Monthly Archives: July 2014

Bringing Carbon Capture and Storage (CCS) To Scale Cost Effectively With a Complex Systems Approach

CCS BACKGROUND

Carbon Capture Storage (CCS) is a process in which CO2 emitted from power plants and industrial sources are separated from other components and transported (if necessary) to geologic storage locations or industrial sites where the CO2 can be utilized for concrete production and steel making.

The purpose of CCS is to reduce emissions and stabilize greenhouse gas levels in the atmosphere. CCS does not have the intermittency issues associated with renewable generation sources; however, the underground storage of CO2 may create long-term liability issues, environmental concerns, and public policy challenges.

Early concepts of CCS were made in the 1970s, initial research and first projects began in the 1990s and in 1996 the Norwegian oil company, Statoil, began operation of the first large-scale commercial CCS project at its offshore Sleipner gas field. ;

In the early 2000s more resources were devoted to promoting CCS and in 2005 a report by the Intergovernmental Panel on Climate Change (IPCC)[1] estimated that worldwide there were 7,887 industrial facilities, including 4,942 power plants that were potential candidates for CCS.

In 2010 president Obama asked his CCS task force to develop a cost effective plan for the deployment of five to ten commercial demonstration projects online by 2016. Despite over $6 billion in federal funds available to develop and demonstrate CCS since 2008 in the United States, only two industrial CCS projects are in operation: one commercial scale coal CCS project in advanced construction, four coal CCS projects, and one industrial CCS project under development.

REASONS FOR SLOWER THAN EXPECTED CCS DEPLOYMENT

There are multiple factors influencing the deployment of CCS projects, including economic, political, regulatory, legal and transport infrastructure requirements. Economic factors include not only the current high cost to build and operate CCS equipment but also other factors such as the low cost of natural gas. The politics of climate change, local job growth, and technological preferences such as renewables over nuclear can lead to less than optimal economic decisions. Regulators must decide when preapproval is appropriate and how to incentivize investment while protecting consumers by enforcing cost estimates. Uncertainties regarding long term liability of stored carbon are a factor and additional infrastructure must be constructed to transport the CO 2 to a geologic storage location or industrial site.

If the engineering planning methods being used by most CCS projects are leading to unnecessary excessive costs, CCS may never reach broad utilization regardless of legislative support, public education, or the implementation of innovative financial incentives[2].  

Southern Energy Co.’s Kemper county IGCC[3] project in Mississippi was initially estimated to cost $2.4 billion with a construction deadline of May 2014. As of July 2014, the plant is estimated to cost $5.5 billion and scheduled to start operations in May 2015. On May 19, 2014, an MIT publication reported:

The cause of these cost increases and time delays are due to a number of causes, including miscalculating pipe thickness, length, quantity and metallurgy. After these changes to the pipes were made, additional changes needed to be done to the support structures.[4]

The characteristics of the Kemper County IGCC project may be too complex for the planning methods employed. Professor Yaneer Bar-Yam, President of the New England Complex Systems Institute (NECSI), explains in his book Making Things Work, that the Manhattan project and the U.S. space program were successful with a “systems engineering paradigm” [5] that included a planning stage, specification stage, design stage, and an implementation stage. However, this paradigm was ineffective for the FAA causing them to abandon their air traffic control system upgrade project after spending over $3 billion between 1982 and 1994. Hopefully future CCS projects will not be added to the long list of other tragic large scale engineering failures.  

POSSIBLE SOLUTION 

An evaluation of the engineering processes employed in CCS project construction may lead to the discovery of opportunities for improvement using a complex systems approach including an “evolutionary process” which according to Bar-Yam, involves creating an agreement to cooperate and defines rules for competition among teams, and promotes innovation in the process itself. The Federal Aviation Administration (FAA) may have been successful in implementing their multibillion dollar air traffic control system had they used a dual system to test new options for air traffic control stations during a transitional period. There may be an opportunity to save billions of dollars on future CCS projects.

Please contact us if you would like to discuss an opportunity to receive an independent evaluation of the engineering processes for CCS projects and a recommendation regarding the application of complex systems concepts.


[1] Special Report on Carbon Dioxide Capture and Storage

[2] For example: carbon tax, state feed-in tariffs, and long-term purchase power agreements (PPAs)

[3] Integrated Coal-Gasification Combined Cycle

[4] https://sequestration.mit.edu/tools/projects/kemper.html

[5] Several Assumptions: (1) New technology will be used (2) New technology is based on understanding of basic principles (E=MC2 , F=ma…)  (3) Goals can and will be understood (4) Design will be created essentially from scratch and then implemented (Bar-Yam 2005)

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The Pennsylvania Public Utility Commission (PUC) voted 4-1 to approve a rate of return on common equity (ROE) under 10% for Columbia Water Co.

This decision makes Aaron Rothschild the first Pennsylvania Office of Consumer Advocate rate of return consultant to provide testimony leading to a Return on Equity (ROE) below 10%.

The ROE is based on a determination of the utility company’s cost of equity based on expert filed testimony.

Please see the following link for the January 9, 2014 press release regarding the Pennsylvania Public Utility Commission’s Final Order regarding Columbia Water Co.’s 2013 rate case:

http://www.puc.pa.gov/about_puc/press_releases.aspx?ShowPR=3289

 

 

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