Capital Power carbon capture plan beset by finances, tech: analysts

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Edmonton — Analysts suggest the company's decision to freeze Canada's largest carbon capture and storage plan is likely a result of financial uncertainty and technological risks.

Capital Power Corp's decision not to pursue its project The Genesee project costs $2.4 billion Scott McDougall of the Pembina Institute, a clean energy think tank, said this was unlikely to be the first of other cancellations.

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“I think (Genesee) is different enough that I'm not extrapolating too much,” McDougall said.

But Sarah Hastings Simon, who studies the energy transition at the University of Calgary, said the decline underscores that, unlike some decarbonization strategies, carbon capture increases costs.

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

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

“It's not where technology advocates would want to be,” Timmins said.

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

Capital Power announced Wednesday it will no longer continue carbon capture at its Genesee power plant near Edmonton because the economy is no longer working.

The decision removed the largest project of its kind in Canada from the books. Genesee was supposed to store three million tons of carbon dioxide per year, about three times the storage rate of the Shell Quest project.

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

“I feel strongly that carbon capture and sequestration works,” he said.

But several factors convinced the company to shelve the project — uncertainty about how much Capital Power could earn from the carbon credits the project would generate, how much of a carbon price it would avoid, and the cost of a ton of carbon sequestered.

“I wouldn't say it's one thing,” he said. “We need all of that to work.

“What will open the door to carbon capture and storage for natural gas is such a low (cost per unit of carbon) that we can work within whatever regulatory framework exists. We're just early days.”

Capital Power was the first natural gas plant to use this technology. That creates risks and adds costs, McDougall said.

“There will be some additional costs related to the second or third project. Costs will decrease for future deployments.”

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

“(Carbon capture) in gas turbines is very different from (carbon capture) in gas boilers.”

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

Alberta can address that risk by tightening its industrial carbon emissions program, Hastings Simon said.

She said making the credits more difficult to obtain would ensure their continued value. The same applies to increasing the market by lowering emissions limits for other industries.

“If you are willing to do that as a government, you can control these risks to a large extent.”

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

But if the groundbreaking technological innovation fails, Timmins said carbon capture will still need public support for projects to move forward.

“It's not yet at the level where it's commercially viable,” Timmins said.

“What is needed? Either a breakthrough or government money.”

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