30 May Transitioning To Coal Is The Preferred Direction
- Coal is not a dirty fuel source thanks to science and engineering expertise.
- Coal is the most efficient fuel source for producing electricity in Sask.
- The value-added features of coal can’t be replicated by any other power generation sources.
- The coal industry is an established driver of the economy.
This study has been compiled and composed to make, what we trust, will be a compelling argument in favour of the retention of coal as a viable fuel to use in the production of electrical power in Saskatchewan in 2021 and beyond.
Our study was extended to include environmental, economic and political arguments for coal-based power production and will by natural course, obviously address a few social issues.
We have learned over the past five or more years the carbon capture and sequestration model implemented at Boundary Dam’s Unit 3 (BD3) has performed beyond original expectations that had been placed upon it as a pilot project. It has set the table for expansion to other facilities, with the nearby Shand Power Station being the foremost target.
This covering document is simply meant to support the fact that sundry arguments have already been made and succinctly delivered to interested parties in the past. These educated parties have studied and commented on various factors surrounding a proposal for a Second Generation of CCS at the Shand Power Station, and beyond.
In some instances we will be restating the obvious advantages of a Second Generation program while perhaps bringing some fresh perspectives and proposals to the table for a current round of discussion.
Contrary to some beliefs, coal does not have to be a “dirty” fuel source for electrical power production. That has been an established fact for several years, although we recognize there is still a sturdy faction within our population and throughout North America that are still trying to convince themselves and others there should be no coal for evermore. We expect they see coal as a substantive commodity used to power our future as a non-starter.
They are hindered by history. Cutting edge technology, economics, environmental science and engineering expertise have proved otherwise and this expertise is in full force at BD3. It has also been shown that once built, industrial ingenuity takes place on the mechanical as well as the scientific side.
Regarding the economic and environmental aspects of this presentation, we must reiterate that for starters, coal in Saskatchewan to all intents and purposes, belongs to the people of Saskatchewan, so is a nearly free fuel. It can be used for decades providing technology advances in lockstep with environmentally correct mining practices. The major cost factors are found in the mining and transportation. But, no other commodity or process can surpass coal in terms of low cost certainty, if we care to use it.
Environmentally, it’s a zero sum, or even a plus process. Strip mining coal is a negative practice. However, restoring and reclaiming mined areas and top soil conditions to allow future agriculture, forestry or nature refuges, is a positive factor that has been practised for several decades by regulating mining programs thanks to earlier provincial interventions and monitoring. These regulations have received full compliance from mining companies.
The continued use of, or a major expansion of, the existing Shand Green House could become an economic, environmental and political power point for public consumption. The major PFRA tree nursery program at Indian Head was cancelled. There is a continued demand for forestry products as well as a variety of agriculture produce.
The Shand nursery could provide that service using a profit-orientated business model if desired. Other greenhouse production models could be injected to add untold advantages if Shand is retained as a viable power producer. It requires some imagination along with business acumen, but it should be included in the planning processes. Expansion is the desired outcome, not contraction or elimination. This CCS greenhouse program can work hand in hand with power production and other business models using renewables.
A CCS power plant is capable of producing cost competitive electrical power, again, that is a proven fact that can be found within various studies and annual reports. Subsidization by senior government(s) can be reduced or eliminated. Power production for renewable power generation has been, and will continue to be subsidized for a period of time, so we draw your attention to that fair and level playing field. It is expected that by the time a third generation of carbon capture projects takes place, subsidization will not be required or desired.
The recent White Paper issued by the CCS Knowledge Centre indicates tax credit systems are another tool that can be unleashed to support climate targets.
Cost comparisons for CCS Shand vs. BD3 are easily found within the Second Generation CCS Shand Study provided by the International CCS Knowledge Centre, so we will not belabour those particular points that favour expansion using carbon and sulphur capture processes. We trust SaskPower and others use a series of price ranges for comparisons with natural gas et al and not just one set to use to compare when gas is at its lowest price range, but would deploy a one or two year average pricing regime so that fairness is established. In the meantime we rest assured the smoke rising from the stacks at these CCS units will be mostly steam that will not carry toxic materials to be released into the air streams. Natural gas plants without C02 removal capabilities will.
Basic mechanical/chemical problems that surfaced early on in the BD3 model were addressed quickly and a second generation capture system that uses steam to run the capture unit leads to an improved efficiency rating.
It also should be noted at this juncture there are at least 17 carbon capture projects currently operating or under construction world wide including five using coal for front end use. In other words there is a lot of engineering design work being deployed globally, so the BD3 and Shand II projects do not put us on a dubious island of experimentation. We merely emphasis the point here that we have the personnel in place who know how it works and can duplicate processes while the other side of our projects are working on business models. Shand already has infrastructure in place to accommodate a carbon capture unit since it was originally built to welcome future expansion.
Cost and use comparisons with present and future natural gas plants or a potential agreement to procure future electrical supplies from Manitoba’s hydro system also needs to be addressed.
It is understood that a natural gas plant, built with a higher cost factor (2X) than a Shand II project, could be operated efficiently with a personnel base of 30 to 60 people compared with coal fuelled plants that also have mining personnel costs to factor in.
These are facts that appear to score a solid point for natural gas. However, the counter argument should be raised that 300 to 800 well paid miners and power plant employees are major contributors to the province’s gross domestic production figures. They are taxpayers, consumers, volunteers and valuable contributors to their respective communities. If they are drummed out of their current positions what are their chances of becoming equally valuable when subjected to lesser paying jobs or, they remove themselves from the province altogether? Let us remind ourselves of the old Henry Ford assessment many decades ago when he came to the realization that a well paid assembly line worker at his plant would be able to purchase one of his vehicles whereas, a poorly paid employee could not and would not since he would not view the company or the process favourably. Keep the cash flowing and trained personnel circulating within the province if you want to do the right thing. Simple economics. There are transition funds pouring out already, but, were they ever even necessary? What has already been spent on unnecessary transitioning projects?
We also keep in mind the continuing reduction in costs in operating a CCS unit since materials keep getting better, early problems are overcome and techniques improve. Those improvements carry cost efficiencies.
Natural gas power plants will, most likely, not meet the carbon reduction levels required in the federal government’s Phase 2 or Phase 3 carbon tax (price) regime. This means they too, will be required to install carbon capture elements to their production base, or face abandonment deadlines.
Would it not be a significant advantage to already have that expertise and materials available with the knowledge in place to install, operate, maintain and replace, as the needs require? Or, do we hire outside corporations and agencies to do these jobs for us? Keep in mind a Shand II would be as near as any other agency could get to a guarantee that a project that would come in at, or under budget. Unlike proposed nuclear energy projects that are currently experiencing huge cost over runs of several hundreds of millions of dollars, Shand would bring home guaranteed greenhouse gas reductions on time and well within budget seeing as how we have moved from pioneer status to be in a position where Saskatchewan can now claim a leadership label, if we so chose. It is now proven fact that CCS has the most significant impact on GHG emissions than any other process. Not using it means a predicted 138% increase in climate mitigation costs for provincial taxpayers. Once CCS hubs are established then demonstration models are out there to attract further investment. We must also point out here that this can be the quickest solution to meet climate goals while retaining competitiveness.
We admit there is now an ample natural gas supply to feed power plants for decades and the price model will probably not exceed US$3 – $3.50 for some time to come. But, there is still some volatility in that market so prices will fluctuate and if Saskatchewan decides to procure the gas from elsewhere then it becomes beholden to other provinces, states or corporations. Our proud Crown Corporation at that point is no longer the master of its fate, and by extension, our fate. Entering into contracted partnerships with private corporations or other political entities carries certain degrees of risk such as changes in political fortunes and beliefs, or, in the case of corporations, future amalgamations, stock manipulations, out-of-country ownerships or bankruptcy. How much do we want to risk?
We must also be cognizant of the fact our front line politicians are, by design, not generally tuned to make long-term, far-reaching business decisions since their jobs are continually on the line in four-year cycles and a desire/need to be elected or re-elected usually supersedes more careful long range master plans and thoughts.
Politicians are in a constant swirling vortex of doubt surrounding their need to sell themselves and then sell their party and sell their party’s policies that may take on different looks within short time periods. It is not an easy burden to carry and often this burden, especially nearer an election year, leads to some decisions that could end up carrying decisive negative factors.
At this point, we remind our political friends that if Shand II is seen as non-viable, then by extension, the BD3 project will be forevermore seen as a failure. The social economic impact could be significant. Political opponents and some environmentalists will point to this section of the province with derision and ridicule, citing “another government boondoggle … the $1.4 billion failure, the great clean coal scam.” And, if the powers that be, do, in fact, vote negatively on a Shand II question, the naysayers will be able to make their argument even though they will be wrong since BD3 did work. Shand II and others can work, but only if we allow them to work. Do the politicians want another Global Transportation Hub or Regina bypass fiasco to aid their political adversaries? Can they afford it politically and economically? There is that old adage we will trot out here that simply states that when you mix science with politics, you get politics. This is an opportunity where science can serve politics, and vice versa.
Moving back to the practical side again, there is another option we are certain the provincial government is contemplating and that is procurement of hydro-fuelled power from Manitoba.
Again, we understand variables are at play and they may not come into play at all as long as Manitoba retains a contract to supply hydropower to the state of Minnesota.
There is a belief, however, that Minnesota might attempt to capitalize on the currently less expensive natural gas sources from North Dakota to power their electrical grid. We expect that would take time and lead to some significant expenses, but that is not our call to speculate on here.
What does enter the picture, however, is, if that happens then Manitoba will come looking for a buyer for this excess supply of power and Saskatchewan could well become their major target. The offer will be submitted, at a bargain basement rate to save Manitoba’s government and power plants and the traditional bi-pole DC/AC power grid currently available could be expanded to Saskatchewan at a reasonable opening cost and would, of course, result in fewer men and women being required to serve the industry in Saskatchewan. It would also mean a lessened control of Saskatchewan power production and grid system.
Fewer people on the payroll should translate to larger profits for the Crown.
However, Saskatchewan then loses 300 mine workers earning on average $100,000 annually, paying a 14.5 per cent provincial tax equalling approximately $4.35 million yearly. We then also lose several hundreds of indirect jobs, wages and corporate structures that cater to the mining and coal production processes. Using a traditional 4X multiplier index, that amounts to an additional economic loss of $17 million (modest assessment) or more per year, every year, not temporarily. And, this is only factoring in lost mining jobs. The lost SaskPower jobs only add to that negative scenario and SaskPower will do that mathematical equation and we do not know what spin they would put on the subject and decision. This is a situation of temporary increased profit vs. job losses (temporary and permanent) and a permanently reduced provincial GDP.
If BD3 is left as an orphan power producer, what is the expected life span? If BD3 is eliminated by politically motivated environmentalists they most certainly will be defying and denying the economic and environmental facts of efficiency. What will decommissioning costs be for Boundary Dam and/or Shand? Again, we cite the fact that politicians are reluctant to venture down the “what if, 15 years from now, road.”
We expect, however, one decommissioned plant would come with a price tag of at least $30 – $40 million in today’s dollars.
There is another item we raise on the lost opportunity topic if Shand II and other similar projects are rejected. That is the sale of CO2 to the oil industry and fly ash sales to the concrete/cement producers who prefer it for the more efficient use of their product, thus reducing their toxic waste factors. Is this positive environmental fact to be dismissed without proper assessment? The cement production industry relies on this product. They have no immediate alternatives. Without it, what type of jeopardy do they face? We will have placed them in a dilemma. Do we want a world without cement, or, more likely, higher cost, higher GHG cement?
C02 is regarded as a valuable property for enhanced oil recovery systems already deployed in southeast Saskatchewan and elsewhere. The C02 captured at BD3 has been used by the oil industry for 20 years and has proven to be successful. There are buyers for this product for decades in the future in adherence with Canadian fuel standards. So we must place that fact in the value added file. On the federal scale of putting a price on carbon, there is the possibility of placing a price on permanently stored carbon and another for the utilization of captured carbon for EOR or other eligible criteria.
Currently, a major oil company is using BD3’s C02 to enhance oil recovery for 43 per cent of its 23,000 to 30,000 barrels of oil per day production. A North Dakota gasification outlet provides the rest. This company’s officials are seeking more C02 that will keep the existing oil fields they own and operate, on a continuing path of production and expansion. That company currently employs 55 people in the immediate region to carry on the work of enhanced oil recovery and environmental stewardship. Without the C02, production would be lowered to approximately 5,000 barrels of oil equivalent per day. That would require a reduction in personnel.
At present, this company has sequestered 2 million tonnes of C02 on a permanent basis. On the offsets side of the file, this sequestration represents 100 per cent of their emissions target. As the company noted, they have 34 million tonnes of C02 in their reservoir now and “we can always do carbon capture, it’s not difficult science now.” The fixation is on emissions and they are simply doing their part to meet environmental targets, and beyond. They need not be punished for doing the right thing. This company is currently in expansion mode on at least three fronts and have expressed high interest in the use CO2 to assist them with their future EOR practices. Other oil gathering entities have expressed similar desires and practices.
If Shand II does not receive approval, then Saskatchewan will be wasting 20 to 30 or more years of useful life and carbon capture from this plant. We also lose that blue print model that others covet. We are saying, in effect, goodbye to 1200 – 1600 megawatts of power that would need to be replaced within three years in a post COVID-19 world. What are those costs, politically, economically and environmentally? As coal-fuelled industry opponents note, when a coal-fired plant supposedly reaches its “end of life” mode it needs to be shut down.
That is simply, not true. “You just go in an redo, just like you would with any other power generating plant. There is no end of life aspect to it, if you don’t want it to shut down,” noted one engineer familiar with the local process.
If there is a decision to pursue carbon capture activities, this expertise and partnership in science, engineering, operations, maintenance and replacement could be sold and/or shared around the globe to and with other nations and agencies who are not as fortunate as we are due to their lack of alternatives to coal fuelled power production.
Solar and wind power along with natural gas require cost structures for 24-hour standby. If solar or wind power ever reach the point where the power can be stored, what will those costs be? What will be the additional costs when subsidies are applied to the bottom line? As another expert in the field noted earlier, “there is a lot of unfairness in comparing these factors. It should be done fairly.” It is said that with the notion when true comparisons are carried out, the faults associated with all manners of power production, are eventually unveiled. All power production systems come with environmental cost, including renewables. It was also noted that a Shand II project would come in with a bulk CO2 gathering system at a financial and operating basis that would be about 30 per cent more efficient than BD3.
This makes this one of the less expensive ways to go if we compare evenly across the board. We must also keep in mind that a diverse power system is desirable. We have extreme weather shifts and our system needs to retain flexibility to answer the sudden calls for power and the continuing calls for growth.
Let us be mindful there are always huge environmental costs associated with any hydro project, a system that is often referred to as being friendly to the environment. This just isn’t so and history backs this statement, as will the populations in communities or regions that have been subjected to such projects.
Again, we must also consider storage costs compared with other power generating units.
We must put economics on the scale along with the political and environmental issues. If that is done, we will understand more clearly that coal definitely belongs in our future once the costs and benefits are all accounted for across that aforementioned level playing field. If Shand II doesn’t happen, Saskatchewan’s options are limited. We will have placed ourselves in a delicate position of being beholden to others for continued growth and financial wellbeing.
Saskatchewan is not a major contributor to the green house gas world, but this province and its experienced power generating practitioners can definitely assist global partners in their efforts to make significant reductions in their green house gas outputs. Once a solid commitment is made for a second project, the floodgates of interest around the world will open. The speculation would be over for China, India and others who rely on coal with few options. This would place more nations on a track to meet Paris Accord targets or any other environmental protection goals that deal with electrical power. In other words, we can help the international community while forging new and consistent business plans that would make our effort not only a profit maker but, even more importantly, a leader on the global stage … not a follower.
How do we want our future to read? How do we present ourselves to the rest of the world? Will we be saying this particular solution to the greenhouse gas problem was made in Saskatchewan, OR, the solution to the problem – was purchased by Saskatchewan?
Do we prefer control, market recognition, economic and job stability and leadership? Or, do we become another follower subjected to the political and economic whims of others?
We suggest that when we see something isn’t right, we must stand up.
When we see and hear false information being spread about the use of coal as a viable fuel source, or, when there is a lack of education regarding the carbon capture process, it is not the time to give up. We must do the right thing for our citizens, our economy and our environmental wellbeing.
We have to speak up.