110 Power / Summit Texas Clean Energy Project

SUMMIT HEADS SOUTH

by Pamela Tomski, Managing Partner, EnTech Strategies, LLC and Nonresident Senior Fellow, Programme on Energy & Environment, Atlantic Council of the United States

Summit Power Group, LLC (Summit) has completed all key permitting and developmental tasks and has signed off-take agreements for its US$2.4bn (£1.5bn) Texas Clean Energy Project (TCEP). Financing remains the final major task before construction, which is expected to begin later this year

THE 400MW integrated gasification combined cycle (IGCC) and urea production “poly-gen” plant will be located on a 600-acre (243-hectare) greenfield site in Penwell, Texas, about 15 miles (24 km) southwest of Odessa. This site had previously been selected as a finalist for the FutureGen project, a US Department of Energy (DOE) co-funded project to demonstrate advanced IGCC technologies with carbon dioxide (CO2) capture and storage. The site offered many advantages, with an adjacent rail line, electric transmission line, natural gas pipeline, major interstate highway, and CO2 pipeline. As part of the application to the DOE and FutureGen Alliance, significant siterelated environmental and geotechnical data was collected and documented. When a site in Illinois was later selected for FutureGen, the group that had proposed the Penwell site contacted Summit, which found the site ideal for its plans for development of a lowcarbon power plant incorporating carbon capture, utilisation and storage (CCUS). The plant will sit atop the oil and natural gas producing Permian Basin and be fully integrated with CCUS technology. Summit’s multirevenue-stream approach primarily includes the sale of electricity, urea for fertiliser and CO2 for enhanced oil recovery (EOR). With the utilisation of CO2 for EOR, the project will also result in permanent long-term carbon storage. This first-of-a-kind plant, expected to be operational in 2015, will have fewer emissions than even the cleanest natural gas power plants and be one of the first IGCC plants to demonstrate CCUS at commercial scale.

INVOLVED FROM THE START

Siemens Energy Inc., Fluor Corporation and Selas Fluid Processing Corporation (a Linde Group subsidiary) joined forces on the front-end engineering and design (FEED) study. All of TCEP’s process components and major equipment items are in commercial use elsewhere but their integration at the TCEP will be new, and serve as a reference plant for future projects worldwide (see figure 1). Summit selected Siemens, Linde and SK E&C as the project’s engineering, procurement and construction (EPC) contractors; all agreed to lump sum, fixed-price, turnkey contracts with warranties for performance and availability. Linde and Siemens signed a separate 15-year operation and maintenance (O&M) agreement. The contracts are key to project financing. The plant is expected to operate for at least 30 years and a Siemens/Linde joint venture will provide long-term O&M for the integrated plant which will create 200, high-paying full-time jobs. CH2M Hill, Inc. has served as Summit’s owner’s engineering and IGCC/process technology consultant, and the company also coordinated environmental permitting and documentation for the comprehensive Environmental Impact Statement (EIS). CH2M Hill’s gasification team includes staff that previously worked at Tampa Electric Company’s Polk Power Station IGCC plant, bringing the valuable operational and integration concepts to the TCEP design and O&M planning.

Above: 3D Rendering of TCEP Plant Power Block. Source: Summit Power Group

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Power / Summit Texas Clean Energy Project 111

All major process components and major equipment items for the TCEP are being supplied by EPC contractors under lump sum, fixed price contracts with warranties for performance and availability provided under a separate 15-year O&M agreement. The plant that will serve as a reference for future projects, these agreements significantly reduce project risk and improve Summit’s ability to secure financing.

Figure 1. Simplified Illustration of the TCEP’s Integrated Poly-generation Process. Source: CH2M Hill, Inc.

OPERATIONS
The TCEP will use about two million tons per year of low-sulphur sub-bituminous coal as feedstock, transported via rail from the Powder River Basin (Wyoming) while natural gas will be used for startup and backup fuel. The gasification island will use two Siemens SFG-500 oxygen-blown gasifiers (see figure 2) to convert the coal into synthesis gas (syngas) for downstream use. After further syngas processing and cleaning, more than 90% of the CO2 in the syngas will be removed using the Linde Rectisol® process and the H2-rich syngas and high-quality steam will be fed to the power island’s combined cycle unit (which includes a Siemens SGT6-5000F gas turbine, heat recovery steam generator unit and a Siemens SST-900RH steam turbine) to generate 400 MW (gross) of electricity. Approximately half of the electricity generated will be sold to the grid and the remainder will be used to power the polygen plant operations including on-site commercial loads for urea production and CO2 compression. The captured CO2 will be further cleaned, compressed and transported via a short connector pipeline to an existing, regional CO2 pipeline network for use in Permian Basin EOR operations.

Electricity – CPS Energy, a municipal utility based in San Antonio, TX, will purchase 195 MW of electricity under a 25-year take-or-pay power purchase agreement (PPA), the first ever for power from a commercial plant with CCUS. Urea – The TCEP is slated to produce just under 10% of total US urea consumption and Summit has entered into a 15-year contract with a large fertiliser company to purchase 100% of the plant’s output (710,000 tons per year). CO2 – Blue Strategies, LLC (sister company of Blue Source, LLC, a leading emissions reduction project developer) is managing most of TCEP’s CO2 matters including sales for EOR, pipeline transport and certification of verifiable emissions reduction (VER) credits for carbon storage. Total CO2 output is expected to be 2.5 million tons (Mt) per year. From the plant, the CO2 will be transported via a one-mile (1.6km) connector pipeline to the existing Kinder Morgan Central Basin pipeline network, where it will comingle with multiple CO2 sources and be transported throughout the Permian Basin for EOR and carbon storage (see figure 3 on page 112). Three buyers have agreed to long-term CO2 purchase agreements and will pay transportation and increased compression costs. (Whiting Petroleum Corp. will be the largest purchaser with 60% of the CO2). Summit is working with The University of Texas Bureau of Economic Geology to develop and implement a monitoring, verification and accounting (MVA) programme that provides an accurate accounting of CO2 storage, and helps set a national standard. CO2 buyers will be eligible for two significant benefits under Texas House Bill (HB) 469: 1) oil severance tax

DIVERSE REVENUE STREAM
Summit’s ability to secure multiple revenue streams will add revenue stability and reduce commodity risk and is critical to project financing. The company has entered into long-term off-take agreements for its major products – electricity, urea and CO2 – which will account for 95% of the plant’s revenue. Another 5% of revenue will come from the commercial sale of sulphuric acid, argon gas and inert non-leachable slag.

Figure 2. Siemens SFG-500 Gasifier. Source: Siemens TCEP’s first of its kind configuration using existing, proven and warranted components, include two Siemens SFG-500 oxygen-blown gasifiers. This “reference plant design” will be a model for the electric power and chemical sectors worldwide.

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112 Power / Summit Texas Clean Energy Project

Absent climate policy, CO2 EOR has become the main driver for CCUS in the US. Around 114 CO2 EOR projects provide 281,000 barrels per day of production. Increases in EOR are constrained by severe limits on natural CO2 supplies thus making the TCEP off-take agreements so important. The 2.5 Mt of CO2 per year from the TCEP is expected to produce about 9 million barrels of oil, resulting in permanent CO2 storage. The Texas Bureau of Economic Geology is developing a MVA program to account for the stored CO2, which will help establish a national standard.
Figure 3. US CO2 EOR Projects and Pipeline Infrastructure. Source: US Department of Energy, National Energy Technology Laboratory

will be cut an additional 25% of the normal CO2 EOR rate and 2) sales tax exemption on CO2 transport and injection equipment.

Summit’s independent Carbon Management Advisory Board to advise on CCUS technical and policy matters.

ENVIRONMENTAL CONSIDERATIONS

FINANCING THE PROJECT
Financing the US$2.4bn (£1.5bn) TCEP remains Summit’s key remaining task before construction, and financial close is expected this summer. While financing will come from both public and private sources, a number of important design features were included to make the project more attractive for financing in private capital markets: N No experimental technology – all is existing, proven and warranted – and integration of fully-warranted components is the only new project feature N Three major revenue streams were secured under long-term contracts to add revenue stability and reduce commodity risk N Reference plant design offers the ability for replication and improvement elsewhere While these design features have significantly reduced project risk, any first-of-its-kind plant carries greater risk and higher costs than conventional power plants thus making public support so critical. The TCEP has been awarded US$450m (£284m) from the US Department of Energy (DOE), Clean Coal Power Initiative (CCPI) and

In addition to integrating CCUS for 90% of the plant’s CO2 emissions, the TCEP will achieve very low emission rates for “conventional” pollutants, e.g. sulphur dioxide (99% removal), nitrogen oxide (>90%), mercury (>95%) and particulates. The plant will also minimise water use through dry cooling for the power block and the plant itself will be a zero liquid discharge (ZLD) facility that cleans and recycles wastewater with zero water discharge. Yet, in drought prone West Texas, water availability and utilisation remain key issues which is why the TCEP is planning to take unusable brackish water from the Capitan Reef and desalinate it onsite for the remainder of facility cooling. As a result of the plant’s strong environmental profile, Summit was able to receive its air permit relatively quickly (eight months) and without objection and has received strong backing from national environmental groups including the Clean Air Task Force, Environmental Defense Fund and Natural Resources Defense Council. Members of these organisations, along with scientists and leading CCUS experts will serve on

the American Recovery and Reinvestment Act of 2009. Summit has also been awarded approximately US$313m (£198m) in investment tax credits for the project from the Internal Revenue Service under Section 48A, and Texas is making a significant contribution under HB 469. Summit’s ability to secure federal and state incentives, coupled with design features to attract private capital, are key to enabling the technology deployment and ultimately help drive down costs and risks. The TCEP represents an important step in advancing commercially viable CCUS projects that not only significantly improves environmental performance but also increases domestic oil production while permanently storing CO2 emissions.

Summit Power Group, LLC, an electric power project developer founded in 1989, specialises in sustainable energy projects including high-efficiency natural gas-fired power plants, wind and solar power and coal gasification with CCUS. Laura Miller is Summit’s Director of Projects in Texas (214) 763-0600, and the company’s Vice President of International Development based in London is Chris Brookhouse, +44 (0)7881 823645.

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