Carbon capture in Alberta likely delayed by financial, technological risks: analysts

The corporate decision to suspend Canada’s largest carbon capture and storage plan is likely the result of financial uncertainty and technological risks, analysts suggest.

Capital Power’s decision not to proceed with its $2.4 billion Genesee project is unlikely to be the first of similar cancellations, said Scott MacDougall of the Pembina Institute, a clean energy think tank.

“I think (Genesee) is different enough that we shouldn’t extrapolate too much,” MacDougall said.

But Sara Hastings-Simon, who studies the energy transition at the University of Calgary, said the rollback underscores that, unlike some decarbonization strategies, carbon capture adds costs.

“When some people say this will be a big part of our decarbonization solution, the question is who is going to pay for it?”

And Thomas Timmins, head of the energy practice at law firm Gowling WLG, called Capital Power’s decision a reminder that carbon capture technology is still new.

“It’s not where technology advocates would like it to be,” Timmins said.

Carbon capture separates climate-changing gases, such as carbon dioxide, from exhaust gases and sequesters them deep underground. Industries from cement manufacturing to tar sands see it as one of the most promising ways to reduce their carbon emissions.

Capital Power announced Wednesday that it would no longer pursue carbon capture at its Genesee power plant near Edmonton because the economics are no longer working.

Financial and technological risks likely delayed carbon capture project in #Alberta: analysts. #CCS #CapitalPower #GeneseeProject

The decision took Canada’s largest such project off the books. Genesee would have stored three million tons of carbon dioxide a year, about three times the storage rate of Shell’s Quest project.

In a conference call with analysts on Wednesday, Capital Power CEO Avik Dey said the technology has a future.

“I firmly believe that carbon capture and sequestration works,” he said.

But several factors convinced the company to pull the plug: uncertainty over how much Capital Power could earn from the carbon credits the project would generate, the amount of carbon pricing it would avoid, and the cost per ton of carbon captured.

“I wouldn’t say it’s one thing,” he said. “We need everything to work.

“What will unlock carbon capture and storage for natural gas is for (the cost per unit of carbon) to be reduced in such a way that we can work within whatever regulatory framework exists. We are at the beginning.”

Capital Power would have been the first natural gas plant to use this technology. That creates risks and adds costs, MacDougall said.

“There would be some additional costs in relation to the second or third project. The costs will be reduced for future implementations.”

The process is better understood in other applications, he said.

“(Carbon capture) in gas turbines is quite different than (carbon capture) in gas boilers.”

Another risk is that other carbon capture projects planned for Alberta could flood the market with the credits that carbon capture would generate, reducing their value.

Hastings-Simon said Alberta could address that risk by tightening its industrial carbon emissions program.

Making credit more difficult to obtain would ensure its continued value, he said. So would increasing the market by reducing emissions limits for other industries.

“If you’re willing to do that as a government, you can control that risk to a large extent.”

Governments can also guarantee companies an adequate minimum price for the carbon credits they generate.

But in the absence of breakthrough technological innovation, Timmins said carbon capture will still need public support for projects to move forward.

“It hasn’t reached the level yet where it’s commercially viable,” Timmins said.

“What does it take? Either a breakthrough or money from the government.”

This report by The Canadian Press was first published May 2, 2024.

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