plants need to allow “sufficient space and access for the additional facilitiesthat would be required.” 25 The UK CCR Guidance similarly notes that developers need todemonstrate that “sufficient space is available on or near the site to accommodate carboncapture equipment in the future,” 26 by submitting conceptual plans and supporting documents.As mentioned above, the type of capture technology that will likely be deployed in thefuture affects the amount of required space significantly. Exhibit 2-2 highlights the differencein space requirements for a 600 MW coal-based power plant that will either use an aminebasedpost-combustion capture system or an oxy-fuel-based capture system. In particular, apost-combustion capture plant on a supercritical pulverized coal plant (SCPC) requires atleast 3.8 hectares (9.4 acres) for the capture and compression plant, additional flue gascleanup equipment, water treatment, and construction space. 27 In contrast, for an oxy-fuelrecirculation retrofit, only about 2.4 hectares (5.9 acres) is needed (although the overallfootprint of an oxy-fuel power plant is greater than that of an SCPC). The estimate of spacerequirements for an oxy-fuel CO 2 capture system in Exhibit 2-2 is based on U.K. DECC’sstudy on retrofitting supercritical PC plants with oxy-fuel capture systems. 2824 Paragraph 12, page 10 of U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capturereadiness (CCR): A guidance note for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810).London, UK: Author..25 Page ii of International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2007a). CO2 capture ready plants(Report no. 2007/4). Cheltenham, UK: Author.26 U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capture readiness (CCR): A guidancenote for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810). London, UK: Author.27 This does not include space for contractors, area for parts laydown for pre-fabricated parts, and parking vehicles—thiscould amount an additional nine hectares of space.28 Page 85 of U.K. Department of Energy & Climate Change (U.K. DECC). (2009b). Coal-fired advanced supercritical retrofitwith CO2 capture.23 February 2010 24

Chapter 2: Capture Ready Plant DefinitionExhibit 2-2: Space Requirements for CO 2 Capture Plant for a 600 MWSupercritical PC Plant 29 and Oxy-fuel CO 2 Capture SystemSupercritical PC Plant:FacilityCO2 Capture and Compression PlantFGD plant/SCR (if necessary)Water treatment, waste water tank, limestone storage, gypsum dewatering,gypsum silo, stacking tankOxy-fuel CO2 Capture System:Plot Area125m x 125m1 x (100m x 150m) or 1.5 hectare75m x 100mAir separation unit 2 x (80m x 140m)CO2 Compression Plant80m x 15mThe space requirements for a post-combustion capture plant for a NGCC plant would belarger than those of a similar capture plant at a pulverized coal-fired power station, since theflue gas from a natural gas-fired power plant has lower CO 2 molar concentration and ahigher volumetric flue gas flow rate compared with a coal-fired plant with the samegenerating capacity. 30 However, given that a BAU NGCC plant has a smaller footprint than aBAU coal plant, the percentage increase in the required footprint is greater for an NGCCrelative to a coal-based plant. Sufficient space, road access, and appropriate layout design arehigh-priority items for capture readiness, especially since many gas-fired power plants havesmaller capacities and are located closer to load centres.Many industrial facilities currently have less available land area for installation of additionalequipment for capture, so space considerations for a Capture Ready plant could be quiteimportant for these facilities. Industrial facilities’ plot space and costing are highly dependenton the flue gas flow rate, CO 2 concentrations, and the concentration of impurities in theflue gas. Some industrial facilities will be more suitable for a retrofit than others.29 Based on Aurecon’s practical experience and using different modelling tools such as Thermoflex and ASPEN PLUS.30 For example, NGCC has a CO2 molar concentration of 4% compared with 12% in the case of a plant burning black coal.23 February 2010 25

Chapter 2: Capture Ready Plant DefinitionThe amount of space required will also be influenced by the particular choice of plant layout.The layout of a plant’s equipment will depend on the particulars of the chosen plant site, andeach site will need to be designed for CCS retrofitting based on its own merits, land shape,and area restrictions. For example, in a new power plant, one potential location for postcombustioncapture facilities is to be as close as possible to the boiler and turbine house.However, this option may not be available due to land availability and tight layout of otherplant equipmentThere are, however, some general plantdesign and layout considerations for the CCSReady options. Typical power plants are builtin a linear layout (see Exhibit 2-3), with theboiler and auxiliaries in a central location.The boiler delivers steam to the turbine hall,which generates electricity, and a switchyardis near the turbine hall. The emission controlequipment, ID fan, and stack are in the otherdirection from the boiler house. The samedesign applies for multiple units that arereplicated next to each other.Exhibit 2-3: Typical Layout for a600 MW Supercritical PulverisedCoal Power PlantIn contrast, for Capture Ready power plantsa non-linear layout approach may bedesirable, with the main designcharacteristics and plant layout optimised toreduce energy consumption and reduce theoccurrence of high-grade thermal losses. Forexample, the absorber and stripper need tobe close to both the flue gas ducts and theturbine (for bled steam for solventregeneration). To address this situation, theoverall plant layout could be horseshoeshaped(see Exhibit 2-4).As the above plant layout designs indicate, tooptimize operations, space allowance is bestaddressed in the context of plant design, notjust by summing up the footprint of requiredcapture facilities.Source : Aurecon23 February 2010 26

Chapter 2: Capture Ready Plant DefinitionExhibit 2-4: Typical Layout for a 600 MW SupercriticalPulverized Coal Plant with 50% Capture of CO 22.4 Common CCS Ready CriteriaSource: AureconAs indicated in the proposed CCS Ready definition, there are several criteria for definingCCS Ready that are common to all three aspects of CCS (i.e., capture, transport, andstorage). These common criteria are described below with a specific emphasis on issuesrelated to defining Capture Ready plants.23 February 2010 27

Chapter 2: Capture Ready Plant Definition2.4.1 Acceptable Economic CostThe proposed definition notes that technical capability of the capture plant retrofit needs tobe “at an acceptable economic cost.” This term refers to whether the cost of a CCS Readyplant and the eventual CCS retrofit is acceptable under the expected economic conditionswithin a jurisdiction. In other words, if the plant can be converted to CCS only at anastronomical cost, then it cannot for any practical purposes be considered CCS Ready.As mentioned in Chapter 1, this might mean, for example, that a reasonable probabilityexists during the operating life of the plant for it to be retrofitted and operated with CCSat a total cost comparable to the GHG mitigation costs expected to be borne by otherplants in a jurisdiction. “Economically acceptable” could also be defined to mean that thetotal cost of a plant’s products with CCS (for example, X$/kWh) is acceptable to and canbe absorbed by the marketplace. The plant’s total cost for capture, transport, and storagewould include costs for planning, construction capital, and operating costs, including thetime value of money.The proposed definition deliberately does not specify a definite criterion for economicacceptability; as such a definition would vary across jurisdictions. Policymakers andregulators in each jurisdiction would need to decide what would constitute aneconomically feasible plant.A study of upfront costs of a Capture Ready plant—and the subsequent benefits of loweredretrofit costs in the future—is critical to determining the level of acceptability of these costsfor the project developer, policymakers, and the public. High upfront costs, or a very longtime lag between building a Capture Ready plant and retrofitting the plant, may not providesufficient economic incentives for developers to make plants Capture Ready.An assessment of economic feasibility is also considered by several existing sources in theCCS Ready literature. Article 33 of the EU Directive 2009/31/EC notes that the economicfeasibility of retrofitting (for plants more than 300 MWe) needs to be demonstrated beforesuitable space for capture and compression of CO 2 is set aside. The UK CCR Guidance alsorequires applicants to assess the economic barriers for retrofitting CCS technologies. 31Applicants are expected to produce a detailed economic analysis for retrofitting the entireCCS infrastructure (capture, transport, and storage) onto the plant. One method forindicating feasibility, according to the UK CCR Guidance, is to model the total lifetime costof electricity as a function of carbon prices and indicate whether the crossover carbon pricefor the cost of electricity for plants with and without CCS is feasible over the plant’slifetime. 32 If the economic assessment indicates that the CCS retrofit is feasible, then theconsent application can be granted.The cost for any specific plant will vary based on the jurisdiction in which the plant islocated, and will depend heavily on assumptions used for the cost analysis. Details of the31 Paragraph 6, page 8, of U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capturereadiness (CCR): A guidance note for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810).London, UK: Author..32 Page 26 of U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capture readiness (CCR): Aguidance note for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810). London, UK: Author..23 February 2010 28

Chapter 2: Capture Ready Plant Definitionincremental capital cost for several different Capture Ready design options are described inmore detail in Appendix B.In addition to capital cost assessments, the level of effort (human labour) needed to meetthe requirements of a CCS Ready policy in a jurisdiction will also affect the cost of aCapture Ready plant. Exhibit 2-5 provides estimated levels of effort (in units of work-years)that project developers may have to expend to meet CCS Ready requirements. A level ofeffort is provided for each component for a Capture Ready Plant, as introduced in Exhibit 1-4 in Chapter 1. These estimates are tentative, and the specific level of effort will depend onthe content and depth of work performed by a project developer to meet a specified levelof readiness. The range of estimated level of effort shown in Exhibit 2-5 indicates thisvariation. In general, most Capture Ready activities will not take longer than two workyears. It is also important to recognize that the expended effort will not be sequential or ina single time block. It is most likely that the effort will be spread out over several calendaryears, as would the development of any BAU plant. In general, the activities related to thedevelopment of a Capture Ready plant are integral with the overall plant design andengineering. It is likely that much of the work needed to be Capture Ready could beaccomplished in the time it would take for a BAU plant to be designed and approved.Exhibit 2-5: Estimated Work Hours for Capture Ready ActivitiesEstimated Range of Work YearsCapture Ready Activitiesto Complete Activity aPlant Site Selection 0.2 – 0.5Technology Selection 0.5Design for Capture Facilities 1– 2Space Allowance 0.5 – 1Equipment Pre-investment 0.25 – 1Cost Estimate for Capture Facilities 1 – 2Environmental, Safety, and Other Approvals for Capture Facilities 1 – 2Public Awareness and Engagement Related to Eventual Capture Facilities 0.5 – 1Sources for Equipment, Materials, and Services for Capture Facilities 0.1 – 0.5Ongoing Obligations 0.1 – 0.2a Work Years is the total number of years of work required for all staff to complete the activity.Most project developers would consider developing Capture Ready plants to be within theirown purview, as the work involved is within the site boundary of the plant; however,transport and storage readiness will likely involve other entities with ownership rights to thetransport network or storage site. As highlighted in the Considerations and RecommendedPractices, it is expected that a developer will be required to show advancement or readinessin all aspects of CCS in order to get approval of its CCS Ready Plant. In this case, projectdevelopers would also have to consider the timing for being Transport- and Storage Ready,as discussed below in later sections.2.4.2 Environmental, Safety, and Other ApprovalsMost countries have existing regulations that would require a wide variety of permits andother types of approvals at the planning, construction, and operational stages of a CaptureReady plant, as well as for retrofitting the plant with CCS. A CCS retrofit will result in23 February 2010 29

Chapter 2: Capture Ready Plant Definitionadditional impacts to air emissions, water effluent, solid waste generation, and water use dueto the installation and operation of capture equipment. 33, 34 These modifications may requirenew permits or modifications to existing ones. In addition, additional approvals on workersafety, emergency planning, or requirements from right-to-know laws may be required,given that retrofit would result in major plant modifications with resulting storage ofpotentially hazardous chemicals. In order to avoid design features that make obtaining thepermits and approvals very difficult and to reduce the potential delays in obtaining theapprovals, it is important to identify the permits and approvals that would be required in thefuture at the time of the retrofit. This would also reduce a project developer’s financial riskin investing in technologies that may not ultimately be approved and increase the likelihoodof eventual CCS retrofit at the Capture Ready plant.Some of the potential new environmental permits or modification of permits include:• Addition of additional exhaust gas cleanup, such as an electronic precipitator and/or fluegas desulphurization system, which could result in lower emissions of some pollutantssuch as SO 2 ;• Control of NO x emissions from the ammonia slip of the selective catalytic reduction andammonia released by amine-based capture systems; 35• Control of air emissions from leaking of solvents;• Water use permits that may need to be modified to ensure sufficient availability; 36• Potential changes to effluent discharge due to CO 2 capture (e.g., potential introductionof monoethanolamine or other solvents); and• Solid waste handling, including wastes associated with the use of amines or othersorbents, 37 and increases in bottom ash, boiler slag, and fly ash due to increased coal use.The existing literature on CCS Ready does not directly call for the identification ofenvironmental, safety or other approvals. However, the EU Directive notes that projectdevelopers would need to comply with existing EU directives on environment and safety.The UK Guidance requires developers to comply with existing UK laws, such as thePlanning (Hazardous Substances Act) of 1990 and the Planning (Hazardous Substances)Regulations of 1992, which implement EU Directive 96/82/EC. 38 The Guidance requires an33 Intergovernmental Panel on Climate Change (IPCC). (2005b). IPCC Special Report on Carbon Dioxide Capture and Storage:Summary for policymakers. A special report of Working Group III of the Intergovernmental Panel on Climate Change.34 World Resources Institute (WRI). (2008). CCS Guidelines: Guidelines for carbon dioxide capture, transport, and storage.Washington, DC: Author.35 Koornneef, J., Van Keulen, T., Faaij, A. & Turkenburg, W.. (2008). Life Cycle Assessment of a Pulverized Coal PowerPlant with Post-Combustion Capture, Transport and Storage of CO2. International Journal of Greenhouse Gas Control 2, 4,448-467. doi:10.1016/j.ijggc.2008.06.008.36 Water used by a power plant capturing CO2 may be twice that of a traditional plant, due largely to increased coolingneeds. See, for example, U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2008d).Estimating freshwater needs to meet future thermoelectric generation requirements: 2008 update. (DOE/NETL Publicationno. 400/2008/1339).37 Intergovernmental Panel on Climate Change (IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture andStorage. New York, NY: Cambridge University Press.38 Council Directive 96/82/EC is also known as the Seveso II Directive, established to prevent major accidents which involvedangerous substances.23 February 2010 30

Chapter 2: Capture Ready Plant Definitionapplicant to apply for a Hazardous Substances Consent (HSC), if the plant is expected to useand dispose of hazardous substances in future capture facilities. 39 Project developers in theUK are encouraged to discuss plans for capture at an early stage with the local planningauthority to determine if an HSC might be needed.2.4.3 Public Awareness and Engagement ActivitiesPublic awareness and engagement activities are an important component of CCS Readyplants because public opposition to CCS has been shown to delay or result in thecancellation of projects (especially since CCS is still is a relatively unknown technology tothe general public), and early engagement with the public will help identify and alleviatepotential public concerns that can be a barrier for retrofit.Getting the buy-in of the general public may be critical for the success of a CCS Ready plant,as well as the eventual CCS retrofit. While nations differ in the degree to which communityacceptance is sought during and after policy development, experience to date indicates thatcommunity acceptance may be very important for CCS, particularly when CO 2 transportand storage activities will be located in pristine or populated areas. In some areas,communities may have a role in approving projects, or have other means of voicingconcerns, such as lawsuits, protests, or media campaigns.Although CCS is still a relatively unknown technology to the general public, 40 initial opinionson CCS matter as these opinions, once formed, are slow to change. 41 Studies have shownthat public acceptance of CCS increases with exposure to more information, and NGOs aretrusted most as conveyers of this information (industry is trusted least). 42A developer that forges alliances with the NGO community, think tanks, or universities mayhave better chance of gaining public support than one that does not. 43 A recent report fromthe US DOE recommends that public outreach be an integral component of CCS projectmanagement, beginning at the initial planning stages and continuing throughout the lifetimeof the project. 44 The IEA has highlighted the need for early public outreach to addresspotential concerns of local communities, and provide information about technologies andplanned projects, risks of CCS, and what is being done to keep communities safe. 4539 Paragraph 75, pg 28 of U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capture readiness(CCR): A guidance note for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810). London,UK: Author.40 Intergovernmental Panel on Climate Change (IPCC). (2005b). IPCC Special Report on Carbon Dioxide Capture and Storage:Summary for policymakers. A special report of Working Group III of the Intergovernmental Panel on Climate Change.41 Ashworth, P. et al. (2009). An integrated roadmap of communication activities around carbon capture and storage inAustralia and beyond. Energy Procedia, 1, 4749-4756. doi:10.1016/j.egypro.2009.02.300.42 Shackley, S., Reiner, D., Upham, P., deConinck, H., Sigurthorsson, G., & Anderson, J.. (2009). The acceptability of CO2capture and storage (CCS) in Europe: An assessment of the key determining factors: Part 2. The social acceptability of CCSand the wider impacts and repercussions of its implementation. International Journal of Greenhouse Gas Control, 3, 344-356. doi:10.1016/j.ijggc.2008.09.004.43 Acceptance of CO2 Capture and Storage, Economics, Policy and Technology (ACCSEPT) Project. (2007). The ACCSEPTproject: Summary of the main findings and key recommendations (DNV-BRINO912GSIG2007-2078).44 U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2009). Public outreach andeducation for carbon storage projects. (DOE/NETL-2009/1391).45 International Energy Agency (IEA). (2009a). Technology roadmap: Carbon capture and storage. Paris, France: Author.23 February 2010 31

Chapter 2: Capture Ready Plant DefinitionA number of proposed CCS projects have already encountered local opposition, causing orcontributing to the cancellation of some projects. For example, Vattenfall’s SchwartzePumpe project in Spremburg, Germany, was intended to annually capture and store up toapproximately 100,000 metric tons of CO 2 emissions from a coal-fired plant. Despite afavourable Environmental Impact Assessment, there was concern from local residents thatthe captured CO 2 would escape and harm public health. Due partially to these concerns, aswell as opposition to CCS in general by NGOs, this project was abandoned. 46The $92.8 million Midwest Regional Carbon Sequestration Project in Greenville, Ohio, USA,was intended to capture and store CO 2 emissions from an ethanol plant. Opposition to theproject by local officials, state representatives, and at least one citizens’ group was based onfears about diminishing property values, that CO 2 injections could trigger seismic activity,and that more research was needed. These concerns, in addition to other businessconsiderations, contributed to the cancellation of this project. 47The Barendrecht CCS Project in The Netherlands intends to capture and store CO 2 from agasification hydrogen plant at a petroleum refinery. Local residents and have expressedconcerns about property values and public safety. The Barendrecht city council hasrequested a halt to the project, although plans are still underway. 48Given these concerns, governments and NGOs are beginning to outline recommendationsfor public engagement for CCS projects. Some of these recommendations include: 49, 50 , 51• Need for policies that require early communication with the public to address concernsby clearly communicating any risks, and raising awareness of positive factors such as jobcreation, stimulus to the local economy, and decreases in local air pollution;• Project developers need to build and maintain relationships with communities, with thisengagement happening at each stage of the project, beginning with the planning stage;• The public should have access to information about the project in local languages; and• Local communities should have the opportunity to raise any concerns, and have thoseconcerns addressed in a timely manner.2.4.4 Equipment Sources, Materials, and Services for Future Retrofit andCapture OperationsEquipment vendors and construction and operation service providers play important rolesin getting CCS-related facilities built and put into operation. By identifying sources for46 Slavin, T., & Alok, J.. (2009). Not under our backyard, say Germans, in blow to CO2 plants; Alok, J.. (2008). World's firstcarbon capture pilot fires up clean-coal advocates.47 Associated Press. (2009). Ohio carbon dioxide underground project abandoned; Recharge. (2009). Midwest groupcancels Ohio CCS project despite DOE Funding; Sutherly, B.. (2009). Greenville carbon dioxide injection plan abandoned.48 Pals, F.. (2009). Barendrechters stand up to Shell’s plan to bury CO2.49 U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2009). Public outreach andeducation for carbon storage projects. (DOE/NETL-2009/1391).50 World Resources Institute (WRI). (2009). Guidelines for community engagement regarding carbon dioxide capture andstorage (CCS) projects. August 2009 draft for stakeholder review.51 Bellona Europa. (2009). Guidelines for public consultation and participation in CCS projects. Brussels, Belgium: Author.23 February 2010 32

Chapter 2: Capture Ready Plant Definitionequipment, materials, and services, the technical feasibility of the CCS retrofit can be betterdemonstrated while also minimizing delays in obtaining such equipment and services at thetime of retrofit. It can also help reduce costs, promote the sharing of knowledge, improvecommunication, speed the deployment of technologies, and assist with financial burdens.The results of a survey conducted by Global CCS Institute found that obtaining contractualagreements for CCS can be time consuming. 52 Prior preparations by indentifying sources andeven obtaining non-binding letters of intent or contingency contracts will reduce the risk ofconstruction delays upon the need for eventual CCS, and reduce the risk of plants beingplanned with capture technology but no feasible options for CO 2 transport and storage.The implementation and testing of large-scale CCS will involve a number of participants withexpertise in various areas and stages of technology deployment. The success of a projectwill depend on the selection of knowledgeable, innovative, reliable, and competent partnersto assist with the planning and implementation. Thus, it is important to identify partners thatcan help in choosing the best methodology given a plant’s characteristics, and, once thecapture methodology is chosen, can provide the project developer with the necessaryequipment and materials such as filters, boilers, solvents, membranes and sorbents,gasification reactors, and water-gas-shift reactors. 53Global CCS Institute, US DOE/NETL, 54 and MIT 55 have prepared comprehensive lists ofCO 2 capture projects across the world, by region and capture technology, along with thecontributing partners (such as coal, electric, chemical, and engineering companies, as well asthe government). These lists provide possible vendors and partners for CCS projects. Thevendors and service providers will be different for each country, and perhaps even withindifferent regions of a country.2.4.5 Maintaining Capture ReadinessA thorough assessment of a CCS Ready plant and its eventual retrofit plan cannot bedeemed completed or sufficient by undertaking only a one-time fulfilment of all the aboveelements and their relevant requirements. Regular assessments of a plant’s Capture Readystatus are important to adapt projects to foreseeable changes such as new technicaldevelopments, additional costs, and delays. Since deployment of CCS technology takes timeand effort, it is important to maintain the ability to deploy CCS as soon as possible whenmandated or when technology permits.By being Capture Ready and maintaining this status, barriers to CCS deployment furtheralong the timeframe can be removed. For example, an applicant can ensure that:52 Global CCS Institute. (2009a). Strategic analysis of the global status of carbon capture and storage. Report 1: Status ofcarbon capture and storage projects globally (Final Report). Canberra ACT, Australia: Author.53 Special filters and thermo-resistant materials and equipment, especially for full-scale industrial deployment of carboncapture technologies. Costs of capture, fixed and variable, may be reduced through the use of special membranes andsorbents, with tailored filtering properties, still at the laboratory stage of development. With funding from the US DOE, theNETL has developed ionic liquid membranes that surpass polymers in terms of CO2 selectivity and permeability at elevatedtemperatures for pre-combustion applications. The ability to gain access to this technology implies not only a reduction incost, but also a quicker payback period through an accelerated schedule of CCS deployment.54U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2010). Carbon sequestration:NETL carbon capture and storage database.55 Massachusetts Institute of Technology (MIT). (2010). Carbon dioxide capture and storage project database.23 February 2010 33

Chapter 2: Capture Ready Plant Definition• New laws or technical developments do not make selected capture technologiesredundant or unviable;• Economic scenarios and considerations do not prevent implementation of identifiedtechnology, or a viable lower-cost methodology is identified whenever possible;• Selected capture technology is still relevant and valid given plant specifics, and no majormodifications have been made that would make it inapplicable;• Space and capacity needs around the plant for retrofitting and other infrastructuraldevelopments are still relevant based on technical developments;• Equipment, environmental, safety, and other approvals and permits for eventual CCShave not changed—and if they have changed, revised necessary approvals have beenidentified;• New approvals or permits for maintenance of status are obtained or renewed asnecessary;• Business relationships and agreements with suppliers and purchasers remain sound andare furthered if necessary; and• Public opposition remains absent or minimal, and ongoing public engagement preventsany barriers though public resistance.For example, the UK CCR Guidance requires all approved applicants to present periodicreports after the initial assessment to confirm that all the technical requirements are still inorder for CCS deployment of a plan/facility. If an applicant defaults on capture readinessafter being approved—for example, by not having enough land available for the CO 2 captureequipment—the applicant will be considered in breach of the consent and may be subject tolegal action. This directive also requires applicants to “retain an appropriate degree ofcontrol over the ownership and use of the additional space on or near the site set aside forthe carbon capture equipment” in order to prevent any barriers to retrofitting, and also topresent periodic compliance reports. 56Filing periodic reports (e.g., every year or once every two years) helps to ensure that theplant remains CCS Ready, particularly in situations where the plant changes ownership orthe organizational structure of the plant’s owner changes. Although the developer incurs acost to file periodic reports, reporting can help the developer assess whetherimplementation of its CCS Ready plan is still feasible. This type of periodic review will alsoreduce the risk that investments are wasted (e.g., ensuring that suppliers of commercial CO 2transport are still in business). Recordkeeping and reporting provide a good indication ofcapture readiness to the government and assure it of a plant’s ability to become CaptureReady if legislation makes CCS mandatory.2.5 RecommendationsGovernments can cooperate with industry to provide technical information for capturetechnologies, their applicability, performance and costs. This information could also include56 Page 30 of U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capture readiness (CCR): Aguidance note for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810). London, UK: Author.23 February 2010 34

Chapter 2: Capture Ready Plant Definitionsupplier lists, bibliographies, case studies, and engineering software. As capture technologiesevolve over time, this information could be updated and revised.Another point of cooperation for government and industry could be to fund capture R&Dand demonstration plants to improve capture technologies and to provide more reliableperformance and cost data. This funding be may necessary to help build knowledge andprovide accessible data to use in assessing relevant technologies to be Capture Ready whilethe gap between the cost of CCS and the price of carbon is closing. Government andindustry funding and resources may also contribute to regional geologic prospectivity studiesand planning efforts for CO 2 pipeline networks to aid project developers in plant sitingdecisions. (See Chapters 3 and 4 for more information on prospectivity studies and CO 2pipeline networks.)In addition to working with industry on the above points, governments can review whatenvironmental and safety laws might be applicable to capture retrofits, and provideguidelines to project developers. The benefits in doing this would include:• Reduced delays due to permitting and compliance;• Potentially reduced burden for project developers;• Increased confidence about the safety of plants that are retrofitted with capturetechnologies; and• Assurance of limited environmental impacts.Because there is limited industry experience with capturing CO 2 , training and capacitybuilding programs offered by schools, professional societies, and private companies can trainengineers to do Capture Ready and CCS Ready studies. Such programs would acceleratethe spread of knowledge and information about capture technologies and being CaptureReady. Governments can also provide for training of regulators on the technical aspects ofCCS Ready filings. This would improve the quality of the oversight and expedite the processof reviewing applications and reports when CCS Ready regulations are in place.23 February 2010 35

Chapter 3: Transport Ready Plant Definition3. Transport Ready Plant DefinitionExtensive CO 2 transportation (mostly pipeline) networks will be required on all continents iflarge numbers of CCS facilities are built over the next several decades. The design andconstruction of these CO 2 transport networks will take many years, and significant lead timewill be needed to plan a CCS Ready transportation infrastructure.3.1 Transport Methods and DesignEnvironmental, safety, and other requirements and factors for CO 2 transport differ bytransport method. Identifying the transport method sets the stage for the othercomponents in demonstrating readiness, and is a requirement consistent with the UK CCRGuidance that calls for applicants to specify which transport options are considered themost suitable for their proposed development.Commercial-scale transportation of CO 2 is expected to occur largely by means of land andmarine pipelines, although road tanker trucks, rail tankers, and marine tankers could be usedas well. CO 2 is typically compressed in transport, usually to a supercritical (liquid-likedensity) state. 57 Transportation of compressed and liquefied gas is a mature technology, andin most cases existing commercial technologies can be adopted to handle CO 2 transport.Underground and underwater pipelines are well established for CO 2 transportation. Landpipelines are the predominant means of CO 2 transport for enhanced oil recovery (EOR).The US and Canada are two early adopters of this technology. For example, in the US, morethan 5,800 km (~3,600 miles) of CO 2 pipelines transport more than 40 million metric tonsof CO 2 per year from natural and anthropogenic sources, largely for the purposes of EOR. 58Minimum composition specifications (including low nitrogen, hydrogen sulphide, andmoisture content) are specified for these pipelines to both guard against corrosion and meetEOR requirements. Looser specifications (e.g., for nitrogen) could be tolerated if CO 2transportation feasibility alone rather than EOR requirements were the controlling factor. Itis technically feasible to move a wetter CO 2 through corrosion-resistant line pipe (e.g.,stainless steel or polymer coated), albeit at a much higher cost.Road and rail tankers are perhaps less suitable for commercial CO 2 transportation, excepton a small scale given that they are uneconomical compared to marine tankers and pipelinesfor constant larger volumes. Marine tankers are an established and economical technologyfor transporting gases, including liquefied petroleum gas (LPG) and liquefied natural gas(LNG), and could be used to transport CO 2 to storage sites.CO 2 Transport Corridor SelectionOne of the main challenges for CO 2 transportation is a careful consideration of routing toreach suitable geological storage areas. Identifying feasible corridors for pipeline routes,including the potential necessity to traverse waterways, roads, other pipelines, or theshoreline, will reduce barriers and delays at the time of CCS retrofit. If the planned57 The volume of compressed gas can be further reduced by solidification or hydration. Solidification requires a higherenergy input, which would result in higher costs.58 ICF International. (2009). Developing a pipeline infrastructure for CO2 capture and storage: Issues and challenges. Reportprepared for INGAA Foundation.23 February 2010 36

Chapter 3: Transport Ready Plant Definitiontransport method includes shipping, then identified potential routes, feasible ports, andpotential restrictions on navigation will reduce barriers and delays.One of the main challenges for CO 2 pipelines is the careful consideration of routing from aCCS Ready plant to suitable geological storage areas. Topographical considerations whencrossing mountains, deserts, rivers, and streams (uneven seabed and very deep or shallowwater for offshore pipelines) are important, as are the nature and stability of the ground orseabed and accommodation of existing infrastructure (e.g., roads, rail lines, shipping lanes). 59Considerations for shipping include identifying ports where loading and unloading of CO 2onto tankers would be allowed and accommodated.The UK CCR Guidance gives an illustrative example on how a pipeline corridor could bedetermined. Applicants are to identify an initial route for the pipeline within a 1km corridorfor the first 10 km of pipeline from the plant, and identify major pre-existing obstacles. Therationale behind this guideline is to ensure that there is flexibility for the final route, in theevent that subsequent development may interfere with the proposed route. The Guidancethereafter recommends that applicants identify a 10 km corridor to the point(s) on thecoast where the pipeline is expected to go offshore or be transported by ships. 60Design of Transport FacilitiesThe design of the transport facilities/network sets the stage for meeting the otherrequirements for a CO 2 Transport Ready plant (in particular, costs, approvals, types ofpublic awareness and engagement initiatives, and sources for equipment). CO 2 pipelinesoperate in the liquid and supercritical CO 2 phases at ambient temperatures and highpressure. The design of a CO 2 pipeline is similar to that of a natural gas pipeline, except thathigher pressures must be accommodated, often with thicker pipe. The added thicknessrequires more steel in the line pipe, adds transportation costs to move the line pipe to theconstruction site, and adds to the cost of welding the line pipe. 61CO 2 pipelines differ from natural gas pipelines in that they require CO 2 -resistant elastomersaround valves and other fittings, and their construction includes fracture arrestorsapproximately every 300 meters to reduce fracture propagation. 61 In addition, a CO 2pipeline is moving a supercritical fluid (15.2 MPa) that is pumped, as opposed to beingcompressed at booster stations. 61 The mechanical design (e.g., operating, valves, pumps,compressors, seals) and construction of pressurized CO 2 pipelines is well understood andthere are no significant technology challenges. 59Design of liquid gas transport ships is also well understood, and follows the the InternationalGas Carrier Code adopted by the International Maritime Organization. The current fleet ofCO 2 -transporting ships consists of small, semi-refrigerated type tankers used to transportliquefied food-grade CO 2 ; however, the same types of yards that construct LPG and LNG59 Intergovernmental Panel on Climate Change (IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture andStorage. New York, NY: Cambridge University Press.60 Paragraph 61, page 23 of U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capturereadiness (CCR): A guidance note for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810).London, UK: Author.61 ICF International. (2009). Developing a pipeline infrastructure for CO2 capture and storage: Issues and challenges. Reportprepared for INGAA Foundation.23 February 2010 37

Chapter 3: Transport Ready Plant Definitionships can carry out the construction of larger, low-temperature and semi-refrigeratedmarine tankers suitable for mass CO 2 transportation. 623.2 Rights of Way and Conflicting Land UsesIdentifying rights of way and conflicting land uses will guide the identification of feasibletransport routes and alternatives, enable early identification of potential barriers to securingrights, and minimize delays at the time of retrofit. This information can be used to assess thefeasibility of a transport plan for linking the future capture plant with a storage site.Obtaining the right of way to site a CO 2 pipeline is an essential step before construction.Acquiring this right could involve the direct purchase of land, though more likely it would beobtained through leases or rights of way. Obtaining rights could require substantial andlengthy negotiations. Alternatively, project developers could consider existing right of waycorridors (if available), which may expedite the siting process. Rights of way will likely bemore difficult to acquire in highly populated or pristine areas. Steps for acquiring will dependon international (in the case of a pipeline crossing national boundaries), national, andsubnational laws.National governments have various laws around the power of eminent domain (also calledcompulsory purchase or acquisition), giving the government the right to seize land or grantuse of private property for public use, often with reasonable compensation to the landowner. For example, the US government has provided natural gas pipelines with eminentdomain authority pursuant to a certification process under the Natural Gas Act. 63 However,currently eminent domain authority is rare for CO 2 pipelines, which may make siting CO 2pipelines more challenging than siting a natural gas pipeline. The US states of Texas and NewMexico are examples of areas that do have eminent domain statues for CO 2 pipelines. 633.3 Common CCS Ready CriteriaThe common criteria applicable to defining Transport Ready plants are described below.3.3.1 Acceptable Economic CostsThe overall economic assessment of a CCS Ready plant, as well as its eventual retrofit,requires an estimate of the cost for making the plant Transport Ready. 64 As with CaptureReady plants, high upfront costs, or a very long time lag between building a Transport Readyplant and the eventual implementation of a CO 2 transport infrastructure, may not providesufficient economic incentives for developers to make plants Transport Ready.Reference examples for first-of-a-kind total CCS costs analysis prepared for the Global CCSInstitute range from $44 to $90 per metric ton captured, transported, and stored for large62 Intergovernmental Panel on Climate Change (IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture andStorage. New York, NY: Cambridge University Press.63 Carnegie Mellon University CCSReg Project, Department of Engineering and Public Policy (CMU). (2009). Carbon captureand sequestration: Framing issues for regulation (CCSReg Interim Report). Pittsburgh, PA: Author.64 Note that the CCS Ready plant developer may not be same as the developer of the CO2 transportation network. The CCSReady developer will thus need to work with potential vendors of such services to obtain cost estimates for transport facilities.23 February 2010 38

Chapter 3: Transport Ready Plant Definitioncoal-fired power plants of various technologies. Of these costs, approximately 7% to 12% isfor transportation, using a reference-case assumption of 250 km transport distance. 65These transport costs depend on the length of the pipeline required, CO 2 throughput rates,and the overall cost of labour and steel in each jurisdiction. As noted above, CO 2 pipelinesrequire thicker pipes (compared with natural gas pipelines) due to the high pressure of thecompressible fluid involved.Exhibit 3-1 illustrates the cost ($/metric ton) of a 300km pipeline section in Canada atvarious capacity rates (metric tons/day) 66 . Volumes over 5 million metric tons/year on a 300-km route can achieve costs of less than CA$20/metric ton of CO 2 transported. 66Exhibit 3-1: CO 2 Pipeline System Costs as a Function of Pipe DiameterSource: Canadian Energy Pipeline AssociationA recent study 67 suggested that a potential “high case” for CCS implementation in NorthAmerica would envision transporting 1,000 million metric tons of CO 2 per year by 2030.The capital cost of constructing the CO 2 pipelines for such a “high case” range fromUS$32.2 billion to US$65.6 billion by 2030. 67 Thus, the cost of building pipeline networks fortransporting CO 2 may be significant.The analytical costs of building Transport Ready plants may be on the order of $1 million to$2 million for a large coal-fired power plant, exclusive of any rights of way that may need to65 Global CCS Institute. (2009b). Strategic analysis of the global status of carbon capture and storage. Report 2: Economicassessment of carbon capture and storage technologies.66 Alberta Carbon Capture and Storage Development Council. (2009). Accelerating carbon capture and storageimplementation in Alberta (Final Report). Edmonton, Alberta: Author.67 ICF International. (2009). Developing a pipeline infrastructure for CO2 capture and storage: Issues and challenges. Reportprepared for INGAA Foundation.23 February 2010 39

Chapter 3: Transport Ready Plant Definitionbe optioned or leased. (See Exhibit 3-2 for ranges of estimated level of work effort.) Rightsof way in the US range in costs from $30,000 to $150,000 per km for natural gas pipelines,according to filings at the US Federal Energy Regulatory Commission (FERC). Options torights of way (as opposed to the rights of way themselves) could be obtained at a fraction ofthose costs.The EU Directive 2009/31/EC requires applicants to carry out an assessment of theeconomic feasibility of both retrofitting and transport, including taking into account theanticipated costs of CO 2 allowances in the European Community. 68The specific time and level of effort required to meet Transport Ready requirements is verydependent upon the nature, length, and route of the pipeline or pipeline network;environmental, land-owner, and other community matters along the route that the pipelineis to traverse; and the potential for extended hearings in response to stakeholder concerns.The geography and geology of the right of way can also influence the time taken to secureapprovals and to construct the pipeline (although this is likely to be similar to siting ofnatural gas pipelines). Exhibit 3-2 provides an estimate of the required level of effort forTransport Ready activities.Exhibit 3-2: Estimated Level of Effort for Transport Ready ActivitiesTransport Ready ActivitiesEstimated Range of WorkYears to Complete Activity aTransport Corridor Selection 1.00 to 2.00Identifying and Resolving Conflicting Uses and Rights 0.25 to 0.75Design for Transport Facilities 0.50 to 1.00Cost Estimate for Transport Facilities 0.25 to 0.75Environmental, Safety, and Other Approvals for Transportation 0.50 to 1.00Public Awareness and Engagement Related to CO2 Transportation 0.25 to 1.00Sources for Equipment, Materials, and Services for Transport Facilities 0.08 to 0.25Ongoing Obligations (per year) 0.25 to 0.50a Work Years is the total number of individual years of work required for all staff to complete the activity. At labour costs of$130 per hour plus a $400,000 allowance for surveys and research fees, these efforts will total approximately US$ 1 millionto US$2 million in costs. Source: ICF International.In jurisdictions where there are no existing CO 2 pipelines or other transportation systems,the initial pipelines will likely be point-to-point routes. 69 These initial pipelines will likely bemore expensive than the later ones, which may connect to a more cost-effective pipelinenetwork. On the other hand, connecting to network may also add necessary contractualagreements for pipeline access and regulatory approvals that could take additional time andadd more layers of complexity.68 Paragraph 47, Pg. L140/119 of European Parliament and the Council of the European Union. (2009). Directive 2009/31/EC ofthe European Parliament and of the Council of the European Union. Official Journal of the European Union, 140.69 Paragraph 49, pg. 20 of U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capturereadiness (CCR): A guidance note for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810).London, UK: Author.23 February 2010 40

3.3.2 Environmental, Safety, and Other ApprovalsChapter 3: Transport Ready Plant DefinitionWith the range of potential approvals and permits required to construct and operatepipelines, CCS Ready requirements include evaluating future approvals. Considerationshould be given to both international and national laws and standards. Addressing theseapprovals as part of CCS Ready will help to ensure that transport sites will be able obtain allneeded approvals, as well as allocate enough time for the permitting processes.The issue of CO 2 pipeline safety, and the associated approvals, will become increasinglyimportant as CCS Ready regulations and guidelines are developed that will govern thedesign of these networks. Pipelines in proximity to populated areas will likely be subject toincreased scrutiny. The IPCC compared the failure incidence rates for CO 2 pipelines with oiland gas pipelines and found the rates to be similar (see Exhibit 3-3). The causes for CO 2pipeline incidents include equipment failure, corrosion, and outside force. 70 The IPCC foundthat the risks associated with CO 2 pipelines are similar to oil and natural gas pipeline risks,and these risks are well understood and can be successfully managed. 71Exhibit 3-3: Failure Incidence Rates for Oil and Gas PipelinesRegion/systemEuropean gas pipelines, 1972-2002(European Gas Pipeline Incident DataGroup, 2002)Western European oil pipelines, 1997-2002 (CONCAWE, 2002)US onshore gas pipelines, 1986-2002(CONCAWE, 2002)US CO2 pipelines, 1990-2002 (Galeand Davidson, 2002)Failure Frequency(failures per year per km)0.0002(all pipelines)0.00005(>0.5 m diameter)CommentsAll unintentional releases for gas pipelinesystems over 1.5 MPa0.0003 All incidents that resulted in injury, death orproperty loss >US$ 50,0000.00011 All incidents that resulted in injury, death orproperty loss >US$ 50,0000.00032 10 incidences, no injuries or death, totalproperty damage US$ 469,000Source: IPCC, compiled from sources in parentheses.The IPCC, the US Department of Transportation, and NETL have noted that the integrity ofthe pipeline can be compromised due to the presence of contaminants in the CO 2 pipeline,such as water, H 2 S, methane, and oxygen. Water can react with CO 2 or H 2 S to formcarbonic or sulphuric acid, respectively, both of which can corrode and fracture a pipeline.Under certain conditions, hydrates (solid ice-like crystals) can form and plug the pipeline.The presence of oxygen can result in the formation of bacterial colonies, which can interferewith injection.Leaking pipelines can present dangers to human health and safety. CO 2 is an asphyxiant andcan be dangerous above levels of 5,000 ppm, 72 which could occur if leaking CO 2 accumulates70 World Resources Institute (WRI). (2008). CCS Guidelines: Guidelines for carbon dioxide capture, transport, and storage.Washington, DC: Author.71 Intergovernmental Panel on Climate Change (IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture andStorage. New York, NY: Cambridge University Press.72 5,000 ppm is the maximum permissible exposure limit in the United States. See U.S. Department of Labor, OccupationalSafety & Health Administration (U.S. DOL-OSHA). (2007). Chemical sampling information: Carbon dioxide.23 February 2010 41

Chapter 3: Transport Ready Plant Definitionin an enclosed space or a low lying area with little air mixing. However, these conditionsmay be rare. H 2 S is immediately dangerous to life or health at concentrations of only100ppm. 73 In the risk assessment for FutureGen, the US DOE cited exposure to pipelineH 2 S releases as one of the main concerns with respect to the health and safety of workersand residents. 74There are also concerns related to transport by ships and tankers, including collision,foundering, stranding, and fire. Safety risks include asphyxiation in the event of a rupturecoupled with atmospheric conditions that result in little air mixing. 75Regulations and permits vary across the international community. Pipeline construction andoperation will be subject to regulatory approval and oversight, and will often includeapproval of a safety plan, monitoring and inspection procedures, and emergency responseplans. Transport of CO 2 across national borders, offshore pipelines, or ships may be subjectto both international and national environmental and other laws. 75In the US, the Department of Transportation’s Pipeline and Hazardous Materials SafetyAdministration (PHMSA) has primary authority to regulate interstate CO 2 pipelines, regulatingthe design, construction, operation, maintenance, and emergency response for pipelines. TheOffice of Pipeline Safety, within PHMSA, sets minimum safety standards for pipelinestransporting hazardous liquids, including CO 2 (CFR 49 Part 195). Some US states areauthorized to administer these regulations. The Occupational Safety and HealthAdministration sets standards for handling CO 2 , which apply in the event of a leak or rupture.To date, no country has established specific composition requirements for transport andgeological storage of CO 2 . However, due to concerns about pipeline integrity as well as CO 2end use, transporters of CO 2 may have certain requirements. Exhibit 3-4 shows industrystandards for CO 2 streams being transported by pipeline and injected into the Permian Basinfor enhance oil recovery.73 According to the National Institute for Occupational Safety and Health. Cited in Intergovernmental Panel on ClimateChange (IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture and Storage. New York, NY: CambridgeUniversity Press.74 U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2007b). FutureGen project finalenvironmental impact statement (Publication no. DOE/EIS-0394).75 Intergovernmental Panel on Climate Change (IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture andStorage. New York, NY: Cambridge University Press.23 February 2010 42

Chapter 3: Transport Ready Plant DefinitionExhibit 3-4: Illustrative Example of Requirementsfor Commercial Transportation of CO 2Type ofLimitLimit(Permian Basin)ConstituentReason for ConcernCO2 Min 95% Minimum miscible pressure for EORNitrogen Max 4% Minimum miscible pressure for EORHydrocarbons Max 5% Minimum miscible pressure for EORWater Max 30 lbs/MMcf CorrosionOxygen Max 10 ppm CorrosionH2S Max 10-200 ppm SafetyGlycol Max 0.3 gal/MMcf OperationsTemperature Max 120 deg F MaterialsSource: INGAA Foundation, 2009As an example of the need to address environmental and safety approvals, the UK CCSReady Regulations recommend applicants:• “confirm that no unavoidable safety obstacles exist within the identified route corridor,on the basis of current knowledge about the hazards posed by CO 2 transport;”• “suggest methods by which the environmental impacts on an unavoidable designated sitewithin the route corridor could be mitigated on the basis of current knowledge at thetime of the feasibility study.”• “inform the local planning authorities in the areas surrounding the power station of thelikelihood that a CO 2 pipeline will be needed in the future to ensure this is taken intoaccount in local planning decisions”• “treat CO 2 as a ‘Dangerous Fluid’ under the Pipeline Safety Regulations (PSR) whenconsidering CO 2 pipeline design and route at the CCR stage. Applicants are advised tocheck with Health and Safety Executive (HSE) for updates to this guidance, applying aprecautionary principle that classifies CO 2 as if it were a “Dangerous Fluid” under thePSR when considering CO 2 pipeline design.”• [in the event CO 2 will be shipped] ...“consider and demonstrate there are no barriers totheir complying with all the relevant safety factors involved in loading a dangerous fluidonto a ship. The Marine and Coastguard Agency are responsible for the safety regulationon ships and their regulations should be consulted. Harbour orders are likely to berequired for the construction of facilities to load CO 2 onboard ships.” 7676 Paragraphs 59 and 60, pg. 22; paragraph 61, page 23; and paragraph 89, pg. 31 of U.K. Department of Energy andClimate Change (U.K. DECC). (2009a). Carbon capture readiness (CCR): A guidance note for Section 36 Electricity Act1989 consent applications (Publication no. URN 09D/810). London, UK: Author.23 February 2010 43

Chapter 3: Transport Ready Plant Definition3.3.3 Public Awareness and Engagement ActivitiesPublic awareness and engagement is deemed an important suggested component of CCSReady due to the following:• Public reaction to a CCS pipeline may be relatively unknown. Engaging the public earlyon will assist in identifying potential future barriers to CO 2 transport routes;• Public opposition to CCS has been shown to delay or result in the cancellation ofprojects; and• Community concerns can potentially be alleviated through transparent, two-wayengagement.The public may have concerns about the location and safety of CO 2 transport pipelines. Inparticular, residents near proposed pipeline routes may have concerns about both safetyand potential impacts to their property value. Project developers may need to engagedirectly with landowners to secure rights of way for a pipeline. In its report on publicoutreach and education for carbon storage projects, NETL advises that project developersidentify residents along potential transportation routes, and recommends informing themthat CO 2 pipelines are a mature and safe technology. 77 If there are plans to load CO 2 ontotankers at shipping terminals, local residents may have concerns about safety. See Section2.4.3 for a more detailed discussion of public awareness issues and recommendations.3.3.4 Equipment Sources, Materials, and Services for Future Retrofit andCapture OperationsIdentification of sources for equipment, materials, and services is deemed an importantcomponent of CCS Ready as it:• More fully demonstrates the technical feasibility of the CCS plan;• Minimizes delays in obtaining such equipment and services at the time of retrofit; and• Reduces the risk of plants being planned with capture technology but no feasible optionsfor CO 2 transport and storage.In particular, a future CCS retrofit will likely require contracting with a company toconstruct and/or operate a CO 2 pipeline. As part of the process for CCS, projectdevelopers will identify which companies provide this service, and whether they operate inthe region or country(s) through which the pipeline will be built. Consequently, identifyingthe companies as part of CCS Ready will reduce delays and decrease the risk that transportis infeasible.Industry associations such as International Pipeline and Offshore Contractors 78 can providelists of contractors and in which regions they operate. Other services such as WorldPipe 79can also provide information about companies that build and operate pipelines. Global CCS77 U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2009). Public outreach andeducation for carbon storage projects. (DOE/NETL-2009/1391).78 International Pipeline & Offshore Contractors Association (IPLOCA). (2010). Member list. Retrieved from IPLOCA’sMembership Centre website.79 WorldPipe. (2010). Current subscription types. Retrieved from WorldPipe Subscription Types website.23 February 2010 44

Chapter 3: Transport Ready Plant DefinitionInstitute, US DOE/NETL, MIT, and IEAGHG have prepared lists of identified CO 2 captureprojects across the world, which can be used to identify possible vendors and partners forCCS projects. 80 Exhibit 3-5 lists the types of equipment for consideration by developers thatwish to construct their own CO 2 transport pipeline.Exhibit 3-5: Key Equipment for CO 2 Transport Pipeline• Line Pipe• Valves• Compressors• Booster pumps• Pig launchers and receivers• Batching stations and instrumentation• Metering stations• Supervisory Control and Data Acquisition (SCADA)systemsSource: WRI 81Early consideration of the companies and infrastructure (e.g., a CO 2 trunk line) that areavailable will help companies determine which type of commercial arrangement they mightneed. Options may include a private contract with a single carrier, aligning with other plantoperators and storage facilities to contract with a pipeline company that will build andoperate the pipeline, or potentially working with government cooperation.As discussed in Section 2.4.4, identifying partners in advance will provide a variety ofbenefits, including promoting acquisition of business procurement agreements, buildingrelationships, promoting knowledge sharing, and minimizing delays in obtaining equipmentand services at the time of retrofit.3.3.5 Maintaining Transport ReadinessAs mentioned in section 2.4.5, a CCS deployment plan requires regular assessments of aplant’s transport readiness status. Future barriers to CCS deployment can be addressed bybeing Transport Ready and maintaining this status. Obligations for transport readinessinclude ensuring that:• Economic development and land use changes do not prevent use of previously identifiedroutes and modes of transport;• Changes to environmental and safety regulations do not complicate plans to transportCO 2 ;• Cheaper and safer available modes of transport are identified when possible;• Selected transport technology is still relevant and valid given plant specifics, and nomajor modifications have been made that would make it inapplicable;80 References include:– Global CCS Institute. (2009a). Strategic analysis of the global status of carbon capture and storage. Report 1: Status ofcarbon capture and storage projects globally (Final Report). Canberra ACT, Australia: Author.– U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2010). Carbon sequestration:NETL carbon capture and storage database.– Massachusetts Institute of Technology (MIT). (2010). Carbon dioxide capture and storage project database.– International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (n.d.) R, D&D projects database.81 World Resources Institute (WRI). (2008). CCS Guidelines: Guidelines for carbon dioxide capture, transport, and storage.Washington, DC: Author.23 February 2010 45

Chapter 3: Transport Ready Plant Definition• Space needs around the plant for retrofitting of pipes and other infrastructuraldevelopment for ease of transport are still relevant based on technical and landdevelopments;• New approvals or permits for maintenance of transport readiness are obtained orrenewed as necessary;• Public engagement continues, and concerns of the community are addressed; and• Strong business relationships with transport equipment and service providers aremaintained.With the potential for significant increases in CO 2 transport, regulatory agencies arebeginning to reconsider existing regulations for CO 2 transport. For example, the UK HSE isconsidering the hazards of and standards for the conveyance of liquid, dense phase, andsupercritical CO 2 in pipelines, and will develop CO 2 classifications and pipeline safetyguidelines accordingly. 82 Key to maintaining transport readiness will be monitoring changesto regulations and best practice guidance.CCS Ready can be maintained by regular assessment of the following transport-relevantcriteria, and adapting CO 2 transportation plans as needed:• Project cost and timing considerations;• Technical developments with respect to viability, costs, and capacity needs;• Regulatory framework pertaining to technical, environmental, route development, andhealth and safety requirements;• Public opposition and continuous engagement; and• Procurement sources and development of business relationships.3.4 RecommendationsWide deployment of CCS will likely require a transport regulatory authority to approvepipeline construction and to oversee commercial practices and terms. As the CO 2 pipelineinfrastructure evolves, regulatory policies will not only facilitate rights-of-way negotiationsbut also help provide assurance to pipeline developers for infrastructural developmentnecessary for CO 2 transport. 83Jurisdictions may wish to clearly designate a commercial regulatory body for CO 2 pipelines(either with existing regulatory agencies or a separate agency). For example, in the US,there is no national commercial regulatory body for CO 2 pipelines, although the US FederalUS FERC regulates rates on interstate and gas pipelines. The composition of the transportedCO 2 and the construction and operation of the CO 2 pipelines and other transport methodswill also have to be regulated in some manner to ensure public safety and provide for easiertranshipments of CO 2 among various pipeline and other transport systems. It is also possible82 Paragraphs 83 and 84, pg. 30 of U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capturereadiness (CCR): A guidance note for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810).London, UK: Author.83 Carnegie Mellon University CCSReg Project, Department of Engineering and Public Policy (CMU). (2009). Carboncapture and sequestration: Framing issues for regulation (CCSReg Interim Report). Pittsburgh, PA: Author.23 February 2010 46

Chapter 3: Transport Ready Plant Definitionthat a specific CCS-related regulatory body can integrate all regulatory aspects of CCSReady and CCS in the future, including transport and storage readiness.In addition to regulations, the government also might choose to have a role in financing andconstructing CO 2 pipelines as a means of accelerating their development. Until the economicgap is closed between the cost of CCS and the price of carbon, government participation maybe needed to potentially finance and, possibly, take an equity position in the development oflarger CO 2 pipeline networks. In general, it is expected that the experience of building naturalgas and oil pipeline infrastructure across the world over the past 80 years will provide someguidance for building a CO 2 pipeline network in any jurisdiction.If large volumes of CO 2 are to be stored, a large pipeline network will likely be needed.Coordinated development of CO 2 pipeline networks by interested parties—possibly undergovernment oversight—could have a number of advantages, including: 84• The potential of higher volumes per individual line segment leading to lower per-unitcosts;• Reduced proliferation of pipelines with a lower environmental footprint;• The number of storage sites can be minimized and thus those candidates with the bestgeotechnical quality can be given priority; and• An open-access pipeline can provide fair space allocation to smaller entities, along withmultiple EOR markets and supply points to provide choice and volume security toparticipants.It is feared that operators will be unable to exploit economies of scale due to lack ofcoordination and capital, 85 and smaller pipelines may be built due to short-term commercialpressures. Supplementing such smaller pipelines to meet an increase in the volume ofsequestered CO 2 would result in a higher lifetime system cost. Coordination may thus berequired to facilitate a more optimum initial sizing of the transport infrastructure. A centralinstitution overseeing CO 2 pipeline networks would be beneficial to improve coordinationamong parties.For example, as part of the EU Flagship Programme of 12 European CCS demonstrationplants, the European Technology Plant for Zero Emission Fossil Fuel Power Plants (ZEP) hasencouraged a plan for a continental CO 2 transport network. It is thought that regional“mainline” pipelines with a high CO 2 volume capacity will accept a supply from contributorypipelines from a range of EU member states. It is also thought that the basic CO 2 pipelineinfrastructure may mimic the network of natural gas pipelines in Europe today, albeit withfewer subsidiary connections. 8684 Alberta Carbon Capture and Storage Development Council. (2009). Accelerating carbon capture and storageimplementation in Alberta (Final Report). Edmonton, Alberta: Author.85 NERA Economic Consulting. (2009). Developing a regulatory framework for CCS transportation infrastructure (vol. 1 of 2)(Report no. URN 09D/596). London, UK: Author.86 Coleman, D.L.. (2009). Transport infrastructure rationale for carbon dioxide capture & storage in the European Union to2050. Energy Procedia, 1, 1673-1681. doi:10.1016/j.egypro.2009.01.219.23 February 2010 47

Chapter 4: Storage Ready Plant Definition4. Storage Ready Plant DefinitionThe proposed definition of a Storage Ready plant includes identifying one or more storagesites that are capable of storing the full volume of the captured CO 2 , showing that the sitehas relevant characteristics for safe storage, and ensuring that any potential roadblocks(conflicting land use, environmental and other permits, public awareness, and identificationof service providers) are identified.4.1 Storage Site SelectionSelecting an appropriate storage site will help improve the viability of an eventual CCSretrofit, and storage site selection influences both the location of the CCS Ready plant aswell as the options for transportation corridors. A key consideration in site selection is thegeological characterisation of the site (discussed below) so that risks of environmental andhuman health impacts can be either avoided or reduced. The selection of a legally availablesite for commercial storage of CO 2 is another consideration. In addition to geologiccharacterisation of the storage site, preparation of designs for the eventual storage sitefacility can also help to reduce any potential problems in the future and ensure that the siteis indeed technically feasible for storage. 87 Poor storage site selection can increase financialand environmental risks enormously, and could set back the eventual CCS deployment, asnew sites will have to be screened, selected, and characterised.The European Union and the Australian government have recognized the importance ofeffective geological site characterization as part of the selection process. The EU Directivenotes that: 88“Member States should, in selecting storage sites, take account of their geologicalcharacteristics, for example seismicity, in the most objective and effective waypossible. A site should therefore only be selected as a storage site, if there is nosignificant risk of leakage, and if in any case no significant environmental or healthimpacts are likely to occur.”An Australian government document notes that the “selection of an appropriate site hasbeen identified as the most effective means of reducing to as low as reasonably practicableany risks over the long-term.” 89 The document also acknowledges that “the selection ofstorage sites and issues surrounding long-term storage pose new elements,” although thetransport and injection of CO 2 do not require any fundamentally new technologies.As part of the selection process, it is important to consider the different options forgeologic storage types, as they have different risk characteristics. 9087 Storage facility design needs to include an assessment of plans for monitoring and verification, as that is critical forreducing risks.88 Paragraph 19, Page L140/116 of European Parliament and the Council of the European Union. (2009). Directive 2009/31/ECof the European Parliament and of the Council of the European Union. Official Journal of the European Union, 140.89 Page 23 of Australian Ministerial Council on Mineral and Petroleum Resources (MCMPR). (2005). Carbon dioxide captureand geological storage: Australian regulatory guiding principles. Canberra ACT, Australia: Author.90 The risks for these different storage types are discussed in Exhibit 2-5 of the report CCS Ready: Considerations andRecommended Practices for Policymakers.23 February 2010 48

Chapter 4: Storage Ready Plant Definition• CO 2 storage with enhanced oil or gas recovery offers potential where suitable oiland gas fields are present, and has significant potential in areas with large oil reserves.The technology is commercially available for onshore regions, and is expected to beapplicable to CCS. The economic benefits of enhanced oil production can partially offsetCCS costs. The applicability of this option offshore has been limited by economicconsiderations and an available supply of CO 2 . Storage with Enhanced Gas Recovery iscurrently unproven, and is at the demonstration stage.• Depleted oil and gas fields provide further options for storage once oil and gasproduction have ended. Like enhanced oil recovery, this option is of interest primarily inmajor oil- and gas-bearing regions, including offshore areas (e.g., the North Sea). Thefield availability is a key issue depending on economics of hydrocarbon depletion. Thereuse of facilities and wells could be economic benefits of this option, subject to sitespecificissues and consideration of the viability of reusing facilities and wells, along withwell integrity risks.• Saline reservoir formations are considered the most important of the option typesfor large-scale long-term storage. Their importance is due to their widespreadavailability, including areas without oil and gas, together with large capacity. However,initial geological understanding is more limited for this option than for oil and gasreservoirs, and less data are available. In view of less evidence for effective trapping,detailed assessment will be required. Consequently, new exploration and appraisalactivities incorporating seismic acquisition and drilling will generally be required, and maytake several years. In specific areas, there is a risk that sites will not be confirmed andvalidated by the detailed investigations.Other theoretical types of storage are:• Storage in coals, and in coals associated with enhanced coalbed methane production.This option may also be available for shale gas resources.• Storage in basalts, salt caverns, disused mines, and carbonation of ultramafic rocks.These options are currently considered lower priority, because the underlying technicalviability has yet to be confirmed, further research and pilot testing are required, or they arelimited by inadequate capacity or injectivity. In addition, geological storage types arecategorized by onshore versus offshore. While many countries are considering bothonshore and offshore storage, the UK, for example, has limited the potential storage sites tooffshore regions only. 91As noted in the proposed Storage Ready plant definition, the full volume of captured CO 2from the eventual capture plant will need to be stored in one or more selected storagesites. Therefore, knowledge about the amount of CO 2 expected to be stored in a potentialstorage site would help in determining whether the selected site(s) has the required storagecapacity. For example, the UK Guidance note addresses this issue: “Applicants shouldinclude information on the amount of CO 2 that would be produced and stored as part of91 Paragraph 33, page 15 of U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capturereadiness (CCR): A guidance note for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810).London, UK: Author.23 February 2010 49

Chapter 4: Storage Ready Plant Definitiontheir CCR storage assessment.” 92 Regulators in the UK are expected to use the data todetermine whether the proposed storage area has sufficient capacity, taking into accountother applications for the same sites.4.2 Storage Site CharacterizationThe geology and geological attributes of the subsurface are highly variable among countries,regions, basins, and even among sites within any basin. Therefore, the appropriateness of astorage site has to be determined by a process of characterisation and assessment of thepotential site. The appropriateness of a storage site (mostly defined by the safe andpermanent storage of CO 2 ) is determined primarily by three principal requirements:• Capacity: i.e., whether sufficient storage volume is available, and can be accessed (e.g.,see injectivity);,• Integrity: i.e., whether the site is secure with negligible risk of leakage; and• Injectivity: i.e., whether suitable reservoir properties exist for sustained injection atindustrial supply rates into the geological formations, or reservoir properties can beengineered to be suitable. 93Assessing these characteristics of a storage site is a critical first step in the series of activitiesthat are needed for geological storage of CO 2 . For example, reliable assessment of thenumerical capacity of geological formations to sustainably inject and store CO 2 is a crucialrequirement for commercial decisions that allow investors to understand the likelihood thatthere will be viable storage at a site for the life of a CCS project.The entire chain of activities needed for CO 2 storage is shown below in Exhibit 4-1. As onepasses through these different stages, the developer achieves progressively more detailedknowledge about the storage capacity of the site and the characteristics of the storagereservoir, with reduction in uncertainty and better understanding of technical risks.Broadly, the technical components of a geological storage process will comprise thefollowing phases:• Regional Prospectivity Studies• Catalogue of Potential Sites Desktop study to assess the validity of any existing regional prospectivity studies.• Site Screening and Selection Identifying potential reservoir seal pairs, drainage cells, migration pathways, andtrapping mechanisms.• Characterisation of Site AssessmentFinding injectivity and containment.92 Paragraph 39, Page 17 of U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capturereadiness (CCR): A guidance note for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810).London, UK: Author.93 For example, by fraccing the reservoir or dropping formation pressure to prevent reservoir build-up.23 February 2010 50

• Site DesignChapter 4: Storage Ready Plant Definition Validating and proving the extent and sustainability of injectivity, storage capacity, andcommerciality. Proving suitable storage integrity for final permitting and approval of the storagedevelopment.• Site Development Construct facilities and drill wells for the storage scheme. Conduct baseline monitoring and update characterisation with new data.• Injection and Storage Operation of the site, with ongoing injection, monitoring, data acquisition, andassessment.• Close Storage site and (where applicable) handover site to jurisdictions for long-termstewardshipMeet regulatory requirements to allow closure and handover of site.Post-closure monitoring to ensure that the stored CO 2 is behaving as expected.23 February 2010 51

Chapter 4: Storage Ready Plant DefinitionExhibit 4-1: Phases of Geological Storage of CO 223 February 2010 52

Chapter 4: Storage Ready Plant DefinitionProspectivity assessment is usually the beginning of the capacity, integrity, and injectivityassessment of storage sites. Prospectivity is a qualitative assessment of the likelihood that asuitable storage location is present in a given area, based on the available information andgeology. 94 This assessment is a high-level screening review of public domain literature toidentify basins or areas where storage may be possible. The storage capacity estimate fromthe prospectivity assessment is usually at the “theoretical” level; see below for a discussion ofcapacity estimates.In many areas, regional assessments already have been performed at a country or regionallevel to map the CO 2 storage prospectivity. These assessments have involved various levelsof data quality, coverage, and public availability, but most have used different standards intheir assessments. Regional assessments have been performed in Australia, USA, Canada,Europe (including UK), Brazil, selected APEC Asian member countries (including China,South Korea, Chinese Taipei, Indonesia, Malaysia, Philippines, and Thailand), Japan, and India.There are also areas in which regional assessments are underway, including southern Africaand Mexico. Areas in which regional assessments are being planned or under considerationinclude selected emerging economies, South America, and parts of Asia (e.g., Indonesia).Assessments in many of these areas are now entering their second and third assessmentphases as they work at more localised scales, or update the original work with newmethodology, data, and understandings. Breakthroughs in understanding are occurring oncritical aspects as more people and innovative approaches are applied to long-term issues,and as the commercial nature and scale of the challenge are acknowledged. Each jurisdictionwill require updating of its assessments in the future, either at more intensive scale in someregions, with new data from exploration efforts, or using improved knowledge andmethodology as the science of geological storage evolves.Potential storage sites are identified through detailed desktop studies that are used todevelop a geological framework, to identify the existence of potential reservoir and sealpairs, drainage cells, migration pathways, and trapping mechanisms for the specific area beingconsidered in an assessment. The studies will rely upon collection of all easily availablegeotechnical data and knowledge for a basin or province where geological storage is beingconsidered, and/or extrapolate from nearby regions or use analogue examples where dataare scarce. Confidence levels would be higher for options related to oil and gas fields,provided data are available and in the public domain. These studies will help get to betterestimates of technically viable “effective” capacity, as explained below in the section oncategories of capacity estimates.Beyond the desktop-based analyses, one or more specific storage sites can be identifiedand characterised with high confidence “practical” estimates for storage capacity, alongwith site-specific assessments of storage integrity and injectivity. The scope, schedule, andcost involved for storage assessment at this stage depend on the storage option type, andare expected to be substantially longer for saline aquifers than for oil or gas fields. Theassessment objectives are to build on the findings of the desktop compilation. The94 Prospectivity was defined (for geological storage) in Chapter 2, page 94 of Intergovernmental Panel on Climate Change(IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture and Storage. New York, NY: Cambridge University Press.It encapsulates the dynamic and evolving nature of geological assessments where conceptual ideas and uncertaintydominate. Estimates of prospectivity are developed by examining data (if possible), examining existing knowledge, applyingestablished conceptual models, and, ideally, generating new conceptual models or applying an analogue from aneighbouring basin or some other geologically similar setting.23 February 2010 53

Chapter 4: Storage Ready Plant Definitionassessment would focus on the most viable opportunities, and importantly would need toco-develop multiple sites in case one area is found not to be adequate or has levels ofuncertainty that are too high or cannot be easily resolved.Categories of Capacity EstimatesMost (>95%) of the values in the published literature are theoretical estimates, 98 and thusare of no practical value for planning purposes to develop Storage Ready plants. Even thedocumented storage capacity volume in Chapter 5 (Geological Storage) of the IPCC’sSpecial Report on CCS 95 are not representative of the true extent of practical storagecapacity; 96 these values probably overstate the likely practical storage capacity andunderstate the economic reality of achieving the quoted storage capacity volumes. Thevalues quoted do not describe the highly theoretical nature of the storage capacitycalculations, which are at the physical limit of the rock pore volume to accept CO 2 (seebelow regarding pressure build-up).Bradshaw et al. raised the problems with the disparate data set of local and worldwideestimates for storage capacity, and the inadequate understanding of storage efficiency. 97 In apresentation of those findings in October 2002 in Kyoto, Japan, the concept of a resourcepyramid was presented as a way to encapsulate the vagaries of CO 2 geological storagecapacity estimates. Subsequently, Bradshaw et al. 98 introduced the concept of quotingstorage capacity in terms of “theoretical,” “realistic,” and “viable” with a resource pyramid,which was later modified by Bachu et al. as “theoretical,” “effective,” “practical,” and“matched.” 99 (See Exhibit 4-2.) The UK CCR Guidance note uses the terms in the earlierBradshaw et al. paper, and recommends that the capacity estimates be in the category of“realistic” or “viable”—which could require significant effort in terms of exploration.The qualifying terms in Exhibit 4-2 need to be quoted alongside any numerical capacityestimate so it is clear whether the values are theoretical estimates or have some degree ofscience, modelling, and realistic validation and quantification behind them. To reach StorageReady, the estimates will have to progress up the resource pyramid definitions, withincreasing certainty from technical, commercial, legal, and regulatory perspectives. Thus,conceptually in this scheme, as more information is used in an assessment, the smaller andmore certain the resource value estimate becomes. However, new information andexploration data will affect the prospectivity assessment and can alter the absolute capacityvalues as better knowledge and more data are produced. Normally, as each phase in thework plan is reached (Exhibit 4-1), a more refined capacity estimation can be produced, thusstepping through the storage capacity levels shown in Exhibit 4-2.95 Intergovernmental Panel on Climate Change (IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture andStorage. New York, NY: Cambridge University Press.96 Holloway, S.. (2008). Advances in global and regional capacity assessment. Paper presented in Session 1A of GHGT-9:9 th international conference on greenhouse gas control technologies, Washington, DC.97 Bradshaw, J. et al.. (2003). Australia’s CO2 geological storage potential and matching of emission sources to potentialsinks. Energy, 29, 1623-1631. doi:10.1016/j.energy.2004.03.064.98 Figure 2 in Bradshaw, J., et al.. (2007). CO2 Storage Capacity Estimation: Issues and development of standards.International Journal Greenhouse Gas Control 1,1, 62-68. doi:10.1016/S1750-5836(07)00027-8.99 Bachu, S., et al. (2007).CO2 storage capacity estimation: Methodology and gaps. International Journal of GreenhouseGas Control, 1, 4, 430-433. doi:10.1016/S1750-5836(07)00086-2.23 February 2010 54

Chapter 4: Storage Ready Plant DefinitionExhibit 4-2: Description of the Terminology for Geological Storage CapacityPressure Build-Up Limitations on Storage CapacitySource: Bradshaw Geoscience ConsultantsThe modelling and consideration of the implications of pressure build-up in reservoirs isimportant for understanding the fracture pressure and the limitations that pressure build-upmay have on storage capacity. The importance of the impact of pressure build-up on therate of injection, and its implications for capacity estimation has been discussed by Bradshawet al. 100 Subsequent studies have been able to better document and simulate the effect ofestimating storage capacity where there are issues associated with pressure build-up andlow permeability reservoirs.Van der Meer & Yavuz calculated the impact of pressure build-up in a reservoir where therewas moderate permeability (40 mD), which had the effect of raising the pressure above amaximum value, such that it resulted in up to a tenfold reduction in the proposed injectionplan. 101 Overall, at a number of potential sites, there was a threefold reduction compared withthe earlier estimations of storage capacity when pressure build-up was taken into account.100 Bradshaw, J., et al.. (2007). CO2 Storage Capacity Estimation: Issues and development of standards. InternationalJournal Greenhouse Gas Control 1,1, 62-68. doi:10.1016/S1750-5836(07)00027-8.101 Van der Meer, L. & Yavus, F.. (2009). CO2 storage capacity calculations for the Dutch subsurface. Energy Procedia, 1, 1,2615 – 2622. doi:10.1016/j.egypro.2009.02.028.23 February 2010 55

Chapter 4: Storage Ready Plant DefinitionModelling of a potential geological storage site by Birkholzer et al. indicated that, in a lowpermeability reservoir, the pressure front with considerable pressure build-up extendedlaterally for more than 85 km with an area of influence of 22,000 km 2 , whereas the CO 2plume occupied a radial area of less than 2 km and that the lateral area of pressure influencewas strongly affected by the variability of the permeability of the overlying seal. 102 Suchfindings indicate that:• There will be a need to carefully monitor multiple injection locations by different storageoperators injecting into a single or hydrodynamically linked reservoir/aquifer system; and• All geological storage proposals will need to consider the large-scale perturbations ofthe hydrologic regime prior to commencement of injection.Modelling by Birkholzer and Zhou, in the Mt. Simon Sandstone in the Illinois region of theUSA, similarly identified pressure build-up over a large area (15,000 km 2 ). 103 While it did notlead to excessive pressure build-up due to the extensive size of the reservoir, it did lead tothe conclusion of the likelihood of pressure interference between operators of injectionsites and the need to carefully regulate such an outcome. While previous theoretical storagecapacity estimates for the Mt. Simon Sandstone (which were based on application of storageefficiency factors and Monte Carlo simulation) ranged from 27,000 to 109,000 Mt CO 2 , 104Birkholzer and Zhou concluded that if geomechanical constraints were put in place byregulators, the storage capacity might not even achieve the modelled values of 5,000 to13,000 Mt CO 2 .A key implication of the pressure-build limitation on storage capacity is that the entirehydrologic regime will need to be monitored and that a regulatory regime for geologicalstorage will need to consider the impact of large-scale injection. In groundwater systemswhere substantial pressure draw-down has occurred due to production of groundwater,pressure build-up may be a benefit, provided that saline water does not mix with thefreshwater systems. There is also the opportunity for storage developers to consider theuse of pressure relief wells to draw off formation water (saline water) and inject it intohigher units, thus redistributing the pressure over a larger area. In these ways, the geologicalreservoir could be engineered to reduce the risk of leakage or fracturing and so increasethe accessible storage capacity. However, each of these additions to a work plan willincrease the costs of geological storage for Storage Ready plants, and will increase the needto produce detailed subsurface studies in order to manage high levels of uncertainty in thedeep subsurface.Data TypesThe different kinds of geological data that will be used in the storage site screening andselection phases are shown in Exhibit 4-3. The data will consist of principally near-surface102 Birkholzer, J., Zhou, Q., & Tsang, C.. (2009). Large-scale impact of CO2 storage in deep saline aquifers: a sensitivitystudy on the pressure response in stratified systems. International Journal of Greenhouse Gas Control, 3, 2, 181-194.doi:10.1016/j.ijggc.2008.08.002.103 Birkholzer, J. & Zhou, Q. (2009). Basin-scale hydrologic impacts of CO2 storage: Regulatory and capacity implications.Lawrence Berkeley National Laboratory paper no.LBNL-1716E.104 U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2008a). 2008 Carbonsequestration atlas II of the United States and Canada – version 2.23 February 2010 56

Chapter 4: Storage Ready Plant Definitionand subsurface information covering the fields of geology, geophysics, and reservoirengineering.Exhibit 4-3: List of Data Types and Measurements that May be Required in anAssessment of a Site for Geological Storage of CO 2105The types of data to be assembled include: 19• Seismic profiles across the area of interest, preferably three-dimensional or closely spaced two-dimensional surveys.• Structure contour and isopach /isochron maps of reservoirs and seals.• Detailed maps of the structural boundaries of the trap where the CO 2 will accumulate, especially highlightingpotential spill points.• Maps of the predicted pathway along which the CO 2 will migrate from the point of injection.• Documentation and maps of faults and fault characterization.• Facies maps showing any lateral facies changes in the reservoirs and seals.• Core and drill cuttings samples from the reservoir and seal intervals.• Well logs, preferably a consistent suite, including geological, geophysical, and engineering logs.• Fluid analyses and tests from downhole sampling and production testing.• Oil and gas production data (if a hydrocarbon field, or nearby to one in similar rock sequences).• Pressure transient tests for measuring reservoir and seal permeability.• Petrophysical measurements, including porosity, permeability, mineralogy (petrography), seal capacity,pressure, temperature, salinity, and laboratory rock strength testing.• Pressure, temperature, water salinity.• In situ stress analysis to determine potential for fault reactivation and fault slip tendency, and thus becapable of identifying the maximum sustainable pore fluid pressure during injection in regard to thereservoir, seal, and faults.• Hydrodynamic analysis to identify the magnitude and direction of water flow, hydraulic interconnectivity offormations, and pressure decrease associated with hydrocarbon production.• Seismological data, geomorphological data, and tectonic investigations to indicate neotectonic activity.Source (IPCC, 2005; Table 5.3). 106Notes: Modified from Intergovernmental Panel on Climate Change Special Report on CO2 Capture and StorageDespite the length of this list, it is not comprehensive. Not all of these data and otherinformation are required at the start of an assessment or a search for a site, but would beprogressively acquired as an assessment passes through its various phases and milestones.The list does, however, document the scope and complexity of the types of work that arerequired to fully assess a site for the safe and secure for the long-term injection of CO 2 . 1074.3 Conflicting Land UsesThe injection of CO 2 in underground reservoirs implies the CO 2 can migrate within thereservoir and occupy a large area projected to the surface. The stored CO 2 will also displacefluids, which might affect geological structures that are further away from the injection sites.Potential storage sites may also be suitable for natural gas storage in some areas. Therefore,geological storage of CO 2 can result in conflicting land use issues, as several different kinds of105 Note that the EU Directive in its Annex I and II provide similar sets of data requirements.106 Intergovernmental Panel on Climate Change (IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture andStorage. New York, NY: Cambridge University Press.107 Annex 1 of the EU Directive also has a similar list of required data for characterising sites.23 February 2010 57

Chapter 4: Storage Ready Plant Definitionusers may need access to subsurface and surface areas on and near a particular storage site. 108Thus, there could be competition between different industries for access to the same area asthe storage site. If these issues are not identified, and potentially resolved, they can besignificant barrier for the eventual storage at the selected site. The resolution of conflictsoften needs clear legal instructions from governments, and depending on the jurisdiction, anappropriate authority can also play an active role in resolving conflicts.CO 2 storage and migration could also potentially affect the geology and operation ofneighbouring oil and gas fields—both positively and negatively. For instance, migration ofCO 2 into a producing oil or gas field could contaminate the hydrocarbon field and increaseproduction costs, due to the need to strip out the produced CO 2 . Conversely, transmissionof pressure into neighboring oil or gas fields may increase production rates and thusincrease profits. The EU Directive specifically address this issue by noting that its memberstates retain the right to block certain areas for CO 2 storage and give priority to any otheruse of the underground, such as exploration, production, and storage of hydrocarbons orgeothermal use of aquifers. 1094.4 Common Criteria Related to StorageThe common criteria applicable to defining Storage Ready plants are described below.4.4.1 Acceptable Economic CostThe overall economic assessment of a CCS Ready plant, as well as its eventual retrofit,requires an estimate of the cost for making the plant Storage Ready and for the eventualstorage operations. 110 As with Capture and Transport Ready plants, high upfront costs, or avery long time lag between building a Storage Ready plant and the eventual implementationof a CO 2 storage infrastructure, may not provide sufficient economic incentives fordevelopers to make plants Storage Ready.Of the three elements of CCS Ready, it is likely that becoming Storage Ready takes themost amount of time and effort, with associated increase in cost, because of the manycomplexities associated with building Storage Ready plants. These complexities includedetermination of pore space and rights (which have not yet been fully addressed in manyjurisdictions), considerations of other uses of the land, and the role of the government instorage site development, injection, and site closure.Moreover, storage requires the build-up of a knowledge base for geological storageprospectivity, in order to enhance the assuredness of Storage Ready plants. This requiressignificant resources, as storage assessments often require a staged approach that rangesfrom assessments at the country, province, sedimentary basin, sub-basin, and prospect (site)levels (Exhibit 4-4). For each stage, more effort is expended to collect detailed data andperform comprehensive studies, thereby reducing the uncertainty regarding the technical108 Some of users include extractive industries, such as coal mining and oil and gas exploration and extraction.109 Paragraph 19, Pg L140/116 of European Parliament and the Council of the European Union. (2009). Directive 2009/31/ECof the European Parliament and of the Council of the European Union. Official Journal of the European Union, 140.110 Note that the CCS Ready plant developer may not be same as the developer of the storage sites, and the developer of aCCS Ready plant will need to work with potential vendors of storage services to obtain cost estimates for geological storageof CO2.23 February 2010 58

Chapter 4: Storage Ready Plant Definitionviability of geological storage. The indicative amount of required effort is shown in Exhibit 4-4 based on work completed in Australia at all of the levels shown.Exhibit 4-4: Illustrative Example of Amount of Resources Neededfor Storage Readiness, based on Australian ExperienceCountryProvince(State)BasinSite(Initial)Site(Exploration/FEED)Work Years a 6 8 2 4 100sCost (AUD) $1 Mill $2 Mill $1 Mill $0.75 Mill $50 - $100 MillDuration (yrs) 2 1 0.5 1 5Level Basin Basin/Play Play/Site Play/Site SiteCritical Role Government Government Government, Industry Industry IndustrySource: Bradshaw Geoscience ConsultantsNote: a) “Basin” is the entire sedimentary basin where geological storage is beingconsidered, or the region within the entire sedimentary basin that is prospective forgeological storage. b) “Sub-basin” is a subset of a sedimentary basin, which focuses on thelocalized opportunity and the better prospective areas in that basin. c) “Play” is a term thatrelates to the concept of the trapping style and mechanism that are envisaged, and is onelevel higher than a specific site or prospect. d) “Work Years” is the total number ofindividual years of work required for all staff to complete the assessment.In this example, the assessment work at the country level benefited from regional assessmentspreviously completed for petroleum prospectivity that were adapted to geological storageassessments. For example, in Australia nearly 120 work-years’ worth of effort was expendedto develop geological databases and knowledge for petroleum exploration and development,and this effort was used to develop information on geological storage of CO 2 at 6 work-years’worth of effort. If such petroleum-based geological assessments are not available at a countryor regional level, more work will be required to understand geological storage prospectivity.Assessments made at the basin level are usually the domain of government agencies andresearch organizations. Once site-specific studies are required, industry will focus on thedetailed assessments that are necessary. In the transition from sub-basin to prospect studies,the work time and costs increase considerably as wells and seismic cost are incurred with adetailed focus on the reservoirs, seals, injectivity, containment, and migration pathways. Foreach specific geological storage site, the likely costs will be site-specific based on thecomplexity, characteristics, and pre-existing knowledge of the site being investigated. If thereservoir quality is low and the injectivity poor, more wells will be required to match theinjection rate of the supplied CO 2 , increasing costs considerably.As a guide from practical experience in Australia, the range of costs for the development ofsites in deep saline reservoirs is shown in Exhibit 4-5, which compares both onshore andoffshore costs. The cost estimates in Exhibit 4-5 should be used as a guide only, as initialexploration costs and final development costs will vary significantly based on the geologicalcharacteristics of the site, and on the local drilling and seismic costs. See the text box belowon Exploration & Storage Costs.23 February 2010 59

Chapter 4: Storage Ready Plant DefinitionExhibit 4-5: Potential Range in Costs at Different Stagesin the Development of a Geological Storage Site for a Deep Saline Reservoir,in both Onshore and Offshore AustraliaTaskTime (years)Cost (AUDmillions)OnshoreCost (AUDmillions )OffshoreExploration 1 – 3 5 – 30 15 – 100Appraisal 1 – 3 5 – 60 25 – 200FEED 1 – 2 5 – 10 5 – 30Development 1 – 3 5 – 200 5 – 1500Totals 4 – 11 20 – 300 95 – 1830Exploration & Storage CostsSource: Bradshaw Geoscience ConsultantsStorage costs should not only include the costs of performing the storage at a proven site, but also the explorationand development costs. Many assessments for costs of storage do not allow for the “finding” costs in theirestimates, or grossly underestimate the likelihood of such costs. As such, any published costs for storage need tobe carefully scrutinized. When considering large industrial-scale injection of CO 2 over a 30- to 50-year period, andwhere geological uncertainty needs to be resolved to allow substantial financial investment for construction of apower plant and pipeline, geological storage exploration may be similar to exploration in the oil and gas industry—which can have exploration drilling success rates as low as 1 in 10.If exploration occurs in a well-proven mature sedimentary basin with a large number of existing wells and goodspatial seismic coverage, the likelihood of geological uncertainty in the exploration phase will be lower than in animmature unexplored basin with complex reservoir characteristics. Geological uncertainty can substantiallyincrease finding costs, as well as result in the need to obtain a large amount of data prior to reaching a level ofprobability that is sufficient for financial and planning purposes.The ZeroGen project in Southeast Queensland in Australia commenced exploration in the Denison Trough of theBowen Basin in 2005, after initial preliminary planning in 2004. To date 12 wells, including an injection well, havebeen drilled. ZeroGen has already acquired more than 5,000 m of core in its drilling program to ensure that it canreduce the geological uncertainty in the problematic reservoirs of the onshore Denison Trough. This will allow it toalleviate the complexity of its planning decision processes, as well as to shorten the timeframe to get to a finaldecision on whether to proceed. By the end of its current exploration phase, ZeroGen could potentially spend up toA$100 million in its quest to identify and prove the existence of a site for commercial scale injection of CO 2 .In addition to the overall estimates of the cost of exploration (discussed above), the level ofeffort (human labour) that is needed to meet the requirements of a Storage Ready plant isshown in Exhibit 4-6. As with the estimates for the level of effort for Capture and TransportReady plants, these estimates are tentative, and the specific level of effort will depend on thespecific geology of the storage site and content and extent of work performed by a projectdeveloper to meet a specified level of readiness. The range of estimated level of effortshown in Exhibit 4-6 indicates this variation.23 February 2010 60

Chapter 4: Storage Ready Plant DefinitionExhibit 4-6: Estimated Level of Effort for Storage Ready ActivitiesEstimated Range of Work Years toStorage Ready ActivitiesComplete Activity aStorage Site Selection 0.25 – 1.5Verifying Injectivity, Capacity, and Integrity of Storage Site 1.0 – 9.0 (up to 50+)Design for Storage Facilities 1.0 – 3.0Cost Estimate for Storage facilities 1.0 – 2.5Environmental, Safety, and Other Approvals for Storage ReadyplantPublic Awareness and Engagement Related to CO2 StorageReady plantSources for Equipment, Materials, and Services for Storage Readyplant0.75 – 3.00.25 – 1.50 – 1.0Ongoing Obligations 0.5 – 1.0a Work Years is the total number of individual years of work required for all staff to complete the activity.In terms of calendar time, the broad timeframe for becoming Storage Ready is estimated tobe between ~2 and 8 years (depending of the particulars of the chosen storage site).Timeframes could be longer or shorter for each component of being Storage Readydepending on the complexity, preparedness, access to resources (trained staff and funding),and willingness of each element of government, industry, community, and geologicalprovince involved.The information below provides indicative timelines and types of activities that are neededfor geological storage, including the activities beyond Storage Ready, in order to providestakeholders with an indicative timeline (and related level of effort) needed for geologicalstorage of CO 2 . The list below also differentiates the time needed for characterising thedifferent geological storage types.• Characterisation of Selected Site (2 – 12 years): Exploration for a geologicalstorage site to identify whether suitable reservoir and seal pairs exist, and the CO 2compliance of pre-existing infrastructure. It will include:In a saline reservoir setting (2 – 12 years):• Acquisition of 2D seismic and drilling several wells.– Seismic will be regional but focus on migration pathways where identifiable.– Wells will acquire large amounts of core and testing of the saline waterreservoir sections and the seal rock.In a depleted field (1 – 3 years):• Assessment of existing well penetrations and the integrity of the infrastructure toensure it is CO 2 compliant.– e.g., cement, well architecture, side track wells, completion histories.• Modelling of production history relative to proposed injection scenarios.• Infill wells and seismic may be required.• If the field is old or abandoned, capturing the pre-existing corporate knowledgeof the previous operators will be a crucial step in the development of the site.23 February 2010 61

Chapter 4: Storage Ready Plant Definition In an enhanced oil recovery (EOR) project (1 – 3 years):• Assessment of existing well penetrations and the integrity of the infrastructure tobe CO 2 compliant.• Modelling of proposed injection scenarios to maximise oil production.• Infill wells and seismic may be required focussing on the proposed injectionscenarios.• Planning may be required for post EOR activities and conversion of the site to astorage location.(Note: Depleted fields and EOR projects, if already held by an operator thatintends to undertake injection and geological storage activities, may bypass theexploration phase and start at the site development plan phase.)• Storage site design (1 – 5 years): In a saline reservoir setting, the new well andseismic data will help locate a potential storage site that will then require further dataacquisition to identify injectivity and containment, including: Acquisition of 3D seismic along the defined migration pathways. Drilling wells along the defined migration pathways and taking of more cores andtesting. Assessment and testing for likelihood to compromise other resources (oil and gas,groundwater, coal-seam methane). Appraisal injection test of CO 2 and/or water.• Site development plan (0.1 – 2 years): When a geological storage site has beenidentified and a preliminary development plan created, it will need to be converted froman exploration permit to either a retention lease or an injection licence.The regulator will require a site development plan for a saline reservoir or depletedfield that can show that:• The geological storage developer has identified a site that can sustainably injectand store CO 2 at the required rates while maintaining high geological integrity inthe subsurface formations (1 – 2 years).• There is not likely to be any significant adverse impact on other stakeholders, orif there is, a decision is made as to what is in the public interest.• This will be the equivalent to a gas field development plan from the oil and gasindustry.An EOR developer will need to produce a similar development plan for a salinereservoir and depleted field geological storage, but its focus will include injection andproduction components (0.1 – 2 years), but not necessarily storage.• Much of the production components will already exist due to the pre-existing oilfield licence.• Some injection components may already exist if secondary recovery (pressuremaintenance with gas or water) has occurred.• If storage is envisaged after final oil production has ceased, a more detaileddevelopment plan may be required.23 February 2010 62

Chapter 4: Storage Ready Plant Definition The retention lease would allow the geological storage developer to retain the rightsto injection while the infrastructure associated with the supply of CO 2 (pipeline andpower plant with capture) are constructed.• A retention lease may be as long as 5 years in its initial term.• The lease might be extended if the CO 2 supply has been delayed.• Pipeline and power plant infrastructure construction (3 – 5 years): Approval of aretention lease or an injection licence is the trigger for the infrastructure construction(pipeline and power plant with capture) associated with the supply of CO 2 (3 – 5 years). Storage Ready before Capture Ready is important. Prior construction of these facilities would only occur nearby to very highlyprospective geological storage sites. Prior construction comes at the risk of geological storage sites being proven to not beviable sites (low integrity or high uncertainty), or only partially adequate (limitedcapacity).• Capital investment could be lost and financial penalties may occur, by having topay for emissions as well as capture and transport costs, or• Longer pipeline routes may be necessary to a different location.• Injection and Storage (5 – 50 years): Injection and storage of CO 2 can commencewhen the geological storage site is proven, approved, and the supply of CO 2 exists at thewell head.Monitoring will be required during the injection and storage activities and baselinestudies may be necessary prior to injection (1 – 2 years).Appropriate measures will need to be in place during the operations, including:• Continual update and maintenance of the parameters at the surface facilities andin the subsurface.• Statutory reporting to the regulator.Long term liability arrangements will need to be considered during the operation ofthe site, thus it will be necessary to:• Maintain the geological and reservoir model “evergreen” as new data andobservations occur.• Keep predictions and modelling up to date with the new data and provide to theregulator.• Recognise that closure regulations may contain clauses such as “closure canoccur only when the modelled and predicted behaviour of the CO 2 matches theobserved.”4.4.2 Environment, Safety and Other ApprovalsAs with capture and transport, there are a number of potential approvals and permitsrequired to construct and operate CO 2 storage sites. Identifying these approvals upfrontas part of being CCS Ready will help to reduce delays, as well as allow the developer toallocate enough time for the permitting processes. Decades of experience in extracting oiland natural gas, injecting CO 2 and other fluids for enhanced oil recovery, and recentexperience with the injection of CO 2 for the purposes of long-term storage, have enabledengineers and researchers to develop a well-understood set of potential risks that could beposed by CO 2 storage sites, shown in Exhibit 4-7. The safety and integrity of geological23 February 2010 63

Chapter 4: Storage Ready Plant Definitionstorage are essential to the deployment and acceptance of CCS as a mitigation option. Thisrequires that the risks (listed below) relating to storage through all the stages of siteprogression are either avoided or reduced.Exhibit 4-7: Potential Physical Risks of CO 2 Storage Sites• Harm to human health• Harm to ecosystem (plants and animals)• Contamination of underground drinking water• Damage to hydrocarbon resources• Damage to personal property (e.g. existing wells)• Ground heave or induced seismicitySources: IPCC Special Report on CCS, 111 WRI CCS Guidelines, 112 Wilson, E.J. et al. (2003). 113To manage these risks, regulatory frameworks for CO 2 storage sites are beginning toemerge in areas where pilot and commercial projects are underway, such as Australia, theUS, and the Europe. These early regulations often cover siting, construction, operation,monitoring, mitigation, and closure of sites. In Australia, three basic levels of permits existfor geological storage, an Assessment (Exploration) Permit, a Holding (Retention Lease), andan Injection Licence. Permits also exist to allow an operator to undertake activities outsidetheir permit area, such as to monitor beyond their area of permit operation.In the US, CO 2 injection for storage is regulated under the Safe Drinking Water Act. USEPA’s Underground Injection Control Program regulates the construction, operation,permitting, and closure of injection wells, and enforcement is undertaken either by EPA orUS states. The EU Directive notes that its member states shall retain the right to grantstorage permits, so long as the site selection and permitting follow the directive’s guidelines.The criteria for each member state will vary based on each state’s environmentalregulations, but the directive requires that the storage permits contain at least the following:proof of the operator’s competence; characterization and security of the proposed storagesite; the total quantity of CO 2 to be injected and stored; sources; transport methods;composition of CO 2 streams; injection rates and locations of injection facilities; measures toprevent irregularities; a proposed monitoring plan; proposed corrective measures; and aproposed post-closure plan, consistent with the guidelines in the directive.4.4.3 Public Awareness and Engagement ActivitiesAs discussed in Section 2.4.3, public awareness and engagement is very important for CCS,especially for storage, in order to reduce delays and potential cancellation of projects due topublic opposition. Communities near a CO 2 storage site may be concerned about many ofthe potential risks identified in Exhibit 4-7, which include risks to personal health,ecosystems, property, and resources. They may also be concerned about negative impactsto the value of their property. Residents will want to better understand the true nature andmagnitude of these risks, as well as assurances that any risks will be properly mitigated.Some examples of projects that have been cancelled or delayed by public opposition werediscussed earlier in Section 2.4.3. As another example, RWE AG, Germany’s second-largest111 Intergovernmental Panel on Climate Change (IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture andStorage. New York, NY: Cambridge University Press.112 World Resources Institute (WRI). (2008). CCS Guidelines: Guidelines for carbon dioxide capture, transport, and storage.Washington, DC: Author.113 Wilson, E.J., Johnson, T.L. & Keith, D.W.. (2003). Regulating the ultimate sink: Managing the risks of geologic CO2sequestration. Environmental Science and Technology, 37, 3476-3483. doi: 10.1021/es021038+.23 February 2010 64

Chapter 4: Storage Ready Plant Definitionutility, has recently expressed concerns that public opposition to CO 2 storage in Germanymay force the company to instead build a coal plant with CCS in the Netherlands. 114 Asdiscussed in Section 2.3.4, there are many recommendations for improving awareness andengaging with the public. These issues are also valid for Storage Ready plants.4.4.4 Equipment Sources, Materials, and Services for Future Injectionand Storage OperationsA future CCS retrofit will likely require the CCS Ready plant owner to contract with acompany to construct and/or operate a CO 2 storage site. In order to make sure that suchstorage services are potentially available, project developers can identify service vendors andassess whether they operate in the region or country(ies) where the selected storage islocated. As discussed in Section 2.4.4, identifying these vendors in advance will provide avariety of benefits, including the promotion of acquisition of business procurementagreements, building relationships, promoting knowledge sharing, and minimizing delays inobtaining equipment and services, at the time of retrofit..Exhibit 4-8 below lists the types of equipment for consideration by developers of CO 2storage sites. These types of equipment are generally the same as what would be needed foroil or gas field development.Exhibit 4-8: Key Equipment for Identifying, Constructing,and Operating a CO 2 Storage SiteEquipment TypeInjection and monitoring wellsFacilities and infrastructurePipelinesPumpsCompressorsProcess control equipmentElectrical SubstationMonitoring equipment & servicesMiscellaneous systems andequipmentPurposeInjection wells drilled to inject CO2 into the storage siteSurface facilities and or offshore platforms, jackets or subsea equipment will beneeded for storage sitesOnsite pipelines to transport CO2 from storage site fence line to injection wellsPumps to boost pressure of CO2 for injectionCompressors may be used in addition to pumps for injection of CO2 for EnhancedRecoveryFlow meters and other process instrumentation to measure and control flow rate,temperature, pressure, and composition of CO2 injected into storage siteElectrical transformers and related equipment to supply electricity to pumps andother equipmentSurface and subsurface Monitoring equipment to monitor CO2 plumes and to detectmigration of CO2 injected from the storage sitePotable water wells, domestic wastewater treatment plant; operations andmaintenance buildings; emergency generators, etc. to support site operations.Early consideration of the companies that provide these equipment and services will helpdevelopers determine their options. Options for eventual partnerships and commercialarrangements may include private contracts, aligning with other plant operators to contractwith an oil and gas company to build and operate the storage site, or potentially workingwith a government corporation. Establishing a commercial arrangement with an existingstorage operation may also be an option for storage.114 Comfort, N.. (2010). RWE may build Dutch carbon capture plant amid German opposition.23 February 2010 65

Chapter 4: Storage Ready Plant Definition4.4.5 Maintaining Storage ReadinessAs mentioned in section 2.4.5, regular assessments of CCS Ready status is important toadapt projects to foreseeable changes such as new technical developments, additional costs,and delays. For a storage site, such periodic assessments can help in identifying andpotentially resolving issues such new regulatory developments, land development changes,additional information about selected sites, and changes in monitoring or injectiontechnologies. Since site characterization and development take significant time (2 – 12 years)and effort, it is important to maintain the ability to deploy CCS as soon as possible whenmandated or when technology permits.In order to maintain the storage readiness status, project developers can consider thefollowing issues:• New regulations that either enhance or decrease the potential for storage in theselected storage sites;• Changes to land ownership, land development, or mineral extraction activities that mayprevent use of the identified potential storage sites;• Assessment of geological characteristics of the selected site changes due to newlyavailable site-specific information, or developments in monitoring and verificationtechnologies or practices; 115• Other CO 2 storage plans or developments in the same region that affect thesequestration potential of the identified reservoir. In some cases, the potential ofpreviously identified alternative sites may have to be assessed;• More viable storage sites are identified;• Storage plans are reassessed based on any changes to capture and transportcomponents (e.g., if a greater amount of CO 2 will be captured than was originallyplanned)• Changes in environmental or safety regulations that interfere with plans to store CO 2 ;• New approvals or permits for maintenance of storage readiness are obtained orrenewed as necessary; and• Public engagement continues and concerns of the community regarding long-term CO 2sequestration are addressed.Section 2.4.5 includes a more detailed discussion on monitoring and recordkeepingregulations, potential requirements to maintain CCS readiness, and submitting periodicreports confirming readiness.115 For example, page 16, paragraph 36 of the UK CCR Guidance notes that the “Government recognises that, as a greateramount of information becomes available on the nature and characteristics of the UK’s storage capacity, operators will as amatter of course review and refine their initial assessments.” See: U.K. Department of Energy and Climate Change (U.K.DECC). (2009a). Carbon capture readiness (CCR): A guidance note for Section 36 Electricity Act 1989 consent applications(Publication no. URN 09D/810). London, UK: Author.23 February 2010 66

Chapter 4: Storage Ready Plant Definition4.5 RecommendationsAs indicated by the above discussion, the amount of work and the length of time requiredfor making plants Storage Ready can be significant, which supports the view that storagereadiness is crucial for a CCS Ready plant. Stakeholders in a jurisdiction may wish to startpreparing for storage as soon as possible in order to ensure that enough well-characterisedstorage sites are available when required.Another challenge to storage readiness is the development of a CO 2 storage industry, whichcan be kick-started by a CCS Ready policy. As such, it is important to increase the generalawareness of the issues related to storage among policy makers, regulators, and projectdevelopers.Size of the ChallengeThere are many good technical and commercial reasons to assume that geological storage ofCO 2 can have rapid uptake at an industrial level, despite the nuances or scale challenges thatare unique to the geological storage industry. One of those scale challenges is the volume ofemissions, which is shown in Exhibit 4-9. This shows that the world’s level of production ofmethane from the oil and gas industry is 5 times less on an annual basis than the world’sannual emissions of CO 2 , and that the ratio of the world’s already produced and discoveredreserves of methane in the oil and gas industry to the world’s annual emissions of CO 2 isless than 13:1. This indicates that if geological storage of CO 2 is to be a significantcomponent of the solution in reduction of CO 2 emissions, then it will have to be an industrythat rivals or is bigger than the current gas industry.Exhibit 4-9: Comparison of CO 2 Emissions andthe Production and Reserves of MethaneNote: LSPS = large stationery point sources, Mt = millions of metric tons and TCF = trillions of cubic feet. Yellow = CO2 andblue = methane production. Source: Bradshaw Geoscience Consultants23 February 2010 67

Chapter 4: Storage Ready Plant DefinitionEducation and Appreciation of Geological SubtletiesBuilding Storage Ready plants requires all stakeholders to become more educated about thecomplexity, risks, and risk management approaches involved in geological storage of CO 2 .This is especially important for industries that have little exposure to subsurface processes,as they need to embrace and understand the subtleties, uncertainties, and complexities ofthe geological environment. For example, the coal industry (which depends on continueduse of coal) and the power industry (which will have to deal with the end result of thecombustion of coal) are not yet sufficiently knowledgeable, or have very little practicalexperience of dealing with deep subsurface matters or the issues of geological explorationand prospectivity for CO 2 storage. They need to rapidly become conversant in those fieldsso that they can manage the associated risk. 116These aspects are gradually being appreciated by non-geoscience groups that have beeninvolved with CCS for a number of years, but more activities that communicate geologicalissues and raise awareness among different stakeholders is critical for the success of CCSand CCS Ready plants.116 Morrison, H., Schwander, M., & Bradshaw, J.. (2009). A vision of CCS business - the zerogen experience. EnergyProcedia, 1, 1751-1758. doi:10.1016/j.egypro.2009.01.229.23 February 2010 68

Appendix A: Summary of Reviewed Existing CCS Ready LiteratureAppendix A: Summary of Reviewed Existing CCS ReadyLiteratureThe tables presented in Appendix A summarize the existing CCS Ready definitions found inthe literature that were reviewed as part of the process to develop the internationaldefinition of CCS Ready.Author, Year Blankinship, S. (2008).Document TitleFull ReferenceElement of CCSAddressedRelevantTechnology/Plant TypeSummary ofDocumentDefinitionNeed for CCSReadyEconomicJustification forCCS ReadyBecoming carbon capture readyBlankinship, S.. (2008). Becoming carbon capture ready. Power Engineering International (PEI).Retrieved from http://pepei.pennnet.com/display_article/340030/6/ARTCL/none/none/1/Becoming-Carbon-Capture-Ready.Capture.Supercritical coal plants; chilled ammonia process technologies; oxy-, pre-, and post-combustioncapture technologies.This document examines the meaning of “carbon capture ready” as discussed by a panel of sevenpower industry experts in a COAL-GEN Webcast, and provides details on a range of approachesand technologies being developed (though not commercial yet).A “capture-ready plant” is one which can include CO2 capture when the necessary regulatory oreconomic drivers are in place.The article outlines an instance where plant expansion was blocked by the state Governor primarilyover CO2 emissions and claims this as a reason why it is important to try and define and quantifywhat carbon capture really means.n/a23 February 2010 69

Appendix A: Summary of Reviewed Existing CCS Ready LiteratureAuthor, Year Bohm, M.C. (2007).Document TitleFull ReferenceElement of CCSAddressedRelevantTechnology/Plant TypeSummary ofDocumentDefinitionNeed for CCSReadyEconomicJustification forCCS ReadyCapture-Ready Power Plants - Options, Technologies and EconomicsBohm, M., Herzog, H., Parsons, J.E., Sekar, R.C.. (2007). Capture-ready coal plants - options,technologies and economics. International Journal of Greenhouse Gas Control, 1, 113-120.doi:10.1016/S1750-5836(07)00033-3.CaptureSupercritical PC; IGCC baseline; IGCC with pre-investment (oversized air separation unit andgasifier)This document summarizes options used during the design and construction of PC and IGCC plantsto reduce costs and energy losses associated with retrofitting for CO2 Capture. It also estimatesNPV costs of plants with differing pre investment under range of CO2 prices.A plant can be considered to be capture-ready if, at some point in the future it can be retrofitted forcarbon capture and sequestration and still be economical to operate.CCS Ready is needed to avoid CO2 lock in. CCS Ready may also be financially optimal dependingon future price of CO2.If carbon prices are high enough in the future, coal-fired power plants will be more economical toretrofit for CCS than to operate as-is. Furthermore, in the future it may be prohibitively costly toretrofit plants that are not designed to be “capture-ready,” resulting in either delayed reductions inCO2 emissions, or stranded generation assets. For the range of future carbon prices that would begenerated by policy options currently under consideration, significant pre-investment forCO2 captureand storage is not economically justified.Author, Year EPPSA. (2006).Document Title EPPSA’s CO2 capture ready recommendations. Status: 07.12.2006.Full ReferenceElement of CCSAddressedRelevantTechnology/Plant TypeSummary ofDocumentDefinitionNeed for CCSReadyEconomicJustification forCCS ReadyEuropean Power Plant Suppliers Association (EPPSA). (2006). EPPSA’s CO2 capture readyrecommendations. Status 07.12.2006. Bruxelles, BE: Author.Capture.PC Steam Plant; Fluidised Bed Steam Plant; IGCC; CCGT.This document discusses some of the challenges linked to the issue of “capture readiness” as seenby the suppliers of capture ready technology, focusing on technical aspects rather than costs orfinancial impact. The document provides recommendations for CO2 capture ready plant designcriteria.In order to label a plant as being “capture ready,” a target abatement percentage of the producedCO2 must be defined beforehand. Furthermore, the key requirement of a capture-ready design is theprovision/availability of space for the CO2 capture equipment of the type or types that may be used.n/an/a23 February 2010 70

Appendix A: Summary of Reviewed Existing CCS Ready LiteratureAuthor, Year Gibbins, J. (2006).Document TitleFull ReferenceElement of CCSAddressedRelevantTechnology/Plant TypeSummary ofDocumentDefinitionNeed for CCSReadyEconomicJustification forCCS ReadyMaking New Power Plants ‘Capture Ready.’Gibbins, J. (2006). Making New Power Plants ‘Capture Ready.’ Presentation to the 9th InternationalCO2 Capture Network, London, England.CaptureSupercritical PC; Oxyfuel PC; IGCC; NGCCThis presentation discusses the general principles and challenges associated with making newplants capture-ready.An ideal capture-ready fossil fuel plant is one that will have no additional expenditures orperformance penalties after capture is added, as compared to an industry standard plant.To avoid CO2 “lock-in.”n/aAuthor, Year IEA GHG. (2007).Document Title CO2 capture ready plants (Report no. 2007/4).Full ReferenceElement of CCSAddressedRelevantTechnology/Plant TypeSummary ofDocumentDefinitionNeed for CCSReadyEconomicJustification forCCS ReadyInternational Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2007a). CO2 captureready plants (Report no. 2007/4). Cheltenham, UK: Author.Capture.PC and IGCC plants; oxy-, pre-, and post-combustion capture technologies.This document provides a summary of capture ready power plant considerations, an assessment ofthe options for capture ready pre-investments at power plants, a discussion of the risks anduncertainties associated with pre-investments, estimation of the impacts of pre-investments oncapital and operating costs, and an assessment of the trade-offs between pre-investment andsubsequent savings.A CO2 capture ready power plant is a plant which can include CO2 capture when the necessaryregulatory or economic drivers are in place. The aim of building plants that are capture ready is toreduce the risk of stranded assets and ‘carbon lock-in’.Without CCS Ready, new plants will “lock in high CO2 emissions for a generation to come.”n/a23 February 2010 71

Appendix A: Summary of Reviewed Existing CCS Ready LiteratureAuthor, Year Irons, R. (2007).Document TitleFull ReferenceElement of CCSAddressedRelevantTechnology/Plant TypeSummary ofDocumentDefinitionNeed for CCSReadyEconomicJustification forCCS ReadyImplications of CO2 capture-ready plants.Irons, R.. (2007). Implications of CO2 capture-ready plants. Presentation at the Third InternationalConference on Clean Coal Technologies for our Future, Sardinia, Italy. Retrieved fromhttp://www.iea-coal.org.uk/publishor/system/component_view.asp?LogDocId=81705&PhyDocId=6361.Capture, TransportIGCC and NGCC; oxy-, pre-, and post-combustion capture technologies.This presentation provides some general reasons why developers should build “capture-ready”power plants and discusses capture technology options for new plants.A CO2capture-ready power plant is a plant which can include CO2capture when the necessaryregulatory or economic drivers are in place. Avoids the risk of “stranded” assets and consequent‘carbon lock-in’.Capture ready power plants offer the possibility of adding capture at a later date so that the requiredcapacity can be built without locking-in increased CO2emissions in the long term.Opportunities for substantial economically attractive capture ready pre-investments are expected tobe limited, unless capture is expected to be retrofitted within a relatively short time after start-upAuthor, Year Lucquiaud, M. (2009).Document TitleFull ReferenceElement of CCSAddressedRelevantTechnology/Plant TypeSummary ofDocumentDefinitionNeed for CCSReadyEconomicJustification forCCS ReadyMaking New Power Plants ‘Capture Ready.’Lucquiaud, M, Chalmers, H, & Gibbons, J.. (2009). Capture-ready supercritical coal fired power plantsand flexible post-combustion CO2 capture. Energy Procedia, 1, 1411-1418.doi:10.1016/j.egypro.2009.01.185.Capture.PC.This paper explores how post-combustion capture can facilitate the concept of capture-ready plantsat limited additional cost . Furthermore, it provides three options for power cycle designs, andincludes comparisons of power loss of capture ready options.When ‘capture-ready’ (and existing non -CCR) plants are retrofitted with post-combustion capturethe capacity of the generator remains unchanged.A global strategy of cutting global emissions by around 50% by mid-century has been suggested as anappropriate response to current understanding of potential global temperature rises that are likely fordifferent stocks of CO2 in the atmosphere. It is likely that this target will be difficult or impossible to meetunless it is possible to retrofit CCS to the vast majority (and preferably all) coal plants that will be built inthe next two decades.Pulverized -coal plants can be made ‘capture-ready’ for post -combustion capture at low cost (lessthan 1% of total capital costs) using a throttled LP or floating pressure retrofit strategy.23 February 2010 72

Appendix A: Summary of Reviewed Existing CCS Ready LiteratureAuthor, Year Markusson, N, & Haszeldine, S.. (2008).Document TitleFull ReferenceElement of CCSAddressedRelevantTechnology/Plant TypeSummary ofDocumentDefinitionNeed for CCSReadyEconomicJustification forCCS ReadyHow ready is ‘capture-ready?’ - preparing the UK power sector for carbon capture and storage.Markusson, N, & Haszeldine, S.. (2008). How ready is ‘capture-ready?’ - preparing the UK powersector for carbon capture and storage. Edinburgh, Scotland: Scottish Centre for Carbon Storage(SCCS). Retrieved from http://www.wwf.org.uk/filelibrary/pdf/capture_ready_ccs.pdf.Capture.PC; IGCC; NGCC.This report examines the ‘capture ready’ concept and its application, and concludes that to becredible in enabling rapid reduction of CO2 emissions the scope of ‘capture readiness’ needs to beextended.‘Capture ready’ should be defined by its outcome, the possibility of converting to full CCS, rather thanthe intention behind the CR investment. From the point of view of climate change policy, only theoutcome matters.Steep reduction of carbon dioxide (CO2) emissions is a repeatedly stated core goal of UK policy forenergy and climate change. CCS Readiness could help avoid the CO2 “lock-in” problem. Additionally,capture readiness may act as part of a regulatory strategy to reduce CO2 emissions from fossilfuelledpower generation. It could be a way of ensuring that in the future regulators will be able tolegally oblige utilities to fit capture on to the plants already built; provide a clear regulatory signal ofcapture readiness may serve to boost post-combustion capture; and a CCS requirement may alsogenerate a need for companies to prepare for and learn about CCS, and thus boost the developmentof CCS-related skills and experience in firms.n/aAuthor, Year Minchener, A. (2007).Document TitleFull ReferenceElement of CCSAddressedRelevantTechnology/Plant TypeSummary ofDocumentDefinitionNeed for CCSReadyEconomicJustification forCCS ReadyCapture ready study (draft).Minchener, A.. (2007). Capture ready study (draft). Prepared for the Energy Technology ConversionGroup of the Institution of Chemical Engineers. Retrieved fromhttp://www.icheme.org/captureready.pdf.Capture.PC; IGCC; NGCC.This study is specifically aimed at providing the outline Qualification Definitions which the regulatorswill require to determine whether or not a proposed Power Station design can be certified as“Capture Ready”.A CO2 capture ready power plant is a plant that will be able to include CO2 capture when thenecessary regulatory and/or economic drivers are in place, thereby avoiding the risk of ‘stranded’assets and consequent ‘carbon lock-in.’Without Carbon Capture and Storage or CCS, it will be near impossible to reverse the rate ofincrease of CO2 in the Earth’s atmosphere, or even to keep it at a stable level. Until the use of fossilfuels is eliminated, it will be necessary to use CCS technology.It can be concluded that opportunities for substantial economically attractive capture ready preinvestmentsare unlikely, unless capture is expected to be retrofitted within a relatively short timeafter start-up of the power plant.23 February 2010 73

Appendix A: Summary of Reviewed Existing CCS Ready LiteratureAuthor, Year Mott MacDonald Group. (2008).Document TitleFull ReferenceElement of CCSAddressedRelevantTechnology/Plant TypeSummary ofDocumentDefinitionNeed for CCSReadyEconomicJustification forCCS ReadyCO2 capture-ready UMPPs, India.Mott MacDonald Group. (2008). CO2 capture-ready UMPPs, India. Brighton, UK: Author.Capture and storage.4,000MW coal fired plants; Ultra Mega Power Projects (UMPPs).This report presents the results of an innovative study carried out by Mott MacDonald on behalf of theBritish Government to identify and evaluate options for making nine 4,000MW plants in India “CO2Capture-Ready.” The study makes new recommendations on the suitability of proposed coal-firedcapacity in India for capture-ready design.The concept of CO2 ‘capture-ready’ plant is to design new-build generation plants without CCS, whileavoiding the lock-in of CO2 emissions from these plants caused by technical or economic costbarriers, implying low upfront costs and unimpaired performance, and encompassing the transportand storage of CO2.*Note: the study does not imply that this is the consensus definition.At the outset this study recognises that the necessary political, financial and regulatory framework forCCS does not exist within India at present (nor in any other jurisdictions). The study argues, however,that the commercial drivers are very likely to emerge during the lifetime of the UMPPs that couldcover the relatively low costs for retrofit of CCS.Future commercial drivers are likely to emerge.Author, Year Sekar, R.C. (2005).Document TitleFull ReferenceElement of CCSAddressedRelevantTechnology/Plant TypeSummary ofDocumentDefinitionNeed for CCSReadyEconomicJustification forCCS ReadyCarbon dioxide capture from coal-fired power plants: A real options analysis.Sekar, R.C.. (2005). Carbon dioxide capture from coal-fired power plants: A real options analysis(Masters of science thesis, Massachusettes Institute of Technology: MIT LFEE 2005-002 RP).Retrieved from http://sequestration.mit.edu/pdf/LFEE_2005-002_RP.pdf.Capture.PC; IGCC baseline; IGCC with pre-investments.In this study, investments in three coal-fired power generation technologies are valued using the “realoptions” valuation methodology in an uncertain carbon dioxide (CO2) price environment.All coal-fired power plants can be retrofitted to capture CO2. So, even though the cost and technicaldifficulty to retrofit may vary greatly, all coal-fired power plants can be considered “capture-capable”.However, initial design and investment that take into consideration such future retrofit, makes thetransition easier and less expensive to accomplish. Plants that have such an initial design can beconsidered to be “capture-ready”.Anthropogenic CO2 emissions are being increasingly viewed as a problem by policy makers in theUS, and it is reasonable to expect that they may regulated in the future. Against this backdrop, itbecomes increasingly important to consider building flexibility into coal-fired power plant design suchthat they can be retrofitted efficiently, both from a technical and economic perspective, to captureCO2.A CCS Ready plant will face lower retrofit costs.23 February 2010 74

Appendix A: Summary of Reviewed Existing CCS Ready LiteratureAuthor, Year Stephens, J.C. (2005).Document TitleFull ReferenceElement of CCSAddressedRelevantTechnology/Plant TypeSummary ofDocumentDefinitionCoupling CO2 capture and storage with coal gasification: defining “sequestration-ready” IGCCStephens, J.C.. (2005). Coupling CO2 capture and storage with coal gasification:defining“sequestration-ready” IGCC (Belfer Center for Science and International Affairs (BCSIA) Discussionpaper 2005-09). Cambridge, MA: Energy Technology Innovation Project, Kennedy School ofGovernment, Harvard University.Capture and storage.IGCC.This paper assesses a spectrum of progressively more involved potential requirements forincorporating consideration of CO2 capture and storage technology in the design of new IGCC powerplants. The paper first reviews the technical and economic details associated with adding CO2capture technology to the design of an IGCC power plant and then identifies and explores severalpotential CO2 capture and storage requirements with varying degrees of integration that could beincluded in a federal financing plan designed to support IGCC deployment.Although various policy proposals associated with supporting the deployment of IGCC specificallymention or allude to the capability of IGCC power-plants to capture and store CO2 in the future, theterms “sequestration-ready” or “CCS-ready” have not been defined. A minimal requirement for a“CCS-ready” IGCC power plant would include a conceptual plan for a future retrofit. This wouldrequire that future CO2 capture capability has been considered in the design of the current plant, butwould not add any significant additional costs to the plant. Additional requirements could include:additional size requirement – pre-investment; identification of an appropriate storage location, andinstallation of CO2 capture equipment without full integration.Need for CCSReadyEconomicJustification forCCS ReadyGrowing concern over the impacts of climate change has resulted in growing anticipation of US CO2regulation. Furthermore, coal plants have a 50-70 year lifetime, which means decisions in today’snew coal plants will have a large affect on future carbon emissions.n/a23 February 2010 75

Appendix B: Technology Design Options for a Capture Ready PlantAppendix B: Technology Design Options for a CaptureReady PlantThis appendix describes the key capture technologies, along with several different CaptureReady design options for each technology. It provides the incremental initial capital cost andretrofit costs needed for each design, and describes potential advancements in eachtechnology category that could affect both the design and economics of Capture Ready plants.B.1 Post-combustion CaptureThe post-combustion capture process is illustrated in Exhibit B-1. Low concentrations ofCO 2 are first captured from the low partial pressure exhaust gas stream in an absorptiontower where flue gas is brought in contact with an absorbent solvent (e.g., amine; see below).The CO 2 binds with the solvent at temperatures of 40 to 60 o C. The flue gas, now separatedfrom most of its CO 2 , is ready to be sent to the stack. Meanwhile, the “rich solvent” ispumped to the regeneration vessel (or stripper) through a heat exchanger. The stripper hasslightly more than atmospheric pressure and temperatures ranging from 100 to 140 o C. 117Under these conditions, the solvent begins the regeneration process and CO 2 is stripped.The heat supplied to the regeneration vessel to strip CO 2 from the solvent carries asignificant energy cost. The CO 2 is then cooled, dried, and compressed to a supercritical fluidstate at which point it can be stored or used commercially. 118 After the removal of CO 2 , the“lean” solvent is cooled and pumped back to the absorption tower through a heat exchangerto be reused in the process.Exhibit B-1: Post-Combustion CO 2 Capture Process (Absorption)Source: Vattenfall. (2010) 119117 Note that these temperatures are applicable for the amine solvents.118 National Coal Council, Inc. (2008). Advanced coal technologies: Greater efficiency and lower CO2 emissions.119 Vattenfall. (2010). Illustrations. Retrieved from Vattenfall News & Reports website.23 February 2010 76

Appendix B: Technology Design Options for a Capture Ready PlantThe post-combustion CO 2 capture absorbent solvents that are most under consideration atthis time are amine, chilled ammonia, and carbonates. CO 2 capture using amine, such asmono-ethanol amine (MEA), is a commercially proven technology. Amine solvents canremove substantial amounts of CO 2 at low pressure and are relatively inexpensive.However, they are corrosive, have high degradation in the presence of oxygen and acidgases, have high solvent losses due to fast evaporation, and require a significant amount ofenergy for regeneration. 120 Estimates from the US National Energy Technology Laboratory(NETL) suggest that the low-pressure steam requirements may reduce a unit’s poweroutput by 20 to 40%. 121The amine-based chemical absorption process for CO 2 capture is widely used in thebeverage and petrochemicals industries, and consequently commercial amine absorptionsystems are available from a number of vendors.An amine scrubbing system is capable of removing between 80% and 95% of the CO 2 from aflue gas stream. However, acidic gases such as NO x and SO x must be removed from the fluegas prior to passing through the absorber tower. NO x and SO x react with the amine,resulting in a reduction in solvent performance, higher chemical consumption, and pooreconomic performance.B.1.1 Capture Ready Design Considerations for Post-Combustion CaptureGiven that the chilled ammonia-based capture process is not yet commercially available, onlythe amine-based capture systems are described in this appendix. It is to be noted, however,that chilled ammonia-based capture is already in the (small-scale) demonstration stage, and ismore likely to be commercialized than other options. With amine-based capture, the keyconsiderations for a Capture Ready plant are to ensure (a) high power plant efficiency, (b) aclean flue gas that is nearly SO x and NO x free, and (c) potential modifications to the steamcycle, as large quantities of low-pressure steam are required for the capture process.High Efficiency: High-efficiency (supercritical and ultra-supercritical) pulverized coal (PC)plants will likely be considered first for CO 2 capture retrofitting, due to the high efficiencyand capacity penalties of CCS.Flue Gas Treatment: Proper treatment of the flue gas prior to its entry into the aminebase capture plant is critical, as economic operation of the capture plant is only possiblewith a clean flue gas. Impurities such as particulates, and especially SO x and NO x , need to beremoved to very low levels. Removal of particulate matter is important to reduce thepotential for clogging in the absorber. 121 The acid gas components have an irreversiblechemical reaction with the amines to form stable salts that reduce the absorptive capacityand create the risks of solid formation; this results in extra consumption of the solvent tomaintain effective CO 2 capture rates, and the generation of a waste steam. The IPCC has120 Zachary, J.. (2008). CO2 capture and sequestration options - impact on turbomachinery design. Bechtel PowerCorporation.121 U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2008e). Existing Coal PowerPlants and Climate Change: CO2 Retrofit Possibilities and Implications.23 February 2010 77

Appendix B: Technology Design Options for a Capture Ready Plantnoted that the maximum SO 2 concentrations can be 10 ppm, 122 although low levels of 1–2ppm may be required for economic operation. 123This implies that commercial FGDs that remove 98–99% of SO x may not be sufficient tomake the economics of capture favourable, and additional SO x cleanup may be necessary. Ina Capture Ready plant design, the SO x removal technology will likely be more stringent thanis strictly necessary to comply with emission specifications. This will be a more expensiveunit, but will save money compared with adding an additional deep SO x removal unit whenCO 2 capture is retrofitted. Clearly, the use of low-sulfur coals is another prerequisite.Steam Requirement: Nearly 1.5 metric tons of low-pressure steam need to be extractedper metric ton of CO 2 for the capture process, which can reduce the overall powergeneration. 124 Furthermore, the loss of steam from the steam turbine implies that theturbine would be running at about 60% of design rating, which is off its efficiencyoptimum. 125 Hence, options to reduce the efficiency and capacity reductions due to theextraction of low-pressure steam are a critical part of designing a Capture Ready plant.Several options are described to achieve this, e.g., the use of throttled low-pressure turbine,a floating pressure LP turbine, or a clutched LP turbine lead to lower penalties when CO 2capture is retrofitted. 126B.1.2 Capture Ready Design Concepts for Amine ScrubbingIn this section, the characteristics of a reference power plant and three different options fora post-combustion CCS Ready power plant are described. The first two options are basedon plant designs from the IEA GHG 2007/4 report, 126 and the third is based on the CaptureReady design in the NETL Capture Ready report. 127Reference Plant: The reference plant represent a business-as-usual (BAU) case with noanticipation of future CO 2 capture controls. The plant is a nominal 600 MW supercriticalPC. Emission control options include flue gas desulfurization, selective catalytic reduction,and activated carbon injection. This plant is assumed to have four steam turbine stages: onehigh, one intermediate, and two low-pressure stages. Although no specific space and tie-insare provided in this plant, a retrofit is assumed to be reasonably possible.Option 1 (Throttle valve case): This first option represents a low-cost approach to aCapture Ready plant. Along with the minimum essential Capture Ready steps, such as122 For example, the Fluor Daniel Econamine FG process has a flue gas specification with a maximum of 10 ppm SO2content. Intergovernmental Panel on Climate Change (IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture andStorage. New York, NY: Cambridge University Press.123 Intergovernmental Panel on Climate Change (IPCC). (2005a). IPCC Special Report on Carbon Dioxide Capture andStorage. New York, NY: Cambridge University Press.124 Simbeck, D.. (2004). CO2 capture from power and fuels. Presentation at the International Petroleum IndustryEnvironmental & Conservation Association Climate Change Workshop, Baltimore, MD.125 Massachusetts Institute of Technology (MIT). (2007). The future of coal: Options for a carbon-constrained world.Cambridge, MA: Author.126 International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2007a). CO2 capture ready plants (Reportno. 2007/4). Cheltenham, UK: Author.127 U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2008b). CO2 capture ready coalpower plants (DOE/NETL Publication no. 2007/1301).23 February 2010 78

Appendix B: Technology Design Options for a Capture Ready Plantensuring enough land and building space, the only major expense for this option is the FrontEnd Engineering Design (FEED) work to plan for retrofitting an amine-based CO 2 capturesystem. In the FEED design work, provisions would be made for incorporation of a throttlevalve, ducting, and extraction steam piping to the amine reboiler. The throttle valve would beinstalled once the amine unit is retrofitted, and would be used to extract steam at a pointbetween the intermediate and first low-pressure steam turbines.Option 2 (Clutch case): The second option represents a more costly approach thanOption 1, with the benefits of lowering total capture costs and improved heat rateperformance. FEED work will be similar to Option 1, with the exception of design andincorporation of a clutch between the two low-pressure steam turbine stages. With 50%steam extraction for the amine reboiler, declutching the second low-pressure steam turbinestage from operation would improve heat rate performance.Option 3 (Oversize case): This option represents a different Capture Ready approachfrom those in Options 1 and 2. Instead of modifying the steam turbine for incrementalperformance gains in heat rate, Option 3 increases the size of the steam furnace such thatthere is no loss in electric output capacity (MW) compared with the reference plant after aCO 2 capture retrofit. The reference plant’s initial gross capacity of 580 MW is upsized toapproximately 660 MW. All downstream systems are upsized as well to accommodate boththe increase in steam flow as well as flue gas. It is assumed that before CO 2 captureretrofitting, the boiler will be operated at partial load with no heat rate penalty.B.1.3 Economics of Post-Combustion Capture Ready OptionsExhibit B-2 below presents a line-item breakdown of the typical capital costs for thepulverized coal reference plant, located in the United States, in 2007 US dollars. 128 Theovernight total plant cost for the supercritical PC station is approximately US$866 millionor US$1,575 per kW. Total plant costs exclude all owner costs, such as rail spurconnection, transmission interconnections and upgrades, interest during construction, etc.Note that these numbers are meant for illustrative purposes only, and they are sensitive tothe chosen assumptions. They mostly serve to illustrate the usefulness of a Capture Readyplant, not the optimal degree of readiness for all situations.The incremental costs for Capture Ready design Options 1, 2, and 3 are also shown inExhibit B-2. The incremental cost of $4.4 million for Option 1 reflects the upfrontengineering design fees associated with accommodating a post-combustion amine-basedCO 2 capture system sometime in the future. Incremental costs of approximately $25 millionfor Option 2 reflect both the design fees consistent with Option 1 and the clutchmechanism between the two low-pressure steam turbine stages. The clutch installation andmaterials costs amount to approximately $20 million. Option 3 has the largest incrementalcapital cost requirements of approximately $444 million, as it represents the upsizing of thesteam furnace and all associated downstream systems that need to accommodate a largersteam and flue gas flow. The cost of the additional land area is not included in this analysis. 129128 The cost is given in 2007 US dollars since the NETL Capture Ready Report (U.S. DOE-NETL, 2008b ) used 2007 USdollars as its basis.129 Given that the design Options 1 and 2 are based on the IEA GHG report, and the design Option 3 was based on NETLreport, there are differing capital cost assumptions behind these two reports. ICF has conducted a first-order reconciliation ofthe different cost assumptions, and the numbers shown in Exhibit B-2 reflect this reconciliation process.23 February 2010 79

Appendix B: Technology Design Options for a Capture Ready PlantExhibit B-2: Capital Cost Breakdown for PC Reference Plant andAmine Scrubbing Options in US dollarsIncremental CostsNot CCS 1: Throttle 2: Clutch Case 3: OversizedReady Valve Case $000 Boiler CaseSystem Name$000 $000$000Coal Handling 53,456 12,502Feedwater & Misc. BOP System 74,795 25,129PC Boiler 280,708 73,231Flue Gas Cleanup 126,202 36,284Ducting 35,801 2,402Steam Turbine Generator 112,230 20,350 13,618Cooling Tower and Water Circulation 37,285 25,868Ash + Waste Handling 12,070 2,420Wiring and Cabling 47,183 24,240Instrumentation & Control 20,284 3,679Improvements to Site + Buildings 66,377 6,433Incremental Front End Engineering and Design 4,400 4,400 18,590Total Plant Cost ($000) 866,391 4,400 24,750 244,396Total Plant Cost ($/kW) 1,575 8 45 444Exhibit B-3 below summarizes the potential significant cost savings for being Capture Ready.As mentioned above, without CO 2 capture, the reference PC plant costs approximately$1,575 per kW to build. Retrofitting this plant for a 90% capture of CO 2 using an aminebasedscrubbing process would cost an incremental $599 million with a total cost of $3,865per kW.Exhibit B-3: Capture Ready and Post CCS Retrofit Capital Cost Comparison forPC Reference Plant and Amine Scrubbing OptionsCapital Cost w/ CR costs a Capital Cost w/ CCS retrofit bCapture Ready Option $000 $/kW $000 $/kWNot CCS Ready 866 1,575 1,465 3,8651: Throttle Valve Case 871 1,583 1,452 3,6822: Clutch Case 891 1,621 1,478 3,6513: Oversized Boiler Case 1,110 2,019 1,568 2,871a w/ CR – with Capture Ready pre-investmentsb w/ CCS – with CO2 capture retrofitCapture Ready Option 1 represents a minimal approach to Capture Ready, and alsorepresents a minimum savings in absolute terms of approximately $13 million or $182/kW.Option 3 has the highest initial capital cost at $1,110 million or $2,019/kW of all theoptions, because Option 3 represents a different Capture Ready approach compared withOption 1 or Option 2 (as explained above). Due to the significant upfront costs, Option 3also represents the highest-cost option in absolute terms after CCS retrofitting, at $1,56823 February 2010 80

Appendix B: Technology Design Options for a Capture Ready Plantmillion. However due to the regaining of capacity from the oversize furnace, Option 3represent the lowest cost on an output basis, at $2,871/kW.Note that the economic benefits discussed here are meant only to provide an approximategain for being Capture Ready, and the cost numbers provided above are valid to within ±30%.B.1.4 Potential for New TechnologiesNew CO 2 capture technologies under development can affect the design of a Capture Readyplant, and as such it is important to assess the potential of these new technologies and theimpact they may have on capture ready designs.As of April 2009, EPRI had determined that there are more than 50 post-combustion CO 2capture concepts and 6 physical/chemical process types under development, which can becategorized as depicted in Exhibit B-4. 130Exhibit B-4: Post-Combustion CO 2 Capture Technology GroupsSource: EPRI. (2009). 130Of these technologies, chilled ammonia-based CO 2 capture is considered a key technologythat could compete with amine-based capture. Although still under development, the chilledammonia-based CO 2 capture process is very similar to that of the amine capture process,but has a strongly reduced efficiency penalty. The greater efficiency of the chilled ammoniacapture process can be attributed to its reduced heat of reaction energy needs (60% lowerthan MEA), its ability to regenerate without stripping steam, and its greater CO 2 absorptivecapacity. 130 Other advantages include:• Lower energy requirement for solvent regeneration (steam consumption is low);• Reduced sensitivity of the solvent to acid gases such as SO x and NO x ;• Resistance to oxidative and thermal degradation;• Ability to clean the flue gases of NO x , SO x and other pollutants;130 Electric Power Research Institute (EPRI). (2009). CO2 capture status. Presented at the Westar Spring Business Meeting,Incline, NV.23 February 2010 81

Appendix B: Technology Design Options for a Capture Ready Plant• Cheap solvent; and• Low corrosion impact.The main barriers, at present, toward large-scale demonstration of ammonia-based captureare:• Ammonia losses as vapour phase in the discharged flue gases, due to its small molecularweight and large vapour pressure—direct discharge into the atmosphere is not allowedin many jurisdictions;• Absorption must be carried out at low temperature to minimise ammonia loss (hence,“chilled” ammonia);• High refrigeration load requirements;• Lack of technology maturity and confidence;• Stripper fouling; and• Increased capital costs due to the need for several absorber vessels used for minimizingloss of ammonia and maintaining water balance.More broadly, the lack of commercial-scale process experience at this time is limiting thedeployment of this technology. 131Beyond chilled ammonia, there are development efforts on novel solvents for improvedperformance with reduced auxiliary energy consumption, as well as new process designssuch as hybrid membrane-absorbent systems, solid adsorbents, and high temperatureregenerable sorbents. 132 One promising option to reduce the efficiency penalty is CaOlooping. 133 In this process, CaO reacts at around 600°C with CO 2 to form CaCO 3 . Thiscalcium carbonate can be regenerated at temperatures of around 900°C, and the heatgenerated in the process can be used to produce extra power. Weak points are the energypenalty of flue gas reheating and sorbent regeneration and the low stability of the CaOsorbent, leading to a large make-up flow of sorbent.While still in the research and development stage, these new technologies may, in thefuture, lead to post-combustion capture systems that have lower energy and efficiencypenalties. A big challenge will be proving the reliability at commercial-scale operation. 132B.2 Oxy-fuel Based CaptureAnother promising CO 2 capture approach is to use high-purity oxygen for combustion, toproduce an extremely concentrated stream of CO 2 that is easily compressed and deliveredby pipeline for storage. The oxy-fuel combustion process, illustrated in Exhibit B-5, beginswith fuel being combusted in pure oxygen and recycled flue gas consisting of water vapour131 Zachary, J.. (2008). CO2 capture and sequestration options - impact on turbomachinery design. Bechtel PowerCorporation.132 Intergovernmental Panel on Climate Change (IPCC). (2005). IPCC Special Report on Carbon Dioxide Capture andStorage. New York, NY: Cambridge University Press.133 Abanades, J.C.. (2002). The maximum capture efficiency of CO2 using a carbonation/calcination cycle of CaO/CaCO3.Chemical Engineering Journal, 90, 303-306. doi:10.1016/S1385-8947(02)00126-2.23 February 2010 82

Appendix B: Technology Design Options for a Capture Ready Plantand CO 2 . The exhaust flue gas is then cleaned, after which it consists of mainly CO 2 andwater vapour. Next the flue gas is cooled and condensed, leaving nearly pure CO 2 .Exhibit B-5: Oxy-Combustion CO 2 Capture ProcessSource: Vattenfall. (2010). 134By using the oxy-fuel process, the need for post-combustion CO 2 capture is avoided, thuslowering the cost of carbon compliance—albeit at the cost of air separation. Additionally,mercury emissions are reduced and NO x emissions are estimated to be cut in half. 135For an oxy-fuel combustion-based power plant to be a cost-effective, a low-cost supply ofpure oxygen is needed. Although commercially available cryogenic air separation technologyis both capital- and energy-intensive, several technologies are being developed that couldgreatly reduce costs.B.2.1 Capture Ready Design Considerations for Oxy-fuel CombustionRetrofit of the advanced power cycles mentioned in the previous section involves numerouschanges. Combined with the uncertainties in these new technologies, it is unlikely that autility would construct a Capture Ready plant with a retrofit to an AZEP arrangement (forexample) in mind. Partly because of this, pulverized-coal-fired boilers are expected to be themain category of power plants that would be constructed as being Capture Ready forretrofitting with oxy-fuel technology. This retrofit could, of course, involve one of theadvanced oxygen generation technologies mentioned in the previous section (if consideredas reliable and economical).134 Vattenfall. (2010). Illustrations. Retrieved from Vattenfall News & Reports website.135 Zachary, J.. (2008). CO2 capture and sequestration options - impact on turbomachinery design. Bechtel Power Corporation.23 February 2010 83

Appendix B: Technology Design Options for a Capture Ready PlantRetrofitting a pulverized coal boiler for oxy-fuel firing can be quite complex. The mainchanges at the time of retrofit are:• Addition of an air separation unit (ASU) and associated equipment at retrofit;• Installation of a flue gas (CO 2 -steam) recycle system to reduce flame temperatures andtransport coal into the boiler (provisions could be made for this recycle system in aCapture Ready design).• Replacement of air-fired burners with burners capable of burning with the oxygen/fluegasrecycle mixture;• Installation of flue gas condenser;• Modified heat integration to use newly available sources of low-temperature heat (e.g.,from the flue gas recirculation cooler and CO 2 compressor intercooler), such that thesteam bleed, which is normally be used to preheat boiler feedwater, is no longerrequired and can be expanded in the low-pressure steam turbine (a Capture Ready plantcould have an overcapacity in the low-pressure steam turbine as well as in the electricitygenerator);• The air ingress should be minimized to 3 to 5% 136 in a PC boiler for oxy-firing. (Inleakageof air—sometimes as high as 20%—into the boiler and its ancillaries, a normalpractice in a standard PC boiler, will cause the CO 2 product to be diluted with air andpartly destroying the effect of burning the coal with pure oxygen; hence the need forminimizing the air ingress);• Ensure handling of the gas flows both before and after the retrofit, as the gas flows inthe flue-gas desulphurisation unit (FGD) will be different after retrofit of oxy-firing.B.2.2 Capture Ready Design Concepts for Oxy-fuel CombustionThe characteristics of a reference power plant and three different options for an Oxy-fuelcombustion plant, based on the IEA GHG 2007/4 report, are described below.Reference Plant: The reference plant under the Oxy-fuel approach is the same referenceplant used in the amine scrubbing approach described above. The plant represents a BAUcase with no anticipation of future CO 2 capture controls. The plant is a nominal 600 MWsupercritical PC. Emission control options include flue gas desulfurization, selective catalyticreduction, and activated carbon injection. The plant is assumed to have four steam turbinestages: one high, one intermediate, and two low-pressure stages.Option 1 (Essentials case): The first Capture Ready option represents a low-costapproach. Along with the minimum essential Capture Ready steps, such as ensuring enoughland and building space, the only major expense to this option is the FEED work to plan forretrofitting to oxy-fuel combustion. In the FEED design work, provisions would be made inducting for the recirculation of flue gas back into the boiler. Further provisions would be forthe interconnection and integration of the air separation unit and the CO 2 compressionplant. In this approach, no additional equipment is purchased.136 International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2007a). CO2 capture ready plants (Reportno. 2007/4). Cheltenham, UK: Author.23 February 2010 84

Appendix B: Technology Design Options for a Capture Ready PlantOption 2 (Oversize Generator case): The second option represents a more costlyapproach than Option 1, with the benefits of lowering total capture costs (on a $/kWbasis) and improved heat rate performance. FEED work will be similar to Option 1, withthe exception of design and incorporation of an oversize turbo-generator to captureadditional steam.In the water-steam-condensate cycle of a steam turbine power generation station, somesteam is bled off from power generation purposes to reheat condensate and feedwater toimprove overall cycle efficiency. However some of this bleed-off could be made up from lowgrade heat recovery made available by the oxy-fuel combustion approach. Low grade heatrecovery is available from three sources with this retrofit: (1) flue gas recirculation circuit,(2) ASU, and (3) CO 2 compression equipment. An additional 2% to 3% of gross capacitycould be reclaimed with an oversized turbo-generator.Option 3 (Oversize Turbine/Generator case): This option represents an incrementalpre-investment to Option 2. In addition to the generator upgrade, oversizing the steamturbine and cooling towers would also be required. Estimates of up to 5% of additionalcapacity could be recovered if all low-grade recoverable heat is captured. In Option 2, fullrecovery is constrained by steam turbine size and limited cooling tower capability.B.2.3 Economics of Oxy-Fuel Capture Ready OptionsExhibit B-6 presents a line-item breakdown of the capital costs for the PC reference plant,in the United States in 2007 dollars, the same reference plant used in the amine scrubbingcase. The overnight total plant costs are approximately $866 million or $1,575 per kW.Exhibit B-6: Capital Cost Breakdown for PC Reference Plantand Oxy-fuel Combustion Options in US dollarsIncremental CostsReference Capture Ready Capture Ready Capture ReadySystem NamePlant $000 Option 1 $000 Option 2 $000 Option 3 $000Coal Handling 53,456Feedwater & Misc. BOP System 74,795PC Boiler 280,708Flue Gas Cleanup 126,202Ducting 35,801Steam Turbine Generator 112,230 1,025 5,125Cooling Tower and Water Circulation 37,285 1,025 3,075Ash + Waste Handling 12,070Wiring and Cabling 47,183Instrumentation & Control 20,284Improvements to Site + Buildings 66,377Incremental Front End Engineering and Design 4,100 5,125 6,150Total Plant Cost ($000) 866,391 4,100 7.175 14,350Total Plant Cost ($/kW) 1,575 7 13 323 February 2010 85

Appendix B: Technology Design Options for a Capture Ready PlantThe incremental costs for Option 1, 2, and 3 are also shown in the Exhibit B-6. Theincremental costs of $ 4.1 million for Option 1 reflect the upfront engineering design feesassociated with planning for the re-routing of ducting for the recirculation of flue gas backinto the boiler and integration of the air separation unit and the CO 2 compression plant.Incremental costs of approximately $7.2 million for Option 2 reflect both the design feesconsist with Option 1 and the incremental cost of an oversized generator. Option 3 has thelargest incremental capital cost requirements of approximately $14 million, as it includes thecosts of Option 2 plus the incremental costs of an oversized steam turbine and increasedcooling tower capability.As seen in the amine capture case, a planned approach can realize significant cost savings aswell as a reduction in the cost of CO 2 abatement (see Exhibit B-7). The reference PC plantcosts approximately $1,575 per kW to build. Retrofitting this plant for a 90% capture ofCO 2 using oxy-fuel fuel gas recirculation would cost an incremental $382 million for a totalcost of $2,974 per kW. Option 1 represents a minimal approach to Capture Ready, and alsorepresents a minimum savings in absolute terms of approximately $1 million. Option 3represents an optimization approach that will take advantage of all the low-grade heat madeavailable when the oxy-fuel system is installed. As a Capture Ready approach, Option 3 hasthe highest initial capital cost in absolute terms, at $881 million. Due to the upfront costs,Option 3 also represents the highest-cost option in absolute terms after retrofitting, at$1,266 million. However, due to the regaining of capacity from the oversized steamturbine/generator, Option 3 represents the lowest cost on an output basis, at $2,858/kW.Exhibit B-7: Capture Ready and Post CCS Retrofit Capital Cost Comparisonfor PC Reference Plant and Oxy-fuel Options in US dollarsCapital Cost w/ CR costs Capital Cost w/ CCS retrofitCapture Ready Option $000 $/kW $000 $/kWReference Plant 866 1,575 1,248 2,974Capture Ready Option 1 870 1,582 1,247 2,972Capture Ready Option 2 873 1,587 1,257 2,916Capture Ready Option 3 881 1,578 1,266 2,858B.2.4 Potential for Advanced Oxy-Fuel TechnologiesResearch into improved power generation with CCS using the oxy-fuel concept focuses ontwo areas: (1) oxygen generation technologies with reduced power requirements andinvestment cost; and (2) improved power cycles. 137 These advancements could reduce theneeded space for Capture Ready plants, as well as lower the internal power and otherresource consumption.Improved Oxygen Generation Technologies: Only cryogenic air separation iscurrently available to supply the required oxygen quantities and purities for large-scale137 For more information on this topic readers are referred to: (1) International Energy Agency Greenhouse Gas R&D Programme(IEA GHG). (2007b). Improved oxygen production technologies (Report no. 2007/14). Cheltenham, UK: Author; and (2) Kluiters,S.C. et al.. (to be published in 2010). Developments in advanced oxygen generation technologies for clean power production. InMaroto-Valer, M.M.. (Ed.), Developments and innovation in carbon dioxide chapter and storage technology: Carbon dioxide (CO2)capture, transport, and industrial applications (Volume 1) (ch. 11). Cambridge: Woodhead Publishing.23 February 2010 86

Appendix B: Technology Design Options for a Capture Ready Plantpower production. But energy consumption and investment cost are substantial. Initiativesto improve cryogenic air separation include moving from a two-column to three-columnsetup. This setup could reduce the electricity input by 20-30%. 138Vacuum Swing Adsorption (VSA) and Pressure Swing Adsorption (PSA) are alternative airseparation technologies. Both are batch processes using a number of columns filled withsorbent to separate the air at ambient temperature. Although promising, the typical size ofPSA and VSA systems is considerably smaller than needed for a large-scale oxy-fuel powerplant, and therefore substantial research is still needed to prove feasibility of thesetechnologies at a larger scale.Another promising air separation technology is oxygen selective membranes. Thesemembranes separate air by transporting only oxygen through the bulk of the material. Thedriving force for this transport is a pressure differential (more correctly chemical potential)of oxygen over the membrane. So far, the scale of oxygen selective membranes has fallenshort of requirements for large scale power generation. Technological gaps still to be closedinclude high-temperature high-pressure sealing and the reproducibility of the production ofthe membrane tubes (e.g., their circularity and roughness).Chemical looping technologies do not produce a high-purity oxygen stream, but make use ofmetallic oxygen carriers to transfer the oxidizing agent to a fuel for full or partialcombustion. This technology is also still in the research phase and faces materials problems,especially concerning oxygen carrier stability under oxidation-reduction cycles.Improved Oxy-fuel Power Cycles: Apart from chemical looping technologies, all the airseparation options described above can be connected to power plants as stand-alone units,replacing cryogenic air separation units. Various power cycles have been proposed with standaloneair separation units, among them the Water Cycle, Graz Cycle and MATIANT Cycle. 139Another group of power cycles incorporate the oxygen generation technology into thepower cycle without producing a high-purity oxygen stream. This group includes the alreadymentioned chemical looping technologies. Another well-known example including an oxygenselective membrane is the Advanced Zero Emission Power Cycle (AZEP). These powercycles with integrated air separation show promise for significant reductions in efficiencypenalty and cost for CO 2 emissions avoided, compared with more standard power plantswith oxy-fuel CO 2 capture using stand-alone cryogenic air separation.138 For other improvement options in cryogenic ASUs see: (1) International Energy Agency Greenhouse Gas R&DProgramme (IEA GHG). (2007a). CO2 capture ready plants (Report no. 2007/4). Cheltenham, UK: Author. And (2) Prins, M.(2009). Technology advances in IGCC with CO2 capture. Presented at the 4 th International Conference on Clean CoalTechnologies, Dresden, Germany.139 See for example: (1) Foy, K. & Yantovski, E.. (2006). History and state-of-the-art fuel fired zero emission power cycles.International Journal of Thermodynamics, 9, 37-63. (2) Kvamsdal, H.M., Maurstad, O., Jordal, K., & Bolland, O.. (2004).Benchmarking of gas-turbine cycles with CO2 capture. Paper presented at 7th International Conference on Greenhouse GasControl Technologies, Vancouver, Canada. And (3) International Energy Agency Greenhouse Gas R&D Programme (IEAGHG). (2007b). Improved oxygen production technologies (Report no. 2007/14). Cheltenham, UK: Author.23 February 2010 87

Appendix B: Technology Design Options for a Capture Ready PlantB.3 Pre-combustion CaptureFor flue gases with low CO 2 concentration, it would be useful to capture CO 2 prior tocombustion. Such “pre-combustion” strives to separate the CO 2 from a process stream richin CO 2 prior to combustion of the remaining hydrogen-rich fuel.Prime candidates for pre-combustion CO 2 capture are Integrated Gasification CombinedCycle (IGCC) power plants. IGCCs generally use high-temperature oxygen-blown entrainedflow gasifiers. Syngas cooling can take place against boiler feedwater and steam in a syngascooler, or by means of a wet quench. Following this, a number of cleanup steps are used toclean the syngas of contaminants.Natural-gas-fired combined cycle power plants can also be equipped with pre-combustioncapture. For these gaseous fuels, the fuel conversion into syngas is achieved through partialoxidation and/or steam reforming. If a combination of both is used, it is generally termedauto thermal reforming. As natural gas is a clean fuel, no elaborate cleaning is required, buthumidifying and possibly steam or water injection in the combustion chamber may still berequired to reduce NO x formation.An important consideration in IGCCs with pre-combustion CO 2 capture is whether toremove sulphur compounds before or after shifting. If removed before, it is called “sweetshift” (or clean shift). An advantage of this setup is that it is easier to remove a relativelypure sulphur (H 2 S) flow without dilution by CO 2 , as the latter is only present in smallquantities. If sulphur compounds are removed after shift, the setup is called “sour shift.”Advantages of this arrangement are a more level temperature profile, and thus higherefficiency, and no need for a separate COS hydrolysis reactor as this reaction already takesplace in the shift reactors. Moreover, sour shift catalysts have a wider temperature windowto operate in than sweet shift catalysts. Avoiding sulphur removal before shifting leavesmore steam in the syngas flow, requiring less additional steam for shifting.After water gas shift, the CO 2 is removed from the syngas. Technologies used includesolvents also used for desulphurization, such as Selexol or Rectisol. For IGCCs for bothsolvents, schemes have been proposed combining sulphur and CO 2 removal (in case a sourshift arrangement would be used). The resulting hydrogen-rich fuel stream cannot be fired ina gas turbine equipped with dry low-NO x combustion chambers, due to the wideflammability limits and high flame speed of hydrogen. Therefore, diffusion flame combustionchambers are needed, the hydrogen-rich fuel stream needs to be humidified, and nitrogenneeds to be added (as is also done in IGCCs without CO 2 capture) to reduce NO xformation. Exhibit B-8 shows an IGCC equipped with pre-combustion CO 2 capture using asour shift.One drawback of pre-combustion method is that there are only a small number of IGCCplants, while the industry has much more experience in PC plants. In recent years, however,many coal gasifiers have been built for chemicals production, and the reliability of IGCCplants currently running (such as Nuon’s Willem Alexander Centrale in Buggenum, TheNetherlands) matches that of PC plants.23 February 2010 88

Appendix B: Technology Design Options for a Capture Ready PlantExhibit B-8: Pre-Combustion CO 2 Capture ProcessSource: Vattenfall. (2010). 140B.3.1 Capture Ready Design Considerations for Pre-Combustion CaptureRetrofitting with pre-combustion CO 2 capture has consequences for the complete powerplant, and consequently Capture Ready considerations apply to virtually all components.Reduced Heat Content of the Gas Turbine FuelAn important consequence of retrofitting a power plant with pre-combustion capture is thatthe heat content of the fuel gas is reduced, potentially leading to a drop in electricity output.The water-gas shift reaction is exothermic, which means that part of the heat content in theincoming flow (into the water-gas shift reactors) is released in the form of sensible heat(most likely used for steam production). This means that the heat content of the hydrogenrichfuel fired in the gas turbine decreases by around 10% compared with the non-capturecase. In other words, the gas turbine combined cycle will operate in part load if noadditional fuel is added.For a natural gas combined cycle this may not be a big Capture Ready consideration, asmost of the equipment required for the pre-combustion capture retrofit (mainly thepartial oxidation/reforming reactor) will be designed at the time of retrofit and thus can besized to guarantee full load operation of the gas turbine. Basically, only the natural gasinput needs to increase. For IGCCs it is an important consideration, however. To preventpart load operation after capture retrofit, the gasifier needs to be oversized in the originaldesign, and with the gasifier also the air separation unit and gasifier auxiliaries (such as thecoal feeding system).Syngas Cooler vs. Wet QuenchFor IGCC power plants, the choice between a convective syngas cooler (which heats andevaporates steam cycle feedwater) and a wet quench influences the shift options at the time140 Vattenfall. (2010). Illustrations. Retrieved from Vattenfall News & Reports website.23 February 2010 89

Appendix B: Technology Design Options for a Capture Ready Plantof retrofit—at least when low-temperature solvents are used for desulphurization. If a wetquench is used, the resulting syngas contains considerable moisture content, which isbeneficial for the water/gas shift section. However, if a sweet shift is used with lowtemperaturedesulphurization, this syngas flow needs to be cooled down considerably andmost of the water will condense. The consequence is that much steam needs to be addedafter desulphurization for the shift reaction, considerably decreasing power output andefficiency. In other words, a wet quench limits the possibilities to apply a sweet shift afterretrofit. A syngas cooler does not affect the sweet vs. sour shift decision as much.Water Gas Shift SectionAn obvious change during the retrofit is the incorporation of shift reactors and heatexchangers as part of the shift section. Depending on the shift arrangement (classical shiftwith two reactors and intercooling vs. advanced shift with up to four reactors or possiblyalternative arrangements), different tie-ins and integration options with the hot water/steamcycle are required. As the shift section also hydrolyses COS into H 2 S, the COS hydrolysisreactor is no longer required if a sour shift arrangement is chosen. These considerationsmainly apply to IGCCs.It is worth mentioning here that Jacobs Engineering has proposed to include a water gasshift reactor from the start; i.e., even when not capturing CO 2 , as a Capture Readyoption. 141 An important benefit of this option is that the extent of retrofit changes issubstantially reduced, with the gasification train already at the right size for capture, whichwill reduce downtime during the retrofit. However, it comes at the expense of a reducedefficiency before retrofit (around 5% additional fuel consumption) and increased initialcapital cost. 142Sulphur and CO 2 SeparationCapture Ready considerations can also be important for the desulphurization section ofIGCCs. Optimal solvents for sulphur removal in IGCCs without CO 2 capture (oftenchemical solvents such as Sulfinol) are usually not the optimal choice for IGCCs with CO 2capture (often physical solvents such as Rectisol or Selexol are preferred). A Capture Readydesulphurization design could already use the solvent anticipated to be used after retrofit,and ideally the desulphurization equipment could also be reused after retrofit. This wouldmean that the only change at the time of retrofit may be addition of a column and auxiliariesto also remove the CO 2 from the syngas stream. Linde has shown that such a CaptureReady desulphurization plant using Rectisol can significantly reduce the cost for CO 2removal at the time of retrofit, although at the cost of elevated investment cost when thepower plant is built. 143141 International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2005). Retrofit of CO2 capture to naturalgas combined cycle power plants (Report no. 2005/1). Cheltenham, UK: Author.142 International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2007a). CO2 capture ready plants (Reportno. 2007/4). Cheltenham, UK: Author.143 Kerestecioglu et al.. (2009). Stepwise Extension of a Gas Cleanup for IGCC Application. Presented at the 4thInternational Conference on Clean Coal Technologies, May 18-20, 2009, Dresden, Germany.23 February 2010 90

Appendix B: Technology Design Options for a Capture Ready PlantGas TurbineIn the gas turbine, the main changes and limitations due to retrofit will be in the combustionchamber and turbine. IGCCs without CO 2 capture already use diffusion flame combustionchambers due to the hydrogen content of the syngas fuel. However, the increase inhydrogen content can still mean that more nitrogen will need to be added as diluents, orpossibly that steam or water injection in the gas turbine may become necessary to limitcombustion temperatures. For natural-gas-fired combined cycles firing with the hydrogenrichfuel, this will mean that the dry low-NO x combustion chambers need to be replacedwith diffusion flame combustion chambers. If nitrogen is available from an air separation unit,it would preferably be used to reduce flame temperatures (in addition to humidification). Ifnot, direct water or steam injection into the gas turbine combustion chamber may berequired to limit NO x emissions. Another option is to install a selective catalytic reducer(SCR) deNO x unit, which can easily be operated to remove more NO x when this isnecessary after installation of CO 2 capture. The main Capture Ready consideration forIGCCs may be to ensure that water/steam injection is possible if deemed necessary afterretrofit, and for natural-gas-fired plants to ensure that the dry low-NO x combustionchambers can be replaced with diffusion flame combustion chambers at the time of retrofit.An important consideration for the gas turbine expander is the mass flow limitation at theinlet. At higher power settings, the corrected mass flow at this inlet is constant as the flowis choked (which means the flow capacity is at a maximum). The diluted syngas will have alower heating value (per unit of volume) than the natural gas for which these gas turbineswere designed. Consequently, a higher fuel mass flow is required to achieve the sameturbine inlet temperature (an important determinant of cycle efficiency). But because thecorrected mass flow at the turbine inlet is at its maximum, either the pressure needs toincrease or the temperature needs to decrease to accommodate this increased mass flow.Increasing pressure means that the surge margin of the compressor is reduced; this isusually not considered acceptable.The main other option remaining is to limit the air flow in the compressor (and thus in thecombustion chamber). To limit the air flow, either the inlet guide vanes can be (partly)closed or air can be bled from the compressor. Both can only be applied to a certain extentwithout endangering stable compressor operation, and air bleeding only makes sense if thecompressed air can be used in the process (it may be possible to use it in the air separationunit). Also, less air through the compressor means lower power consumption by thecompressor and thus higher net gas turbine output. The maximum gas turbine output isusually also limited (e.g., due to mechanical stresses), so this may also limit the extent towhich the mass flow in the compressor can be reduced. 144 To conclude, the mass flowlimitation at the gas turbine inlet often means that the turbine inlet temperature needs to bereduced compared with natural gas operation, reducing cycle efficiency. With CaptureReady in mind, a gas turbine could be selected that can handle reduced compressor loadsand consequently increased power outputs without need to reduce turbine inlettemperatures or bleeding.144 For an example where this maximum output turns out to be limiting, see: International Energy Agency Greenhouse GasR&D Programme (IEA GHG). (2005). Retrofit of CO2 capture to natural gas combined cycle power plants (Report no.2005/1). Cheltenham, UK: Author.23 February 2010 91

Appendix B: Technology Design Options for a Capture Ready PlantAnother turbine consideration arises from the fact that the gases flowing through theturbine are different when CO 2 capture is installed, containing more water. This highermoisture content leads to increased heat load on the turbine, reducing the lifetime ofturbine blades. In practice, this means a slight reduction in turbine inlet temperature isrequired after retrofit. 145 To qualify the design as Capture Ready, a gas turbine could beselected with a turbine designed to handle the high-moisture content flow without reducedturbine lifetime.Heat Recovery Steam Generator and Steam TurbineThe heat recovery steam generator (HRSG) is also likely to be affected by introduction ofpre-combustion CO 2 capture. A lower gas turbine inlet temperature translates directly intoa lower HRSG inlet temperature, which may lead to lower steam quality at the steamturbine outlet. Also, the higher moisture content of the gas turbine exhaust gases mayinfluence heat transfer in the HRSG. To make the design more Capture Ready, theseconsiderations could be taken into account when selecting a HRSG.Retrofit will likely have considerable consequences for the heat and steam integration of thesystem. More elaborate design studies would be required to determine what changes toanticipate at the time of design. Steam turbine modifications, such as the ones describedearlier for post-combustion retrofit, may be required here as well.B.3.2 Capture Ready Design Concepts for Pre-Combustion Capture in an IGCCBased on the considerations for a Capture Ready plant discussed above, a Capture Readydesign option for a pre-combustion capture ready technology option, based on the IEAGHG 2007/4 report, is presented below:Reference Plant: The reference plant represents a BAU case with no anticipation offuture CO 2 capture controls. The plant is a nominal 600 MW IGCC. Gasifiers will beoxygen-blown using ConocoPhilips E-Gas technology with the oxygen being supplied by twoair separation units. The syngas will be cleaned of H 2 S by an amine-based acid gas removal(AGR) system. The clean syngas will feed 2 F-class gas turbines. The gas turbines will beoperated in combined cycle mode with the addition of a single steam turbine.Option 1 (Selexol case): This design option represents a mid-tier approach to CaptureReady. There are four parts to this option. First, along with the other options previouslymentioned, minimum essential Capture Ready steps such as ensuring enough land andbuilding space are to be performed. Second, as the Selexol process will be used in CO 2removal, the acid gas removal process will be switched from amine-based to Selexol-based.This approach will allow for easier retrofitting by adding an additional Selexol stage whenCO 2 capture is required. Third, to mitigate a gas turbine derate due to firing lower-heatingvaluesyngas, a small increase in coal feed capability to the gasifier is required. The lowerheating-valuesyngas refers to the downgrade effects caused by the water shift process usedto concentrate the CO 2 in the syngas. Finally, as with all options, an expense is incurred forFEED work to plan for retrofitting to a CO 2 capture system.145 Zachary, J.. (2008). CO2 capture and sequestration options - impact on turbomachinery design. Bechtel Power Corporation.23 February 2010 92

Appendix B: Technology Design Options for a Capture Ready PlantB.3.3 Economics of Pre-Combustion Capture Ready PlantExhibit B-9 presents a line-item breakdown of the capital costs for the reference plant in2007 dollars, in the United States. The IGCC station with the E-GAS gasifier costsapproximately $1,080 million or $1,734 per kW. The costs represent total plant costs andexclude all owner costs such as rail spur connection, transmission interconnections andupgrades, interest during construction, etc.Exhibit B-9: Capital Cost Breakdown for the IGCC Reference Plant andCapture Ready Option in US dollarsIGCC SelexolIncremental Cost -System NameCapture ReadyReference Plant $000 Option 1 $000Coal Handling 85,022 1,536Feedwater & Misc. BOP System 34,108 788Gasifier & Accessories 422,280 22,292Flue Gas Cleanup 122,503 27,752CO2 Removal and Compression 0 0Combustion Turbine/Accessories 110,676 12,409HRSG, Ducting & Stack 56,606 -1,682Steam Turbine Generator 63,133 -6,069Cooling Water System 26,339 -1,618Ash/Spent Sorbet Handling Sys 34,386 600Accessory Electric Plant 67,016 6,000Instrumentation & Control 22,992 1,901Improvements to Site + Buildings 35,106 -164Incremental Front End Engineering and Design 0 3,003Total Plant Cost ($000) 1,080,167 66,748Total Plant Cost ($/kW) 1,734 107Notes: In the Capture Ready option there is no expected derate in capacity pre CO2 capture.The incremental cost of $67 million for Option 1 is also shown in the Exhibit B-9.Incremental costs for the single-stage Selexol cleaning of H 2 S are approximately $28 million.The small increase in coal feed rate incurs an incremental cost of $23 million. FEED costsare approximately $3 million.Exhibit B-10 is a summary table indicating the potential benefits of the Capture Ready plant.As mentioned above, the reference plant costs approximately $1,733 per kW to buildwithout CO 2 capture. Retrofitting this plant for a 90% capture of CO 2 using the Selexolprocess would cost an incremental $238 million, or a total cost of $2,634 per kW. Theplanned approach, illustrated in Capture Ready Option 1, could realize significant savings forthe developer. While incurring an upfront expense of approximately $67 million, after aretrofit to CO 2 capture, a total savings of $47 million (4% savings) could be realized. On a $per kW basis, the savings is even greater at 7%. Not only is the retrofitting made easier withthe initial investment of single-stage Selexol for AGR, but the increase in coal feed recoverssome lost capacity from the gas turbines as well. 146146 The net capacity for the reference plant under the BAU approach starts at 623 MW pre-capture and falls to 500 MW postcapture.The drop in net capacity in post-capture operation can be attributed to three areas: (1) loss in gas turbine output due tolower heating value syngas, (2) loss in steam turbine output due to additional steam loads, and (3) increase in auxiliary loads.Under the “planned” approach, an increase in the coal feed restores gas turbines to full capacity, which in turn creates additionalsteam, regaining some lost capacity in the steam turbine. In total, through the “planned” approach, a gain of approximately 4% inpower is achieved over the BAU case.23 February 2010 93

Appendix B: Technology Design Options for a Capture Ready PlantExhibit B-10: Capture Ready and Post CCS Retrofit Capital Cost Comparisonfor IGCC Reference Plant and Selexol OptionCapital Cost w/ CR costs Capital Cost w/ CCS retrofitCapture Ready Option $000 $/kW $000 $/kWReference Plant 1,080 1,733 1,318 2,635Capture Ready Option 1 1,147 1,840 1,271 2,453B.3.4 Potential for New TechnologiesThere are a large number of potential improvements for the pre-combustion capturesystems. Research in the field of pre-combustion capture is focused on both improving theIGCC process itself as well as improving CO 2 separation technologies. IGCC technology isstill in the development phase, with little commercial operation experience. Therefore, thereis a significant potential for major performance improvements and capital cost reductions.NETL 147 mentions a number of improvements to the IGCC process, as shown in Exhibit B-11. As both gasification and power island technologies are fairly mature, most efforts arefocused on the development of integration components such as air separation, syngascleanup, and advanced turbines for hydrogen-rich gas. Factors driving gasifier developmentscenter on increasing availability and reliability and reducing the investment cost.Exhibit B-11: Areas of Potential Technology Improvement and Their ImpactsTechnologySyngas cleanupAir Separation through IonTransport Mechanism andadvanced syngas turbineAir Separation through IonTransport Mechanism andadvanced syngas turbine (II)Major TechnologyImpactWarm gas clean upeliminates cold gas cleanup thermal penalties andreduces capital costEliminates ASU thermalpenalty and auxiliary loadand reduces capital costsCombination of increasedpower output andefficient, cheaper ASUEfficiencyImpact(% point increase)TPC Impact($/kW reduction)TPC Impact(% reduction)2 319 17.6%0 118 6.5%2.1 89 4.9%Advanced syngas turbine Increases power output 0.9 73 4.0%Dry coal feed pumpAdvanced IGCC TechnologyTotal ImpactIncreases cold gasefficiency1 19 1.1%5.9 618 34%Source: U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2008c).The base cost is $1800/kW over which reductions are computed. Note: efficiency impacts are HHV-based.147 U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2008c). Current and futureIGCC technologies (DOE/NETL Publication no. 2008/1337).23 February 2010 94

Appendix B: Technology Design Options for a Capture Ready PlantSyngas CleanupOne of the significant areas of potential improvement in IGCC technology is the process ofsyngas cleanup. In order to avoid damaging the turbine, particulate materials and othercontaminants must be removed before the syngas produced by the gasifier is injected intothe gas turbine.Conventional syngas cleanup is generally accomplished by cooling the syngas totemperatures as low as 38ºC or less (the coldest point is usually the syngas desulphurizationusing chemical or physical absorption processes). To humidify syngas before firing andpossibly before shifting, the syngas needs to be re-heated. To avoid these temperaturechanges and thus improve electrical efficiency and cost, less complex syngas cleanup systemswith moderately cooled syngas requirements (“warm gas cleanup”) are being developed.Warm gas cleanup processes may use solid sorbents for the removal of chlorides andsulphur at high temperatures of around 480ºC.Warm gas cleanup is projected to cost about 25 percent less than cold gas cleanup. Whencapital costs are measured on a $/kW basis, they are further reduced as both the steampower output is increased and auxiliary power requirements are lowered. 148 It should benoted that higher temperature syngas cleanup has been pursued for decades, so far withoutsuccess in terms of complete cleanup systems and actual commercial introduction.Oxygen GenerationAir separation provides high-purity oxygen (around 95%) for the gasifier. Currently, this isachieved by using a cryogenic process in which air is cooled to a liquid state and thendistilled. There are, however, new technologies for oxygen generation—as discussed abovein the oxy-fuel combustion sections.Advanced Syngas TurbineTesting shows that hydrogen diluted with nitrogen could be fired in current-vintage F-Classgas turbines. However, achieving significantly higher efficiencies, reduced emissions, andlower costs will require advances in combustor technology, materials, and aerodynamics.R&D strives to increase efficiency by 2% to 5% compared with the conventional combustorF-frame turbines. 148 Coupling the advanced syngas turbine with a low-cost air separationprocess can further increase efficiency gains and reduce cost.Dry Coal Feed PumpNew coal feed pump technology can lead to improvements in gasifier efficiency comparedwith slurry fed gasifiers, as evaporation of the slurry is no longer required. According toNETL an efficiency gain of around 1% can be achieved this way.148 U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2008c). Current and futureIGCC technologies (DOE/NETL Publication no. 2008/1337).23 February 2010 95

Appendix B: Technology Design Options for a Capture Ready PlantAdvanced ShiftAs noted above, the classical shift setup with a high-temperature shift reactor, cooler, andlow-temperature shift reactor requires a considerable amount of steam. Several advancedshift setups have been proposed reducing this steam input. 149Improved CO 2 SeparationAs noted above, current technology for CO 2 separation involves solvents like those used fordesulphurization, working at low temperatures (up to 38°C) and requiring considerablesteam flows and pressure swings. A number of different CO 2 separation technologies areunder development, such as membranes and sorbents. Due to the larger size of CO 2molecules compared with hydrogen molecules, it is hard to develop membranes that arehighly selective to CO 2 (if CO 2 can get through the membrane, hydrogen usually can too).Applying membranes or sorbents is expected to contribute to increased steam powergeneration and lower auxiliary power requirements. 150B.4 Technical Options for Capturing CO 2 from Industrial FacilitiesThis section presents the specific technical considerations for capturing CO 2 from thedifferent categories of industrial sources and the potential barriers to CCS Readiness.B.4.1 Nearly Pure CO 2 ProcessesThere are several industrial processes that produce an exhaust stream of nearly pure CO 2 .In such cases, the capture process can be great simplified to primarily compression of theCO 2 for transport. The primary processes of this type are hydrogen and ammoniaproduction and natural gas processing.Ammonia and Hydrogen ProductionHydrogen is produced for a variety of chemical processing applications, especially associatedwith hydrotreating to reduce the sulphur content of petroleum products. Hydrogen can beproduced at petroleum refineries or at separate facilities. Ammonia is used primarily forfertilizer, as well for some chemical processes. A much larger volume of ammonia is usedglobally compared with hydrogen, and ammonia is transported globally as a commoditychemical. Thus the volume of CO 2 associated with ammonia production is much larger thanthat associated with hydrogen production.For ammonia production, nitrogen and hydrogen are combined in an additional step toproduce ammonia (NH 3 ). The hydrogen production steam reforming step is used in bothhydrogen and ammonia production and is the source of capturable CO 2 .The CO 2 must be removed from the process stream to produce pure hydrogen. There areseveral processes that are used to remove the hydrogen, which produce varyingconcentrations of CO 2 . The pressure swing adsorption (PSA) process produces a CO 2149 Carbo, M.C. et al. (2009). Steam demand reduction of water-gas shift reaction in IGCC power plants with pre-combustionCO2 capture. International Journal of Greenhouse Gas Control, 3, 712-719. doi:10.1016/j.ijggc.2009.08.003.150 U.S. Department of Energy, National Energy Technology Laboratory (U.S. DOE-NETL). (2008c). Current and futureIGCC technologies (DOE/NETL Publication no. 2008/1337).23 February 2010 96

Appendix B: Technology Design Options for a Capture Ready Plantconcentration of approximately 55%. 151 Some systems use an amine system to recovernearly pure CO 2 , which is sold for use in beverages or dry ice. Facilities with an aminesystem will be in a position to supply CO 2 directly for compression for transport. Otherfacilities would need to add an amine unit or other system to purify the CO 2 for transport.Since hydrogen is typically produced at large chemical facilities, the required infrastructure(e.g., steam) would likely be available, though space limitations could be a consideration.Natural Gas ProcessingNatural gas leaving the well contains a variety of impurities and contaminants that must beremoved before the gas can enter the gas pipeline system. These include water, heavierhydrocarbons, CO 2 , and H 2 S, among others. Liquids can be removed at the wellhead, butgaseous components are removed at a natural gas processing plant using a variety ofcompression and sorbent technologies. The CO 2 content of the raw gas varies according tothe geological source. In some cases it can be quite low, while other sources are very high.In most gas processing plants, the CO 2 and H 2 S are removed via amine sorbent systems andthe CO 2 is vented from the plant. In some cases, the CO 2 is transported by pipeline for usein enhanced oil recovery. In some cases, the CO 2 and H 2 S are reinjected as a means ofdisposing of the H 2 S. Depending on the make-up of the raw gas and the specific CO 2removal technology, a gas processing plant may already have very pure CO 2 , which is mostlikely being vented. In many cases this stream could be ready for transport and storage, as ishappening in some cases. One important question is the tolerance of the pipeline forcontaminants such as H 2 S. As noted above, some systems already handle mixed CO 2 andH 2 S streams; however, this might not be the case for a CCS system. In this case, the gasprocessing plant output might need additional purification.B.4.2 High Concentration SourcesThe most significant industrial source of high-concentration CO 2 streams is cement and limeproduction. Both cement and lime production involve the heating of calcium carbonate rock(CaCO 3 ) in a cement kiln at a temperature of about 1,450°C (2,400°F) to form lime (i.e.,calcium oxide or CaO) and CO 2 in a process known as calcination or calcining. In cementproduction, the lime is later combined with silica-containing materials to produce clinker (anintermediate product). The clinker is then allowed to cool, mixed with a small amount ofgypsum, and potentially other materials (e.g., slag) and used to make Portland cement. Limeis an important manufactured product with many industrial, chemical, and environmentalapplications. Its major uses are in steel making, flue gas desulfurization (FGD) systems atcoal-fired electric power plants, construction, and water purification.Cement and lime are relatively low-cost commodities. Since the raw material for cement andlime production as simply ground-up rocks, the energy input to the process is a key factor inproduction cost and profitability. Thus, lime and cement kilns have typically been fuelled withthe lowest-cost available fuels, most often coal and sometimes even hazardous waste.The cement kiln is basically an inclined tube in which the combustion products pass directlyover and through the carbonate rock to heat it. The exhaust gas contains the CO 2 from fuel151 Spath, P.L., & Mann, M.K.. (2001). Life cycle assessment of hydrogen production via natural gas steam reforming(Report no. NREL/TP-570-27637). Golden, CO: National Renewable Energy Laboratory (NREL).23 February 2010 97

Appendix B: Technology Design Options for a Capture Ready Plantcombustion and the carbonate reaction, thus increasing the CO 2 concentration. It alsotypically has a high dust loading, as well as other contaminants from the combustionincluding SO 2 and NO x , and potentially others depending on the fuel. All of thesecontaminants would likely create problems for a CO 2 removal system.In locations with aggressive pollution control requirements, dust removal would likely be inplace already, and lower-sulfur fuel would be required, though possibly not to the levelrequired for a CO 2 capture system. NO x controls are less common. In regions with lessrigorous emission controls, the emissions might not be limited at all. This would probablyrequire significant additional investment in gas cleanup prior to the CO 2 capture system.There are some natural-gas-fired cement kilns, which would require less cleanup dependingon the tolerance of the CO 2 system.The other important consideration is that cement and lime manufacturing facilities do notrequire steam, and typically do not have boilers. If the CO 2 capture system requires steam,then a boiler and associated infrastructure would need to be installed at the site. Onealternative possibility would be to recover heat from the hot kiln exhaust to raise steam forthe CO 2 capture system; however a heat balance would need to be performed to seewhether this would be adequate. While this would avoid the cost of fuel, it would still be asignificant additional cost for the system.Oxy-fuel combustion might be another alternative, but could be challenging for severalreasons. First, it would be a very large additional operating expense for a product/businessthat has a very low margin and a high sensitivity to operating cost. Second, the kilns typicallyoperate with a very large amount of excess combustion air. Reducing the mass flow ofcombustion gas could require a significant redesign of the process and preclude retrofitapplications. That said, a major redesign of the calcining process could be a future approachto reducing the CO 2 from this important industry.B.4.3 Standard CombustionCCS from standard combustion in the industrial sector will likely rely on the sametechnologies available to the power sector (discussed above). The major differences willhave to do with the differences in facility configuration between typically industrial andpower generation facilities, including:Size: Industrial combustors are typically much smaller than those for power generators. Anindustrial boiler with a heat input of over 100 MMBtu/hour is considered to be relativelylarge, yet this corresponds to a power plant boiler providing only 10 MW of power. Thereare very few industrial combustors as big as the boiler for a 100 MW power plant, whichwould be considered small for economic application of CCS. Some industrial facilities mayhave a large number of combustors, which in aggregate amount to a significant flow ofexhaust gas. However, bringing these streams together for processing could be mechanicallydifficult and expensive. The other implication of small size is the high cost of providing fortransport of the captured CO 2 to a storage facility. The cost of building a pipeline for a smallCO 2 volume would be very high on a per metric ton basis. In some cases, where there aremultiple facilities in one region, there could be the potential to aggregate the captured CO 2 .23 February 2010 98

Appendix B: Technology Design Options for a Capture Ready PlantCO 2 Concentration: Coal combustion is less common in many industrial applications,especially for smaller combustors. Thus, the CO 2 concentration will be lower and the totalsize smaller, both leading to a higher cost per metric ton of removal.Exhaust Stream Characteristics: In countries with less developed emission controlprograms, the requirements for industrial facilities are likely to be less rigorous than thosefor power generating facilities. Thus there are less likely to be pre-existing controls forparticulates and SO 2 at some industrial facilities. This could increase the cost of adding CCSequipment. In addition to control of conventional pollutants, some process heatingapplications involve direct heating of products and can entrain a variety of process-relatedimpurities in the exhaust stream. This would require application-specific analysis to ensurethat the impurities do not adversely affect the capture process.Availability of Steam: Some industrial combustors, such as melters, dryers, calciners andmetal heaters, can be associated with facilities that do not use steam. Thus there would beno readily available source for steam to regenerate CO 2 capture processes. It wouldsignificantly increase the cost of capture if it required the installation of a new boiler andassociated infrastructure to provide steam. On the other hand, many industrial facilities thatdo use steam have excess or back-up boiler capacity that could be used for a capturesystem. In addition, while this would require additional fuel, it would not directly affect theprimary production processes, i.e., reduce productive output.Use of oxy-fuel Combustion: Some high-temperature gas-fired processes (such as glassmelters) already use oxy-fuel combustion as a NO x control measure. Such facilities would bewell-positioned for capture.23 February 2010 99

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsAppendix C: Policy Considerations and Assessments ofCCS Ready EconomicsC.1 Policy Considerations for CCS ReadyBy geologically storing CO 2 emissions from fossil-fuel based plants, global CO 2 emissions canbe reduced even with an increased consumption of fossil fuels. CCS will likely be a keycomponent of a portfolio of technologies needed to achieve significant emissions reductionsin major energy-consuming nations. Yet CCS has not been widely deployed on thecommercial scale, and there are still technical, economic, regulatory, and policy barriers toits deployment, despite the fact that governments and industry have been working togetherfor several years to resolve these barriers.While barriers to CCS are gradually being reduced, new fossil-fuel power plants andindustrial facilities continue to be designed and built worldwide. Unless new plants aredesigned with eventual CCS in mind, higher lifecycle costs could be incurred by projectdevelopers in a carbon-constrained future. Therefore, in the interim, governments andindustry may adopt a CCS Ready policy to prepare for the future and provide potential costsavings, while CCS technology is being developed and more knowledge is gained on CCScost and performance. CCS Ready planning and plant design, and perhaps some incrementalequipment pre-investment in order to reduce potential CO 2 lock-in, can be adoptedwithout fully committing to CCS before it has been commercially proven. If cost-effectivepreparatory measures to reduce GHG emissions are taken now, this may potentially lead toreduced costs and less business interruption in the future.A jurisdiction may decide to have a CCS Ready policy when it believes such a policy willfurther its existing or expected GHG goals. Even if the absence of clear GHG goals, a CCSReady policy may be adopted to help create and preserve the option for future low-costCCS retrofits, in case a general GHG policy is later adopted. The policy decision to adopt aCCS Ready policy, and when and how to apply it, will usually be based on economic analysesindicating that the CCS Ready policy will reduce costs and/or lead to faster and more certainGHG reductions. Such a finding is usually based on the presumption that, left on its own,industry will not quickly and adequately make the proper choices in siting and designingplants to be CCS Ready, and so government intervention is justified. These policyconsiderations are discussed below in terms of key questions that can be posed.Is CCS a Viable Option for GHG Mitigation?A significant part of the decision-making process is an investigation into the economics ofCCS as a GHG mitigation measure and how it compares with other options. A CCS Readypolicy is most appropriate in jurisdictions where CCS is likely to be a substantial GHGmitigation measure due to the nature of fossil fuel use, the availability of geologic storagecapacity, a legal and regulatory framework conducive to CCS, and limited amounts of lessexpensive alternatives to CCS. A jurisdiction in which CCS is unlikely to ever be applied, dueto technical, legal, and economic reasons, is a poor candidate for a CCS Ready policy.Will there be Policy Drivers to CCS?A CCS Ready policy would usually be based on the anticipation that CCS will beimplemented sometime in the foreseeable future due to technology mandates, emissions23 February 2010 100

Appendix C: Policy Considerations and Assessments of CCS Ready Economicsperformance standards, economic penalties, or economic incentives. In other words, thereis good reason to believe that CCS Ready plants will be sometime in the future retrofittedto CCS. CCS Ready is most favourable when the drivers toward CCS are expected tocome into force soon, so that discounting of future savings will not be too large. If suchdrivers toward CCS are not in place and are not expected, then CCS Ready policy maynot be needed.Is it Important to Preserve an Option for Low-Cost CCS Retrofits?Even in the absence of existing or expected drivers to CCS, a CCS Ready policy may bedesirable if the jurisdiction wants to create and preserve the option for future low-cost CCSretrofits, if and when a general GHG policy is adopted. This may be appropriate injurisdictions with uncertain GHG mitigation plans but for whom CCS would have to be animportant part of any potential GHG mitigation strategy due to the jurisdiction’s heavyreliance on coal and other fossil fuels at power plants and industrial facilities. The adoption ofa CCS Ready policy in these circumstances would be justified in terms of keeping open theoption for significant near-term GHG controls, which in the absence of CCS Ready plantsmight otherwise be cost-prohibitive.Will there be Significant Cost Savings if Plants are CCS Ready?An economic case for CCS Ready can be made when the higher upfront costs relative tobuilding a business-as-usual (BAU) plant are offset by the present value of lower adaptationcosts for the plant to later add CCS to mitigate GHG emissions. In other words, byinvesting early in making a plant CCS Ready, the developer could experience a lower-costGHG compliance option that can be (but does not have to be) exercised sometime duringthe plant’s operating life. A CCS Ready policy is most justified when such savings are large.Will there be More Certain or Faster CO 2 Reductions from CCS Ready Plants?A CCS Ready plant can be expected to more quickly adopt CCS compared with abusiness-as-usual plant, because some of the CCS-related planning for capture, transport,and storage is done upfront; obstacles to CCS are avoided in plant design and siting; andretrofit costs are lower, meaning that the economic threshold for retrofit—brought on byrising carbon prices—can be realized more quickly. The CCS Ready policy may be justifiedwhere faster adoption to CCS can be expected to lead to faster and more certainreductions to GHG emissions.Will Plants be CCS Ready in the Absence of a CCS-Ready Policy?Developers of new power plant and industrial projects could themselves undertake (even inthe absence of any national CCS Ready policies) to create a “real option 152 ” for lateradoption of CCS in their new facilities. In other words, the developers might anticipate thatsome time in the future the new facility may need to adopt CCS as a GHG mitigationstrategy, and so could make their facility CCS Ready in order to reduce the cost of a futureretrofit. By investing early in making a facility CCS Ready, the developer would create the“real option” of a lower-cost CCS retrofit that can be (but does not have to be) exercisedsome time during the facility’s operating life.152 A “real option” is distinct from a “financial option” in that it concerns a physical asset such as a power plant.23 February 2010 101

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsMarket Imperfections That Justify CCS Ready Policies• Project developers do not perceive economic value in making facilities CCS Ready, because they do notappreciate or they underestimate the likelihood of future requirements for GHG reductions;• There is a lack of knowledge about CCS and how it can be applied as a GHG mitigation technology forpower plants and industrial facilities;• There is much greater perception of technology risks for CCS than those seen by policymakers;• The expected future GHG allowance prices are seen as too low to ever make CCS economic for projectsbeing designed now;• There is a misperception that potential storage sites are geographically ubiquitous and simple to identify,rather than being unevenly distributed with complex characterisation processes like all other subsurfaceresources; or• Project developers do not appreciate the complexities and will not adequately investigate the availabilityand feasibility of transport and storage options for the plant.However, large uncertainties about GHG policy, future cost of fuels/carbon, and cost andperformance characteristics of CCS technologies can reduce the perceived economic valueof CCS Ready investments from a developer’s perspective. In addition, the “private”discount rate for cost of capital used by plant developers may be higher than the “social”discount rate that policymakers might attribute to GHG mitigation initiatives. Hence,industry might continue on a BAU path for determining plant production economics thatmay not be optimal from a broader social-cost perspective—thus, justifying some form ofgovernment-initiated CCS Ready policy. A CCS Ready policy is most justified when one ormore market imperfections, such as those indicated in the text box below, exist.Do the Society-wide Benefits Outweigh the Costs?In many jurisdictions, public policies are adopted and justified by cost-benefit analysis. Thesociety-wide economic perspective for costs and benefits encompasses the developer’scosts and revenues related to the plant’s economics and its ability to supply electricity andother products with the smallest feasible use of resources. In addition, the society-wideperspective adds other considerations such as the improvement of human capital (educationand skills formation), job creation, human health, and the reduction of environmentaldegradation. Also the society-wide perspective is often longer-term and values futurebenefits more highly (i.e., has a lower discount rate) than does the perspective of adeveloper. Basing a CCS Ready policy (including the subject industries and types of plants)on an economic rationale ensures a reasonable chance that the policy will reduce total longruncosts (including the time value of money) of complying with the jurisdiction’s generalGHG policy.C.2 Treatment of Uncertainty under Economic AnalysesThe Considerations and Recommended Practices discuss two types of economic analyses thatmight be done as part of designing and implementing CCS Ready policies. One type isconducted by policymakers in determining whether to implement a CCS Ready policy at alland, if so, when and where it would apply. These analyses are done on the basis of socialcosts and benefits using “example” or “pro forma” cost parameters for different industryand plant types that might be considered for coming under the policy. The relevant question23 February 2010 102

Appendix C: Policy Considerations and Assessments of CCS Ready Economicsfor policymakers is: Does the application of CCS Ready to an industry/plant type reduce theexpected overall lifecycle cost of complying with the existing or expected GHG policy?The second type of economic analysis would be the “acceptable economic cost” test that isproposed as a criterion for defining what a CCS Ready plant is. That analysis would be donefor an individual plant using plant-specific engineering and cost parameters. Here therelevant question is: Does the proposed CCS Ready plant design allow for future economicretrofit to and operation with CCS?Both types of analyses consider similar CCS technology and cost parameters within amarket context for fuel prices, carbon prices and values for plant outputs (e.g., electricityprices). The economic evaluation usually is done using discounted cash flow analysis to takeinto account the time value of money. Some of the key issues involved in doing sucheconomic analyses are discussed below and some example results are provided.Whether these economic analyses are being done by policymakers for an entire industrysegment of a jurisdiction or by a developer for a single plant, they would project costs andbenefits into an uncertain future. Therefore, any economic analysis of CCS Ready has tomake assumptions regarding many future factors and uncertainties including:• GHG policies and when they will be implemented or modified, including, setting a priceon carbon emission and the potential for CCS mandates that could force the use of CCSregardless of economics;• Expected future price of carbon;• Expected timing of the commercialization of CCS and the enabling legal and regulatoryframework;• Performance characteristics and costs of current and advanced CCS technologies andcompeting alternative emissions mitigation options;• Expected economic environment regarding an industry’s or plant’s fuels, feedstocks andother operating costs;• Expected competitive environment regarding an industry’s or plant’s output product(s)(such as electricity in the case of a power plant);• Relative capital availability and costs of capital—incorporating potential legal, regulatory,technical, and economic risks of CCS compared with pursuing alternative emissionsreduction strategies; and• Level of government support (if any) for some or all components of the CCS value chain.These complexities and uncertainties can be incorporated into economic analyses by a)carefully considering each item and developing a single “most likely scenario” thatincorporates a best judgement as to the expect outcome for all parameters, b) developing afew “alternative scenarios” for how the parameters will play out or c) developing a largenumber of alternative scenarios through a probabilistic “Monte Carlo” process. Because ofits complexity, Monte Carlo analysis is most appropriate for a cost benefit analysis of ajurisdiction’s overall CCS Ready policy – usually not to evaluate the design of a single plant.23 February 2010 103

C.3 Frameworks for Economic AnalysesAppendix C: Policy Considerations and Assessments of CCS Ready EconomicsThe framework for an economic analysis is the method used to combine costs and benefitsinto indicators of relative economic value. Some of the options for frameworks that can beused by policymakers or developers for economic analysis of CCS Ready plants include (inincreasing order of complexity and accuracy):1) A very simple comparison of the added capital costs for the new CCS Ready plantversus the future capital cost savings if a “Not CCS Ready” (i.e., BAU) plant was laterconverted to CCS. This technique can serve as a simple and easy-to-use screening toolto show a) how much higher the CCS Ready plant’s initial capital costs are versus theBAU plant and b) how much the savings will be in capital for a future retrofit. Thiscomparison would ignore any operating cost savings, the time value of money, andwhether future retrofit to CCS will be economical. See top part of Exhibit C-1 for anillustration using the same assumptions as will be described later in this chapter for theMonte Carlo example.2) A comparison of the added capital costs for the new CCS Ready plant versus the futurecapital cost and gains in net operating revenue if a BAU plant were later converted toCCS. This comparison could assume, for example, that there are 25 years of operatingcost savings, but it still ignores the time value of money or whether a CCS retrofit willbe economic. This too can be used as an initial screening tool.3) Same as #2 but taking into account the time value of money by discounting the financialcosts and gains based on how many years into the future they occur. This is the mostsophisticated of the simple screening tools but is the minimum that should be employedfor decision making since it is critical that the time value of money be taken intoconsideration. This framework is illustrated in the bottom part of Exhibit C-1, whichshows that CCS Ready designs 1 and 2 appear to be economics under the assumptionsused for the illustration, but that CCS Ready design 3 is not economic.4) Same as #3, but instead of assuming when retrofits to CCS take place and the number ofyears of operation of CCS, looks at each year of operation and determines theeconomics of a decision to convert to CCS given a projection of GHG allowance costor other value of reduced emissions and assumptions for energy prices. If appropriatefor the market conditions in a jurisdiction, this framework would also take into accounthow the dispatch of the plant would change. If conversion to CCS seems to be far fromever being economic (or not be otherwise incentivised or mandated), there will be littlejustification for CCS Ready. The Monte Carlo example to be shown later in this chapteremploys a variant of Framework 4.23 February 2010 104

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsExhibit C-1: Illustrations of Economic Analysis Frameworks(for a new pulverized coal power plant)Framework #1: Undiscounted Capital Cost Gains/Losses ($/MW original plant capacity)A B C=A+B DInitial Capital CostCapital Cost forRetrofit to CCSTotal Capital CostGains (Loss) in CapitalCosts vs Not CCS ReadyNot CCS Ready 1,575,000 1,088,200 2,663,2001: Throttle Valve Case 1,604,609 1,057,313 2,661,922 1,2782: Clutch Case 1,664,269 1,067,751 2,732,020 (68,820)3: Oversized Boiler Case 2,062,636 831,431 2,894,067 (230,867)Note: Initial capital costs for CCS Ready options include capital costs for a Capture Ready Plant and storage site selectionand characterisation.Framework #2: Undiscounted Capital and Operating Gains/Losses ($/MW original plant capacity)D E F G=Fx25 H=D+GGains (Loss) inCapital Costs vs NotCCS ReadyAnnual NetOperating Revenueafter RetrofitGain (Loss) in Annual NetOper. Rev. vs Not CCSReadyAll Years of Gainin OperatingRevenueGain (Loss) in Capitaland Net Op. Rev. vsNot CCS ReadyNot CCS Ready 90,1391: Throttle Valve Case 1,278 113,551 23,412 585,311 586,5892: Clutch Case (68,820) 132,678 42,539 1,063,479 994,6593: Oversized Boiler Case (230,867) 168,555 78,416 1,960,401 1,729,534Notes: Assumes 25 years of operation with CCS. Annual utilization rate is 0.85 in all instances.Net operating revenues account for fact that net plant output is reduced after retrofit to CCS.Framework #3: Discounted Capital and Operating Gains/Losses ($/MW original plant capacity)A I=B discounted J=A+I KInitial CapitalCostDiscountedCapital Cost forRetrofit to CCSTotalDiscountedCapital CostNot CCS Ready 1,575,000 325,640 1,900,640Gains (Losses) inDiscounted Capitalvs Not CCS ReadyL=GdiscountedDiscounted AllYears of Gains inNet Op. Rev.M=K+LNet Present Valueof Gains (Losses)1: Throttle Valve Case 1,604,609 316,397 1,921,006 (20,366) 60,558 40,1922: Clutch Case 1,664,269 319,521 1,983,789 (83,149) 110,031 26,8823: Oversized Boiler Case 2,062,636 248,803 2,311,439 (410,799) 202,830 (207,969)Notes: Assumes 25 years of operation with CCS. Annual utilization rate is 0.85 in all instances.Net operating revenues account for fact that net plant output is reduced after retrofit to CCS.Discount factor is 9 % per annum.Uncertainty can be included in any of these frameworks by varying CCS capital costs,operating cost and performance characteristics into alternative scenarios or through MonteCarlo analysis. Likewise uncertainty in expectations for fuel, electricity and carbon pricescan be dealt with within a single most likely scenario, several alternative scenarios orthrough Monte Carlo analysis.Under these frameworks it is also possible to evaluate uncertainty in CCS technology byanalysing potential future CCS technologies and how they alter the economics of CCSReady. A new CCS technology might reduce the value of CCS Ready by lowering the costsavings that come when CCS retrofit takes place.23 February 2010 105

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsIssues in Economic Assessment of EU CCS DirectiveThe EU Directive of geological storage of CO 2 states that it must be financially feasible to fit CCS technologiesonto large combustion plants over 300MW capacity. There is no further information provided on how to conductthe economic analyses, or what costs and benefits to include. Therefore, although economic criteria can addrobustness to a definition of CCS ready, the level of technological and political uncertainty surrounding futureretrofitting of CCS technologies means that proving project feasibility is difficult. Economic analyses of retrofits aremade problematic through potential cost reductions of technologies, either through the development of newtechnologies or learning curve effects. In the EU, the price of CO 2 /ton under the Emission Trading System is also amajor variable that is difficult to predict. Therefore, an economic analysis conducted to prove economic feasibilityof a retrofit under current conditions can only be made with a large degree of uncertainty. In the UK, applicantswishing to certify a power plant design as capture ready must develop reasonable scenarios under which the CCSretrofit would be economically feasible. However it is acknowledged by the UK government that many assumptionswill be made, and inherent uncertainties are unavoidable.Policymakers evaluating whether and where to apply CCS Ready Policies may wish to do asimpler screening analysis first (Framework #3) and then move to economic modelling of thedecision to retrofit to CCS (Framework #4). Likewise the use of Monte Carlo techniques canbe done after a most likely scenario and a few alternative scenarios are evaluated.A developer evaluating the design of an individual plant to determine whether it could beeconomically converted to CCS would apply a variant of Framework #4 in which the plant isevaluated in each future year to determine when and if it would retrofit to CCS given oneor more sets of assumptions for future prices for fuels, carbon, electricity and otherindustrial outputs and inputs relevant to the plant. 153C.4 Illustration of Monte Carlo Analysis of CCS Ready EconomicsIn order to illustrate how uncertainties regarding future regulations, technologies, andmarket conditions can be accounted for, a Monte Carlo simulation was employed to analysethe future operation of four different power plants (BAU + three capture ready options asfirst defined in Appendix B) over their useful life. This example is an application ofFramework #4 in which the future dispatch and retrofit decision is investigated for eachfuture year of plant operation. A Monte Carlo analysis creates hundreds of scenarios inwhich key parameters are drawn from statistical distributions of possible values for theyears when the new power plant or industrial facility could operate. These values shouldrepresent the most likely expected path over time for each parameter, as well as theuncertainty around that path. By examining many scenarios, it was possible to investigate thelikelihood that the CCS Ready investment “pays off” and whether the statistical averageoutcome or “expected value” of the CCS Ready investment is positive. The analysisexamples presented in this section are based on U.S. conditions and are presented in realU.S. dollars.The analyses presented in this section are performed from the perspective of the projectdeveloper that is trying to maximize the economic value of its investment based on marketprices, including whatever externalities are internalized by national policies. The value of anyadditional externalities and policymaking considerations must be added as other steps in theanalyses. For example, the value of CO 2 emission reductions is represented in the Monte153 U.K. Department of Energy and Climate Change (U.K. DECC). (2009a). Carbon capture readiness (CCR): A guidancenote for Section 36 Electricity Act 1989 consent applications (Publication no. URN 09D/810). London, UK: Author.23 February 2010 106

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsCarlo analyses by an allowance price in dollars per metric ton of CO 2 equivalent. Ifpolicymakers believe that the full social cost of CO 2 emissions will not be reflected in futureallowance prices, these economic analyses performed from a private sector perspective canbe adjusted to reflect the added benefit when CCS is applied.In addition to the “Base Case” analysis, we conducted several Sensitivity Cases to assess theimplications of 1) the timing of general GHG policy implementation, 2) the pricing of naturalgas and electricity, and 3) potential commercialization of advanced capture technology. Thesimulations illustrate how such analyses can be performed, while also drawing some generalconclusions about the economics of CCS Ready, presented below. The results can be usedfor assessing alternative scenarios and costs.The approach for the Monte Carlo analyses consisted of following steps:1) Define the CCS Ready options for evaluation. (e.g., a BAU not CCS Ready case; andthree CCS Ready cases based on the “throttle valve,” “clutch case,” and “oversizeboiler” plant design options defined in Appendix B);2) Define the possible CCS retrofit options (e.g., do not retrofit and incur CO 2 emissioncosts, retrofit to current CCS technology, or retrofit to an advanced CCS technology ifavailable);3) Define the decision criteria for determining if and when plants will retrofit to CCS. Inthis analysis the criteria was that a retrofit would be done if it increased the net presentvalue of the power plant;4) Estimate probability distributions for the year when GHG policy will be implemented,key costs and price variables and the year when an advanced CCS technology will becommercialized; and5) For each given Monte Carlo scenario (i.e. a specific combination of costs, prices, andinitiation dates) and for each year of operation, simulate the operation of four plant typeand determine if and when they retrofit to CCS; then calculate the plants’ annual cashflows and the life cycle net present value of the plants for each Monte Carlo scenario.The lifecycle net present value of the plant is all revenues received by the plant minus allcosts discounted back to the first year of operation. A CCS Ready plant design would beconsidered economic if it would increase the expected net present value of the BAU plant.Stated in other words, the increase (decrease) in the net present value versus the BAUplant represent the economic gain (lose) from the particular CCS Ready plant design.C.4.1 CCS Ready and CCS Retrofit Options for EvaluationInitial CCS Ready costs and associated future savings in CCS retrofit and operating cost willvary across jurisdictions and among plant types and site locations. However, as anillustration of costs and how they can be analysed, the costs for new pulverized coal-firedpower plant built in the United States at different degrees of readiness is provided here. It isassumed that post-combustion capture technology will be used for retrofitting the plant tocapture. The plant assumptions are based on the four capture ready plant design casescontained in Appendix B:23 February 2010 107

Appendix C: Policy Considerations and Assessments of CCS Ready Economics• Reference Plant (Not CCS Ready) – A business-as-usual (“BAU”) plant with noanticipation of future carbon capture controls. The plant is a nominal 600 MWsupercritical PC. Although no specific space and tie-ins are provided in this plant, aretrofit is assumed to be reasonably possible.• Option 1 (Throttle valve case) – Along with the minimum essential capture readysteps, such as ensuring enough land and building space, the only major expense for thisoption is the front-end engineering design (FEED) work to plan for retrofitting an aminebasedcarbon capture system, with a provision for incorporation of a throttle valve,ducting, and extraction steam piping to the amine reboiler.• Option 2 (Clutch case) – The second option has a FEED and the incorporation of aclutch between the two low-pressure steam turbine stages. With 50% steam extractionfor the amine reboiler, declutching the second low pressure steam turbine stage fromoperation would improve heat rate performance.• Option 3 (Oversize case) – Option 3 increases the size of the steam furnace suchthat there is no loss in electric output capacity (MWe) compared with after a captureretrofit. All downstream systems are upsized as well to accommodate both the increasein steam flow as well as flue gas. Before retrofitting, the boiler is assumed to operate atpartial load with no heat rate penalty.To account for uncertainties in future CCS technologies, two CCS retrofit options arerepresented in addition to a “no CCS retrofit” option. The “current” capture technology isan amine solvent and the “advanced” case is an unspecified solvent process that requiresone-half of the energy used for current amine solvent regeneration.C.4.2 Decision Criteria for CCS RetrofitIn the Monte Carlo analysis the option to retrofit the plants to current CCS technology(and, if available, the advanced CCS technology) is evaluated in each operating year based onthe principle of profit maximization by the plant developer. If the discounted net presentvalue of the plant can be increased by the CCS retrofit, then retrofit is assumed to takeplace that year. Because the plants are modelled as having a maximum life of 41 years,retrofit costs must be recovered between the retrofit year through the year 2055. Thedecision between current and advanced CCS technologies is assumed to be made“myopically” based only on whether or not the advanced technology exists in the retrofityear. In other words, the power plant owner does not know the advanced CCS technologyis coming until after it arrives.A key determinant of when the retrofit will take place is the assumed CO 2 allowance price.Sufficient economic incentive for retrofit may be provided as the allowance priceapproaches or exceeds the per-unit-abated total cost (i.e. $/tCO 2 e) of the CCS retrofitincluding all money-forward capital and operating costs. This per-unit-abated economicindicator is “approximate” because the process of retrofit likely will increase plant dispatch(capacity utilization) and may increase operating life by dropping the variable operating costof the power plant (chiefly because the CO 2 allowance cost then will be paid for 90 percentfewer CO 2 emissions) 154 Because the hours dispatched and operating life of the plant mayincrease after CCS retrofit, the economic measure of $/tCO 2 e abated versus allowance154 If the Monte Carlo example were done for a jurisdiction that has severe electricity supply shortages, then the retrofit ofthe plant to CCS might not be modeled as increasing capacity utilization.23 February 2010 108

Appendix C: Policy Considerations and Assessments of CCS Ready Economicsprice may not be a full measure of retrofit economics and so the increase to net presentvalue of the plant is used as the criteria for the retrofit decision.C.4.3 Estimates for a General GHG Policy and Cost of GHG EmissionsThe probability distributions of some of the key inputs for the Base Case are shown in ExhibitC-2. All prices are in real U.S. dollars. One of the most important inputs is the year in whichgeneral GHG restrictions come into force. Assumptions for this parameter must be made bypolicymakers based on their best judgement of the likely outcome of political and regulatoryprocesses in their own jurisdictions. For theBase Case illustration for a new coal-fired USpower plant, GHG restrictions are assumedto begin as early as year 2016, with a 10%probability of beginning in that year. Thecumulative probability of GHG restrictiongoes up in each successive year, reaching100% in 2025. This cumulative probabilitydistribution for the start date of GHGrestrictions is shown as the in the first charton the second row of Exhibit C-2.Examples of Computer Models ThatAnalyse GHG Policies and Economics• Integrated Planning Model (IPM)-Plus, ICF International• Emissions Predictions and Policy Analysis (EPPA) Model(EPPA), MIT• Applied Dynamic Analysis of the Global Economy (ADAGE)Model, RTI International• Mini-Climate Assessment Model (MiniCAM), Joint GlobalChange Research Institute (PNNL)• MARKAL, Brookhaven National LabThe cost of emitting one metric ton of CO 2 (this can be interpreted as the expected valueof an allowance price under a cap and trade system or as a CO 2 tax) is assumed to start atabout $12/metric ton in the first year of restrictions, reach $30/metric ton about 15 yearslater and continue to rise to $150/metric ton after about 40 years. For the Base Case theexpected value of allowances is $21.77/metric ton in 2030 and $102.64/metric ton in 2050.The probability distribution for allowance prices in those two years is shown in the secondchart on the second row of Exhibit C-2. The assumptions for the range of allowances priceswould typically be determined by policymakers through analysis of computer models thatanalyse energy supply and demand and GHG policies and economics. One such model isICF’s IPM-Plus. This model and examples of other models are listed in the text box above.C.4.4 Estimates for Future Fuel and Electricity PricesIn the Monte Carlo analysis the price of fuels and electricity should be drawn fromdistributions that maintain a logical relationship among all prices. Most US regions havewholesale electricity prices which are determined for most hours in the year by the dispatchcosts of marginal natural gas-fired power plants. Therefore, in the Monte Carlo analysis theelectricity prices are modelled primarily as a function of natural gas prices with additionalinfluences from allowance prices, coal prices and a random variable representing otherelectricity market factors. For the Base Case illustration, in the year 2030 the expectedvalue of natural gas prices are about $7.50 per MMBtu and those of coal are $1.90 perMMBtu. In the year 2050 the expected value of natural gas prices are about $9.00 perMMBtu and those of coal are $2.10 per MMBtu. These fuel prices are stated before anyGHG allowance related to their use is factored in. The distributions for natural gas and coalprices are shown for the year 2030 and 2050 in the first row of Exhibit C-2.The new power plant is assumed to have revenues based on the prevailing wholesaleelectricity prices and the number of hours it can be dispatched given those prices and thevariable cost of dispatch (fuel costs plus variable O&M plus GHG allowance cost). The off-23 February 2010 109

Appendix C: Policy Considerations and Assessments of CCS Ready Economicspeak and on-peak electricity price probability distributions are shown in the bottom row ofExhibit C-2. The expected value of off-peak electricity is $56.91 per MWhr in 2030 and$92.38 in 2050. For off-peak electricity, the expected value of is $92.38 per MWhr in 2030and $146.36 in 2050.Policymakers will need to consider how power plant revenues are determined in theirjurisdictions and value produced electricity accordingly in Monte Carlo analyses. Forexample, power plants that are subject to regulated cost-of-service rates may have revenuesthat are based on the plants dispatch costs plus a capital cost component.Exhibit C-2: Key Inputs: Base Case (real US dollars)23 February 2010 110

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsC.4.5 Estimate for Commercialization of Advanced CCS TechnologyThe advent of advanced carbon capture technology can be treated as uncertain with acumulative probability function versus year, a methodology simular to that used torepresent the uncertainty in when the general GHG policy will begin. For the Base Case theadvent of the advanced carbon capture technology is assumed to appear as early as 2020(2% chance) and the cumulative probability of its appearance rises slowly and reaches 100%only by the year 2054. (See Exhibit C-2 first chart on second row, the dashed line)C.4.6 Key Assumptions for CCS Retrofit OptionsThe key base plant assumptions for the economic simulation are shown in Exhibit C-3. CCSReady Option 1 (Throttle Valve) uses use a throttled low-pressure turbine to lower energypenalties when CO 2 capture is retrofitted. The CCS Ready Option 2 (Clutch Case) achievesthe same goal using a clutched low pressure turbine. The CCS Ready Option 3 (OversizedBoiler) reduces the capacity loss by installing a larger boiler that can generate the additionalsteam needed when CCS is retrofitted.Exhibit C-3: Base Plant Capital and Operating Cost Assumptions (all cases)Before CCS is AddedCCS Ready OptionCapital Costs($/MW)Fixed O&M Costs($/MW/yr)Variable O&MCosts ($/MWhr)Heat Rate(Btu/kWhr) aCO2 Emissions(kg/MWhr)CapacityLostNot CCS Ready $ 1,575,000 $ 41,046 $ 2.74 8,726 805 0%1: Throttle Valve Case $ 1,604,609 $ 41,046 $ 2.74 8,726 805 0%2: Clutch Case $ 1,664,269 $ 41,050 $ 2.74 8,727 805 0%3: Oversized Boiler Case $ 2,062,636 $ 41,032 $ 2.74 8,726 805 0%aCoal burned for baseload.Exhibit C-4 shows the incremental capital costs (per unit of original plant capacity) ofretrofitting the power plants to amine solvent CCS and the resulting changes in operatingcosts, heat rates and emissions of CO 2 . Also shown are the capacity of the plant that is lostdue to the need to supply energy for solvent regeneration and the additional parasiticelectricity use for the capture process and CO 2 compression.The assumed upfront capital cost for the CCS Ready plants (shown in Exhibit C-3) is thecapital cost for the capture ready plant options as presented in Appendix B (Exhibit B-3), aswell as an additional cost for site assessments and selection for geologic storage and pipelinecorridor assessment. Depending on the degree of readiness, the cost of geologic storage andcorridor assessment is assumed to be $12 to $24 million for a 550 MW (net) power plant for41 years of storage capacity ($22,000 to $44,000 per MW). Because this money is spent whenthe plant is originally designed and built, the post-retrofit dollar per metric ton transport andstorage costs shown in Exhibit C-4 are reduced for the three CCS Ready cases. The transportand storage costs are further reduced under the assumption that a CCS Ready procedurewould increase the chances for coordination of infrastructure development leading to a moreefficient CO 2 pipeline grid and lower $/volume transport costs.Exhibit C-5 below shows the build up of the transport costs based on the assumption thatbetter planning and coordination would increase the chance that larger diameter pipelinewith better economies of scale could be used for CCS Ready plants (or alternatively betterplant siting would reduce the mileage needed to reach a suitable storage site). The assumed23 February 2010 111

Appendix C: Policy Considerations and Assessments of CCS Ready Economicsreduced for capture Ready plants because site selection expenditures have been made at thetime the plant was designed (and reflected in higher initial power plant capital costs) andbecause the time needed to find and develop the a suitable storage sites is reduced. In otherwords, the total dollar amount of the finding and developing the storage site is the same –only the timing of those costs is different. In contrast, there are significant savings expectedfor the transport costs.Exhibit C-4: Retrofit to Current CCS Technology Capitaland Operating Cost Assumptions (all cases)After Regular (Current Technology) CCS is AddedCCS Ready OptionIncrementalCapital Costs($/Original MW)Fixed O&MCosts($/MW/yr)Variable O&MCosts ($/MWhr)Heat Rate(Btu/kWhr) aCO2 Transport& Storage Cost($/metric ton)CO2Emissions(kg/MWhr)CapacityLostNot CCS Ready $ 1,088,200 $ 62,161 $ 4.18 12,637 $ 12.67 117 31%1: Throttle Valve Case $ 1,057,313 $ 60,840 $ 4.02 12,146 $ 10.96 112 28%2: Clutch Case $ 1,067,751 $ 59,922 $ 3.91 11,828 $ 9.24 109 26%3: Oversized Boiler Case $ 831,431 $ 53,582 $ 3.79 11,556 $ 9.24 107 13%aCoal burned for baseload.Exhibit C-5: Storage and Pipeline Cost Assumptions(Incurred After Retrofit Decision)Best (Capture Ready) Middle (Capture Ready) Worse (BAU Plant)Miles of Pipelines NecessaryMiles of 12 inch Pipeline 25 50 75Miles of 16 inch Pipeline 25 50 75Miles of 36 inch Pipeline 100 50 0Total Miles 150 150 150Transport (Pipeline) and Storage CostsPipeline Cost $/metric ton $ 4.74 $ 6.21 $ 7.67Storage Cost $/metric ton $ 4.50 $ 4.75 $ 5.00Total Pipeline and StorageCost $/metric ton $ 9.24 $ 10.96 $ 12.67The Monte Carlo analysis may include a representation of an advanced CCS Technology interms of when it might be available and its cost and performance characteristics. Theimportance of an advanced CCS technology is that it can make retrofitting to CCS moreeconomic (thus making CCS Ready investment more valuable) and it might change thespace, equipment and energy requirements for CCS, (possibly making some of the CCSReady investments unnecessary).Exhibit C-6 shows the incremental capital costs (per unit of original plant capacity) ofretrofitting the power plants to the assumed advanced capture technology. The advancecapture technology is assumed to be more energy efficient than current amine technologiesand to have somewhat lower capital costs. Capture efficiency is 90 percent in both cases.Because the advanced technology capture process requires less energy for solventregeneration, the net electricity generating capacity lost is substantially lower for the firstthree options in which steam needs to be diverted for solvent regeneration. The CCS Ready3 option (which assumes that the plant is built with an over-sized boiler to supply steam to afuture amine capture process) has nearly the same capacity loss with the current and the23 February 2010 112

Appendix C: Policy Considerations and Assessments of CCS Ready Economicsadvanced technologies, because the source of lost capacity is only electricity needs for CO 2compression. The small difference in capacity lost for CCS Ready Option 3 between currentand advanced technologies stems from the fact that less CO 2 is compressed per MWh ofelectricity for the advanced technology because less coal needs to be burned.Exhibit C-6: Retrofit to Advanced CCS Technology Capitaland Operating Cost Assumptions (all cases)After Advanced CCS is AddedCCS Ready OptionIncrementalCapital Costs($/Original MW)Fixed O&MCosts($/MW/yr)Variable O&MCosts($/MWhr)Heat Rate(Btu/kWhr) aCO2 Transport &Storage Cost($/metric ton)CO2Emissionskg/MWhrCapacityLostNot CCS Ready $ 794,386 $ 56,460 $ 3.79 11,581 $ 12.67 103 22%1: Throttle Valve Case $ 771,838 $ 55,815 $ 3.67 11,223 $ 10.96 101 21%2: Clutch Case $ 779,458 $ 55,367 $ 3.60 10,991 $ 9.24 100 20%3: Oversized Boiler Case $ 606,945 $ 51,877 $ 3.50 10,792 $ 9.24 98 12%aCoal burned for baseload.C.4.7 Base Case ResultsThe results of Monte Carlo analysis are typically calculated in terms of average or expectedvalues of key outputs or in terms of probability distributions of those outputs. For example,a new power plant can be evaluated in terms of a net present value (NPV). The NPV is thesum of annual revenues minus costs discounted by the time value of money. Under a welldesigned policy, a CCS Ready power plant might have an expected NPV better or a leastsimilar to its Not-CCS Ready counterpart. A well-designed policy also might have aprobability distribution of NPVs that has fewer instances of large losses.Each of the four possible power plant configurations (Not CCS Ready and three levels ofCCS Ready) is modelled for each Monte Carlo scenario through an operating life that couldspan 41 years, if economic conditions permit. First, the annual dispatch of the original (i.e.no CCS retrofit) plants are computed based on market prices for fuels, electricity and GHGallowances. Increasing GHG allowance prices reduce the number of profitable dispatchhours each year and, in some instance, eventually cause the originally-configured plants to beshut down before their 41 year operating life is reached. On average in the Base Case, theplants would operate 37.8 years in the absence of CCS retrofits. In a second step in theanalysis, the option to retrofit the plants to current CCS technology (and, if available, theadvanced CCS technology) is evaluated in each year. If the discounted net present value ofthe plant can be increased by the CCS retrofit, then it is assumed to take place that year.The summary results of the Monte Carlo simulation are shown in tabular form inExhibit C-7. The first column in the tables show what year the CO 2 restrictions begin. Byassumption, the earliest year is 2016 and the latest year is 2025. The average year CO 2restrictions begin is 2020.6 across all scenarios.A key measure of the economics of each option is the expected value (that is, the averageover all Monte Carlo scenarios) of NPV per MW of original plant capacity. The secondcolumn in Exhibit C-7 shows expected NPV of the original plants assuming they are notretrofitted to CCS. For this calculation, the plant operators are assumed to either pay theCO 2 emission costs or cease operating. Because the operating characteristics (heat rates,O&M costs and CO 2 emissions) of the four plant options are nearly identical, the differences23 February 2010 113

Appendix C: Policy Considerations and Assessments of CCS Ready Economicsin NPV for the original plants without CCS retrofit are almost entirely due to initial capitalcosts. Therefore, the best NPV without CCS retrofit is the Not CCS Ready Zero optionand the worst is for the CCS Ready 3 (Oversized Boiler) option.The third column in Exhibit C-7 indicates what year CCS would be retrofitted assuming thatthe owner of the plant would make the retrofit decision based on private sector profitmaximization wherein the “cost” of the CO 2 emissions is internalized through a cap andtrade system or tax. The average cost of capital used for this decision is 9 percent per yearreal, after tax. Any initial capital cost of making the plant capture ready is considered a “sunkcost” as only money spent or earned in the future is taken into account when retrofit toCCS is considered each year.The average year that CCS adopted in the Not CCS Ready option in the column labelled“Zero: Year CCS is Adopted” and has a value of 2045.2. Data on the types of retrofit, if any,appears in the column labelled “Zero: CCS Type” in the three rows beginning with the label“Percent Chance of: No Retrofit.” The results show that with the Not CCS Ready option50 percent of the Monte Carlo scenarios do not retrofit to CCS, zero percent retrofit tothe current CCS technology and 50 percent retrofit to the advanced CCS technology.As would be expected, the results across design options show that degree of capturereadiness influences if and when retrofit to CCS is made. A plant built with the CCS Ready 3option would retrofit to CCS under 97 percent of the Monte Carlo scenarios on an averagedate of 2037.9. A plant built with the CCS Ready 2 option would retrofit to CCS under 67percent of the Monte Carlo scenarios on an average date of 2043.3. Those same values for aplant built with the CCS Ready 2 are 61% and an average date of 2044.4. If a plant is notcapture ready at all, its probability of retrofitting to CCS is just 50% and would retrofit on theaverage date of 2045.2.The results show that the degree of capture readiness also influences the technology chosenfor CCS retrofit. The current CCS technology is chosen for significant number of scenariosonly if the plant is built with the CCS Ready 3 option. This occurs because the large preinvestmentin the larger boiler reduces the “money forward” cost of retrofit and avoids alarge derate of the power plant. Plants built with lesser degrees of CCS readiness generallyrequire the improved economics of an advanced CCS technology to make retrofit to CCSeconomically viable under this example set of Monte Carlo scenarios.The NPV of the power plants can be improved by retrofitting to CCS. The life-long expectedvalue NPV of the power plants including the effects of CCS retrofits is shown in 5th column ofExhibit C-7. The distribution of NPV for the Monte Carlo scenarios is shown in Exhibit C-8.These NPVs are calculated using the private sector discount rate of 9 percent, real, after tax.Based on this criterion, a power plant operator would select the Not CCS Ready option ashis first choice followed by the CCS Ready 1 option. The CCS Ready 3 option has the lowestNPV because it has higher capital costs in the early years, which carry more weight in theNPV calculations than costs and revenues incurred in later years.23 February 2010 114

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsExhibit C-7: Tabular Results: Base Case(Expected value of net present value (private discount rate of 9% real) per MW original capacityshown in yellow boxes. NPV for public sector discount rate of 5% real is shown in blue boxes.)Simulated Frequency of Retrofit for CCS Ready OptionsRetrofit Technology BAU Reference PlantOption 1: ThrottleValve CaseOption 2: ClutchCaseOption 3: OversizedBoiler CaseNo CCS Retrofit 50% 40% 33% 3%Retrofit to Current CCS 0% 3% 8% 46%Retrofit to Advanced CCS 50% 58% 58% 51%StatisticYear GHGRestrictionsBeginOption Zero: BAU Reference PlantNPV OriginalPlant w/oCCSYear CCSis Adopted priv disc rateNPV Overall including CCSpub discrateNPV OriginalPlant w/oCCSOption 1: Throttle Valve CaseYear CCSis AdoptedNPV Overall including CCSpriv discratepub disc rateAverage 2020.6 253,016 2045.2 268,544 1,392,531 217,702 2044.4 242,014 1,400,085Min 2016.0 (163,707) 2038.0 (117,790) 764,677 (199,020) 2035.0 (133,722) 728,018Max 2025.0 650,678 2053.0 650,678 1,944,050 615,365 2053.0 615,365 1,907,392Median 2021.0 246,814 2045.0 260,928 1,392,155 211,501 2043.0 234,720 1,405,130Stand Dev. 2.9 148,073 4.3 137,935 190,552 148,073 4.9 134,361 184,046StatisticYear GHGRestrictionsBeginNPV OriginalPlant w/oCCSOption 2: Clutch CaseNPV Overall including CCSYear CCSis Adopted priv disc rate pub disc rateNPV OriginalPlant w/oCCSOption 3: Oversize Boiler CaseYear CCSis AdoptedNPV Overall including CCSpriv discratepub disc rateAverage 2020.6 146,208 2043.3 177,058 1,360,114 (328,569) 2037.9 (252,162) 1,056,152Min 2016.0 (270,499) 2034.0 (196,693) 653,135 (745,292) 2027.0 (610,108) 219,001Max 2025.0 543,950 2053.0 543,950 1,841,886 69,093 2054.0 108,959 1,626,973Median 2021.0 140,032 2042.0 168,769 1,369,076 (334,770) 2037.0 (251,181) 1,085,224Stand Dev. 2.9 148,099 5.4 132,582 186,788 148,073 5.4 130,586 234,748Exhibit C-8: Distribution of NPV Results:Base Case (private discount rate)23 February 2010 115

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsPublic policy decisions are sometimes made using “social (public) discount rates” rather thancost of capital of private companies. Assuming that the public discount rate is 5% real, the6th column of Exhibit C-7 shows the revised NPVs 155. Using this criterion the best option isCCS Ready 1 option followed by the Not CCS Ready and CCS Ready 2 options. The use ofsocial discount rates for public policy decisions is often controversial in free marketeconomies because it implies that private companies might have to loose money to complywith policy mandates. That is, power plant developers have to pay a high private cost ofcapital for an incremental invest that yields a return consistent with a lower, social discountrate. Therefore, policymakers should consider policy mechanisms that subsidize CCS Readyexpenditures if the policy is based on net benefits computed using social discount rates.C.4.8 Sensitivity Case: Implementation of a General GHG PolicyThe first sensitivity case assumes that the general GHG policy is implemented sooner withthe cumulative probability reaching 100% by 2018 (rather than by 2025 as in the Base Case).The key inputs to this case are shown in Exhibit C-9 and the summary outputs are shown inExhibit C-10 and Exhibit C-11. Because the GHG restrictions start on average 3.6 yearssooner, the allowance prices are higher in any given year compared to the Base Case. For2030 allowance prices average $27.96 per ton (versus $21.77 in the Base Case) and $107.20per ton in 2050 (versus $90.32 in the Base Case). Since electricity prices are modelledpartially as a function of allowance prices, electricity prices are also higher in theAccelerated GHG Restrictions sensitivity case. For 2030 off-peak/on-peak electricity pricesare about $3.80 per MWhr higher than the Base Case and in 2050 about $10.40 higher.155 The social discount rate is used only to discount the plants’ cash flows. The decision to retrofit to CCS is unchanged (i.e.it is still made based on private discount rate).23 February 2010 116

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsExhibit C-9: Key Inputs: Sensitivity Case with Accelerated GHG Restrictions(General GHG policies are implemented sooner, so GHG allowances and electricity prices increasesooner. Natural gas and coal prices are assumed to be unchanged)23 February 2010 117

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsExhibit C-10: Tabular Results: Sensitivity Casewith Accelerated GHG RestrictionsSimulated Frequency of Retrofit for CCS Ready OptionsRetrofit TechnologyBAU Reference PlantOption 1: ThrottleValve CaseOption 2:Clutch CaseOption 3: OversizedBoiler CaseNo CCS Retrofit 7% 6% 4% 0%Retrofit to Current CCS 0% 7% 22% 71%Retrofit to Advanced CCS 93% 87% 74% 29%Year GHGRestrictionsBeginOption Zero: BAU Reference PlantOption 1: Throttle Valve CaseNPV Overall including CCS NPV OriginalNPV Overall including CCSNPV Original Year CCSYear CCSPlant w/o CCS is Adopted priv discPlant w/opub disc rateis Adopted priv discStatisticrateCCSpub disc raterateAverage 2017.0 136,007 2044.1 178,893 1,278,000 100,694 2042.9 160,785 1,315,263Min 2016.0 (164,011) 2037.0 (133,393) 797,105 (199,325) 2035.0 (135,097) 760,447Max 2018.0 461,123 2053.0 502,118 1,765,791 425,810 2053.0 487,422 1,831,890Median 2017.0 129,966 2042.0 176,683 1,289,524 94,653 2042.0 159,236 1,335,421Stand Dev. 0.8 112,895 4.7 112,006 172,857 112,895 5.3 113,255 195,341Year GHGRestrictionsBeginOption 2: Clutch CaseOption 3: Oversize Boiler CaseNPV Overall including CCS NPV OriginalNPV Overall including CCSNPV Original Year CCSYear CCSPlant w/o CCS is Adopted priv discPlant w/opub disc rateis Adopted priv discStatisticrateCCSpub disc raterateAverage 2017.0 29,147 2041.1 100,977 1,294,719 (445,577) 2033.0 (307,253) 1,038,141Min 2016.0 (270,831) 2032.0 (195,522) 685,968 (745,596) 2026.0 (629,312) 246,113Max 2018.0 354,286 2053.0 426,514 1,833,936 (120,462) 2037.0 61,912 1,725,030Median 2017.0 23,175 2040.0 98,032 1,323,109 (451,619) 2033.0 (302,516) 1,102,645Stand Dev. 0.8 112,910 5.4 114,469 215,931 112,895 1.7 126,581 310,628Exhibit C-11: Distribution of NPV Results: Sensitivity Casewith Accelerated GHG Restrictions (private discount rate)23 February 2010 118

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsThe results of the Accelerated GHG Restrictions sensitivity case show that the powerplants without CCS retrofits have 4.4 year shorter expected lives: 33.4 years versus 37.8years in the Base Case. As would be expected, the retrofits to CCS occur more quickly forall plant design options. The Not CCS Ready option goes to CCS an average of 1.0 yearssooner, CCS Ready 1 option retrofits 1.5 years sooner, CCS Ready option 2 retrofits 2.2years sooner, and the CCS Ready 3 option goes to CCS 4.9 years earlier. Also, the percentof scenarios in which the plants convert to CCS is higher with 93 percent retrofitting ofeven in the No CCS Ready option.The relative economic attractiveness of the more intense CCS Ready options increases inthe Accelerate GHG Restrictions sensitivity case. The net present values of the plantsdecline by about $89,000 per MW in the Not CCS Ready option to $53,000 in the CCSReady 3 option. The decline in value stems from the higher allowances prices, which are notfully compensated by higher electricity prices. The more intense CCS Ready options declineless in value because they are more economic to convert to CCS and thus retrofit soonerand operate at higher utilization rates. The order of preference among the four optionsdoes not change in Accelerate GHG Restrictions sensitivity case, as the Not CCS Readyoption still has the highest private sector NPV.C.4.9 Sensitivity Case: Pricing of Natural Gas and ElectricityThe second sensitivity case assumes that natural gas prices are $1.00 to $1.25 per MMBtuless expensive than in the in the Base Case. Such a sensitivity case might be justified by moreoptimistic views for the prospects for gas shales and other kinds of non-conventional gasesin the US, Canada and possibly other countries. This assumption of lower natural gas priceshas the effect of dropping electricity prices from about $9.00 to $2.00 per MWhr. The keyinputs to this case are shown in Exhibit C-12 and the summary outputs are shown in ExhibitC-13 and Exhibit C-14.The most important impact of these changes is to make the NPV of all four coal powerplant options negative, even with the option to retrofit. This means that the desired returnon investment of 9 percent real after taxes, on average, would not be achieved and thepower plant would not be built by developers if this price environment were anticipated.The lower electricity prices cause the CCS retrofits to occur a little (0.6 to 1.1 years)sooner than in the Base Case. The order of preference among the four options does notchange in Lower Natural Gas sensitivity case, as the Not CCS Ready option still has thehighest private sector NPV and the CCS Ready 3 has the lowest.23 February 2010 119

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsExhibit C-12: Key Inputs: Sensitivity Case with Lower Natural Gas Prices(Natural gas price $1.00 to $1.25/MMBtu lower leading to lower electricity prices.)23 February 2010 120

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsExhibit C-13: Tabular Results: Sensitivity Case with Lower Natural Gas PricesRetrofit TechnologySimulated Frequency of Retrofit for CCS Ready OptionsOption 1: Throttle Option 2: ClutchBAU Reference Plant Valve CaseCaseOption 3: OversizedBoiler CaseNo CCS Retrofit 39% 26% 20% 1%Retrofit to Current CCS 0% 5% 11% 52%Retrofit to Advanced CCS 61% 70% 69% 47%StatisticYear GHGRestrictionsBeginOption Zero: BAU Reference PlantNPV OriginalPlant w/o CCSYear CCSisAdoptedNPV Overall including CCSpub discpriv disc raterateNPV OriginalPlant w/o CCSOption 1: Throttle Valve CaseYear CCSisAdoptedNPV Overall including CCSpub discpriv disc raterateAverage 2020.3 (83,609) 2044.5 (63,512) 842,578 (118,922) 2043.6 (88,184) 860,631Min 2016.0 (459,487) 2037.0 (413,823) 221,217 (494,801) 2035.0 (441,408) 205,690Max 2025.0 351,039 2053.0 351,039 1,409,553 315,726 2053.0 315,726 1,372,894Median 2020.0 (81,576) 2044.0 (66,534) 848,801 (116,890) 2043.0 (92,694) 874,576Stand Dev. 2.8 143,502 4.2 132,957 179,160 143,502 4.8 130,476 182,507StatisticYear GHGRestrictionsBeginNPV OriginalPlant w/o CCSOption 2: Clutch CaseYear CCSisAdoptedNPV Overall including CCSpub discpriv disc raterateNPV OriginalPlant w/o CCSOption 3: Oversize CaseYear CCSisAdoptedNPV Overall including CCSpub discpriv disc raterateAverage 2020.3 (190,410) 2042.3 (151,948) 827,781 (665,193) 2036.8 (573,947) 540,412Min 2016.0 (566,320) 2033.0 (508,309) 142,574 (1,041,072) 2028.0 (959,961) (278,713)Max 2025.0 244,281 2053.0 244,281 1,298,407 (230,546) 2054.0 (230,546) 1,100,087Median 2020.0 (188,335) 2041.0 (155,995) 847,202 (663,161) 2036.0 (573,911) 584,924Stand Dev. 2.8 143,517 5.3 129,461 190,263 143,502 5.1 130,492 250,102Exhibit C-14: Distribution of NPV Results: Sensitivity Casewith Lower Natural Gas Prices (private discount rate)23 February 2010 121

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsC.4.10 Sensitivity Case: Commercialization of Advanced CCS TechnologiesThe final sensitivity case is based on an accelerated commercialization of the advanced CCStechnology. The cumulative probability of commercialization reaches 100 percent by 2030instead on 2054 as in the Base Case. The cost and performance characteristics of theadvanced CCS technology are not changed from the Base Case.The results of this sensitivity are only slightly different from the Base Case in terms of NPV.The most economic option is still the No CCS Ready option followed by the CCS Ready 1option, the CCS Ready 2 option and, finally, the CCS Ready 3 option. The faster availabilityof the advanced CCS technology increases the chances that the advanced technology will beselected instead of the current technology and increases the overall chances that CCS willbe adopted. It also accelerates the date by which CCS is retrofitted by 3.2 to 5.5 years.Exhibit C-15: Key Inputs: Sensitivity Casewith Accelerated Advanced CCS Technology(Advanced CCS Technology comes in by 2030. Other inputs unchanged)23 February 2010 122

Appendix C: Policy Considerations and Assessments of CCS Ready EconomicsExhibit C-16: Tabular Results: Sensitivity Casewith Accelerated Advanced CCS TechnologySimulated Frequency of Retrofit for CCS Ready OptionsRetrofit Technology BAU Reference PlantOption 1: ThrottleValve CaseOption 2: ClutchCaseOption 3:Oversize CaseNo CCS Retrofit 48% 37% 32% 3%Retrofit to Current CCS 0% 0% 0% 0%Retrofit to Advanced CCS 52% 63% 68% 97%Option Zero: BAU Reference PlantOption 1: Throttle Valve CaseYear GHGYear CCS NPV Overall including CCSNPV Overall including CCSRestrictions NPV Original isNPV Original Year CCSpub discStatistic Begin Plant w/o CCS Adopted priv disc rate pub disc rate Plant w/o CCS is Adopted priv disc rate rateAverage 2020.4 253,927 2040.9 271,748 1,421,045 218,613 2039.4 246,237 1,455,424Min 2016.0 (143,819) 2037.0 (66,679) 950,946 (179,132) 2035.0 (78,246) 1,031,334Max 2025.0 639,315 2046.0 639,315 1,898,219 604,002 2044.0 604,002 1,863,128Median 2020.0 255,603 2041.0 270,516 1,420,386 220,290 2039.0 244,910 1,446,167Stand Dev. 2.9 141,956 1.8 130,030 158,763 141,956 2.2 125,877 145,307Option 2: Clutch CaseOption 3: Oversize CaseYear GHGYear CCS NPV Overall including CCSNPV Overall including CCSRestrictions NPV Original isNPV Original Year CCSpub discStatistic Begin Plant w/o CCS Adopted priv disc rate pub disc rate Plant w/o CCS is Adopted priv disc rate rateAverage 2020.4 147,093 2037.8 180,606 1,418,881 (327,658) 2034.7 (230,593) 1,209,529Min 2016.0 (250,631) 2032.0 (130,958) 967,067 (725,404) 2027.0 (551,267) 739,266Max 2025.0 532,595 2044.0 532,595 1,844,787 57,731 2043.0 83,251 1,653,428Median 2020.0 148,411 2038.0 179,990 1,422,247 (325,982) 2035.0 (231,608) 1,216,049Stand Dev. 2.9 141,990 2.4 123,951 143,559 141,956 3.4 114,771 163,771Exhibit C-17: Distribution of NPV Results: Sensitivity Casewith Accelerated Advanced CCS Technology (private discount rate)23 February 2010 123

C.4.11 Conclusions of Monte Carlo AnalysesAppendix C: Policy Considerations and Assessments of CCS Ready EconomicsThe specific results from our Monte Carlo analyses are based on a particular set ofassumptions for technology performance, costs, regulatory setting, and market conditions. Adifferent set of assumptions representing a different country or regulatory regime, ofcourse, would yield other results. Therefore, such Monte Carlo results could be developedspecifically for every country considering CCS, as an aid to policymakers in deciding theirCCS Ready policy choices.The Monte Carlo analyses performed here under a variety of reasonable assumptions, yieldthe following general conclusions:• The important determinants of the overall economics of CCS Ready are the initialcapital cost differences versus savings in retrofit capital costs and gains in net operatingrevenues (operating revenues minus operating costs). CCS Ready is most economicwhen there are only small increases in initial capital, savings in retrofit capital costs aresignificant and gains in net operating revenue are large.• The value of capture ready investment to power plant owners is increased if a bindingCO 2 emission limit is expected earlier in time, and if the uncertainty about delays of thelimits is reduced.• The value of capture ready investment to power plant owners is increased when theexpected CO 2 emission costs are higher. If the CO 2 emission costs are low, CCS maynot be economic—therefore, the capture ready pre-investment will not be economicfrom the perspective of private sector decision makers.• A high private sector cost of capital discourages capture ready investment, as thebenefits of future cost savings are more discounted for the time value of money.Conversely, the use of a lower social discount rate tends to favour more capture readypre-investment.• Capture ready options with high levels of pre-investment (whether or not they areeconomic using private sector plant-life economic criteria) tend to increase the chancesfor retrofitting to CCS sooner. This occurs because the retrofit decision is made on a“money forward” basis that treats the initial capture ready pre-investment as a sunk cost.• The effect of advanced CCS technologies (with lower costs and better performancecharacteristics) on the economic attractiveness of capture ready investments is complex.By making retrofits to CCS more economic, advanced technologies help encourage theadoption of CCS and can make capture ready investments more likely to pay off. On theother hand, if the capture ready pre-investment includes assets that are not fully used byan advanced technology, then capture ready economics are not helped as much. Thissuggests that capture ready measures that can be used by multiple CCS technologieshave more value than those specific to one CCS technology.23 February 2010 124

Appendix D: AcronymsAppendix D: AcronymsAPECAGRASUAUDAZEPBACTBAUCaCO 3CaOCCGTCCRCCSCCS ReadyCO 2CSLFDBMEOREPRIEUFBCFEEDFGDG8GHGH 2 SHSEAsia-Pacific Economic CooperationAcid Gas RemovalAir Separation UnitAustralian DollarAdvanced Zero Emission Power CycleBest Available Control TechnologyBusiness as UsualCalcium Carbonate RockCalcium oxideCombined Cycle Gas TurbineCarbon Dioxide Capture ReadinessCarbon Dioxide Capture and StorageCarbon Dioxide Capture and Storage ReadyCarbon DioxideCarbon Sequestration Leadership ForumDesign Basis MemorandumEnhanced Oil RecoveryElectric Power Research InstituteEuropean UnionFluidized Bed CombustionFront End Engineering and DesignFlue Gas DesulfurizationThe Group of EightGreenhouse GasHydrogen SulphideHealth and Safety Executive23 February 2010 125

Appendix D: AcronymsHRSGHSCHSEIEAIEA GHGIGCCIPCCIPLOCAKmKWKWhLAERLNGLPLPALPGmDMEAMITMMBtuMPaMRCSPMMVMWNETLNH 3NGCCHeat Recovery Steam GeneratorHazardous Substances ConsentHealth and Safety ExecutiveInternational Energy AgencyInternational Energy Agency Greenhouse Gas R&D ProgrammeIntegrated Gasification Combined CycleIntergovernmental Panel on Climate ChangeInternational Pipeline and Offshore Contractors AssociationKilometerKilowattKilowatt HourLowest Achievable Emission ReductionLiquefied Natural GasLow PressureLocal Planning AuthorityLiquefied Petroleum GasMillidarcyMono-Ethanol AmineMassachusetts Institute of TechnologyMillion British Thermal Units (Btu)MegapascalMidwest Regional Carbon Sequestration ProjectMonitoring, Measurement and VerificationMegawattNational Energy Technology LaboratoryAmmoniaNatural Gas Combined Cycle23 February 2010 126

Appendix D: AcronymsNGONO XNSBTFNSPSNSRNPVOPSOSHAPCppmPHMSAPSANon-Governmental OrganizationNitrogen OxideNorth Sea Basin Task ForceNew Source Performance StandardsNew Source ReviewNet Present ValueOffice of Pipeline Safety, within U.S. Department of Transportation’s Pipelineand Hazardous Materials Safety AdministrationOccupational Safety and Health AdministrationPulverized CoalParts Per MillionU.S. Department of Transportation’s Pipeline and Hazardous Materials SafetyAdministrationPressure Swing AbsorptionPSR Pipeline Safety Regulations 1999SCADASCPCSCRSO 2SO XTCO2eUKUMPPU.S. DOEU.S. FERCVSAZEPSupervisory Control and Data AcquisitionSupercritical Pulverized Coal PlantSelective Catalytic ReducerSulphur DioxideSulphur OxideMetric Tons of Carbon Dioxide EquivalentUnited KingdomUltra-Mega Power PlantU.S. Department of EnergyU.S. Federal Energy Regulatory CommissionVacuum Swing AbsorptionZero Emission Fossil Fuel Power Plants23 February 2010 127

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Appendix E: ReferencesElectric Power Research Institute (EPRI). (2009). CO 2 capture status. Presented at the WestarSpring Business Meeting, Incline, NV. Retrieved fromhttp://www.westar.org/Docs/Business%20Meetings/Spring09/Incline/07.2%20CO2%20Capture.ppt#671,1,CO2 Capture Status - Post-combustion - Pre-combustion(IGCC) - Oxy-combustion.European Parliament and the Council of the European Union. (2009). Directive 2009/31/ECof the European Parliament and of the Council of the European Union. Official Journalof the European Union, 140. Retrieved from http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:140:0114:0135:EN:PDFEuropean Power Plant Suppliers Association (EPPSA). (2006). EPPSA's CO2 capture readyrecommendations. Status: 07.12.2006. Bruxelles, BE: Author. Retrieved fromhttp://www.eppsa.org/fileadmin/user_upload/EPPSA_Publications/EPPSA_CO2_Capture_Ready_Recommendation.pdf.Foy, K. & Yantovski, E.. (2006). History and state-of-the-art fuel fired zero emission powercycles. International Journal of Thermodynamics, 9, 37-63. Retrieved fromhttp://www.co2.no/download.asp?DAFID=52&DAAID=4.Gibbins, J.. (2006). Making New Power Plants ‘Capture Ready.’ Presentation to the 9thInternational CO 2 Capture Network, London, England.Global CCS Institute. (2009a). Strategic analysis of the global status of carbon capture andstorage. Report 1: Status of carbon capture and storage projects globally (Final Report).Canberra ACT, Australia: Author. Retrieved fromhttp://www.globalccsinstitute.com/downloads/Reports/2009/worley/Foundation-Report-1-rev0.pdf.Global CCS Institute. (2009b). Strategic analysis of the global status of carbon capture andstorage. Report 2: Economic assessment of carbon capture and storage technologies.Retrieved fromhttp://www.globalccsinstitute.com/downloads/Reports/2009/worley/Foundation-Report-2-rev-1.pdf.Global CCS Institute. (2009c). The Global CCS Institute. Presented at the RegionalRoundtables on Establishing an Internationally Recognized Definition of CarbonCapture and Storage Ready and Best Practice Guidelines for Policy MakersWorkshop held 19 October, 2009, Washington, DC.Holloway, S.. (2008). Advances in global and regional capacity assessment. Paper presented inSession 1A of GHGT-9: 9 th international conference on greenhouse gas controltechnologies, Washington, DC.ICF International. (2009). Developing a pipeline infrastructure for CO2 capture and storage:Issues and challenges. Report prepared for INGAA Foundation. Retrieved fromhttp://www.ingaa.org/cms/31/7306/7626/8230.aspx.Intergovernmental Panel on Climate Change (IPCC). (2005a). IPCC Special Report on CarbonDioxide Capture and Storage. New York, NY: Cambridge University Press. Retrievedfrom http://www.ipcc.ch/pdf/special-reports/srccs/srccs_wholereport.pdf.23 February 2010 130

Appendix E: ReferencesIntergovernmental Panel on Climate Change (IPCC). (2005b). IPCC Special Report on CarbonDioxide Capture and Storage: Summary for policymakers. A special report of WorkingGroup III of the Intergovernmental Panel on Climate Change. Retrieved fromhttp://www1.ipcc.ch/pdf/special-reports/srccs/srccs_summaryforpolicymakers.pdf.Intergovernmental Panel on Climate Change (IPCC). (2007). Climate change 2007: Synthesisreport. Contribution of Working Groups I, 11, and III to the Fourth AssessmentReport of the IPCC. Geneva, Switzerland: Author. Retrieved fromhttp://www.ipcc.ch/publications_and_data/publications_ipcc_fourth_assessment_report_synthesis_report.htm.International Energy Agency (IEA). (2008). Energy technology perspectives 2008: Scenarios andstrategies to 2050. Paris, France: Author.International Energy Agency (IEA). (2009a). Technology roadmap: Carbon capture and storage.Paris, France: Author.International Energy Agency (IEA). (2009b). World Energy Outlook 2009.International Energy Agency (IEA). (2010). Carbon dioxide (CO2) capture and storage (CCS).Retrieved from IEA CCS website, http://www.iea.org/subjectqueries/cdcs.asp.International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2005). Retrofitof CO 2 capture to natural gas combined cycle power plants (Report no. 2005/1).Cheltenham, UK: Author.International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2007a). CO 2capture ready plants (Report no. 2007/4). Cheltenham, UK: Author.International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (2007b).Improved oxygen production technologies (Report no. 2007/14). Cheltenham, UK:Author.International Energy Agency Greenhouse Gas R&D Programme (IEA GHG). (n.d.). R, D&Dprojects database. Retrieved February 2010 from IEA GHG CO 2 Capture and Storagewebsite, http://www.co2captureandstorage.info/co2db.php.International Maritime Organization (IMO). (1972 and 1996). London Convention: The"Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter1972 & 1996.”International Pipeline & Offshore Contractors Association (IPLOCA). (2010). Member list.Retrieved from IPLOCA’s Membership Centre website,http://www.iploca.com/platform/apps/members/index.asp?MenuID=36&ID=56&Menu=1&Item=6.4.Irons, R.. (2007). Implications of CO2 capture-ready plants. Presentation at the ThirdInternational Conference on Clean Coal Technologies for our Future, Sardinia, Italy.Retrieved from http://www.iea-coal.org.uk/publishor/system/component_view.asp?LogDocId=81705&PhyDocId=6361.23 February 2010 131

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