Capital Power Corporation, Enbridge Inc. and TransAlta Corporation have decided to cancel Project Pioneer, a carbon capture and storage project that was proposed for Capital Power and TranAlta’s jointly-owned Keephills 3 coal-fired power plant located approximately 70 kilometers west of Edmonton, Alberta.
The project was intended to include: a carbon capture facility that would have removed CO2 from a portion of the Keephills 3 flue gas, a pipeline to transport CO2 to a sequestration site approximately 6 kilometers from the power plant, and a second pipeline to transport CO2 to an existing oil production facility in the Pembina oil field, approximately 75 kilometers from the plant. CO2 from the second pipeline, which would have carried the majority of the captured gas, was to have been used for enhanced oil recovery. Project Pioneer was intended to demonstrate the commercial scale-viability of carbon capture and storage technology.
The federal government had committed $342.8 million to the project. These funds were to have come from its $1 billion Clean Energy Fund and its ecoENERGY Technology Initiative. The Province of Alberta had agreed to invest an additional $436 million from the Alberta CCS Fund, a $2 billion program announced in 2008 to advance carbon capture and storage technology.
A feasibility study conducted for Project Pioneer determined the technology was viable and that capital costs would be consistent with expectations. However, reports suggest that even with the committed government funding, the project would not have been economically viable because of two factors. First, because of the relatively low cost of carbon under Alberta’s carbon pricing scheme, the project would have generated insufficient savings on carbon offsets or carbon charges under that scheme. Second, the project was not able to secure sufficient guarantees of revenue from the sale of CO2 for enhanced oil recovery purposes.
These two factors are at play in the broader project development sector in Canada. Low or non-existent carbon prices across Canada make carbon-reduction projects (including non-carbon based power generation, energy storage, and CCS projects) less financially attractive, particularly in an era of already low natural gas prices. At the same time, a variety of energy (and non-energy) projects are challenged by an inability to secure bankable off-take agreements. For example, development of a number of renewable generating projects in Alberta is being slowed by a scarcity of opportunities to obtain long-term power purchase agreements.
The federal and Alberta provincial governments have focused their carbon strategies on capture and storage, rather than reduction. The failure of Project Pioneer, despite large amounts of government financial support, may force a rethink in tactics (although likely not in strategies).