Briefing for the Energy and Telecommunications Interim Committee

Montana Legislature

NextGen Energy CouncilMay 1, 2008

• A collaboration of industry, the public sector and others to promote the deployment of clean coal technologies and use of CO2

• Based in Colorado, focused on the Western states

Who is the NextGen Energy Council?

Presentation Outline

• Technology options to reduce CO2 or capture it :– Craig Hansen of Babcock & Wilcox– Paul Jacobson, Evergreen Energy

• Options for the legal and regulatory framework for CO2 capture and sequestration :– Kipp Coddington, Alston & Bird

• Questions

Craig HansenVice President, Washington Operations

Energy and Telecommunications Interim Committee Briefing

May 1, 2008

Our Roots: Harnessing the Power of Steam

B&W invents water tube boiler

Teddy Roosevelt’s Great White Fleet powered by B&W boilers

1881 1918 1957 1967 1960s-present 1973-present 2006-present

Over 95 percent of U.S. Fleet in Tokyo Bay at Japanese surrender are powered by B&W boilers

Provided components & process development for Manhattan Project

Environmental Management: D&D Nuclear Material Stabilization

Built components for the USS Nautilus, the world’s first nuclear powered submarine

Nuclear Non-proliferation: downblendingHEU from U.S. nuclear weapons(Coal, Oil, Nuclear)

Largest boiler (1300 MW) built for TVA

B&W developing oxy-fuel technology for carbon capture.

DOE Nuclear Weapons Complex & Laboratory Nuclear Operations

First U.S. utility boiler is supplied by B&W

First pulverized coal plant provided by B&W

First supercritical pressure coal-fired boiler supplied by B&W

B&W leader in coal-fired emissions environmental controls for SOX, NOX, Mercury

1907-09 1944 1945 1953-1955 1983-present 1998-2007 2000-present1867

Civilian Applications

National Security& High Consequence

Applications

(Coal, Nuclear, Biomass)

Over 140 years of manufacturing and operations for civilian, national security & high-consequence applications

2008

B&W designs & manufactures heavy nuclear components for new, re-emerging commercial nuclear power

Technology Commitment

High Performance Combustion and Environmental Control Systems

The Babcock & Wilcox Company has more than 140 years’ experience in the design, engineering, manufacturing, construction and servicing of steam

generation equipment, environmental control systems and related components.

Oxy-Coal Combustion Process

The air utilized in a conventional combustion process is about 21% oxygen and 78% nitrogen. The flue gas exhaust from the process contains about 17% carbon dioxide, while the 78% nitrogen component passes through virtually unaffected. This has the effect of diluting the carbon dioxide, making it more difficult to remove.

In an oxy-coal combustion process, pure oxygen is utilized rather than air. Oxygen is combined with recycled carbon dioxide to create the desired volume of gas in the furnace to achieve appropriate temperature and heat transfer conditions. The flue gas is then relatively pure carbon dioxide that can be captured, further purified if needed, and compressed for geologic storage.

AirSeparation

Unit

BoilerAir In

Oxygen(O2 )

Nitrogen (N2 ) OutRecycled Flue Gas

CO2 andFlue Gas

Coal InCO2 Capture

(liquid)

CO2 andFlue Gas

Low pressuresystem Atmospheric

system

CO2Compression

High pressuresystem

Oxy-Coal Combustion Principles

Oxygen

Nitrogen

CO2

Nitrogen

+ Coal

Air0

25

50

75

100

Perc

ent b

y Vo

lum

e

N2

Flue Gas after WFGD

O2

N2

CO2

H2O

0

25

50

75

100

Perc

ent b

y Vo

lum

e

SyntheticAir

CO2

FlueGas to CPU

O2

CO2

H2OH2O

Oxygen CO2

+ Coal

CO2

CO2

Managed and funded by B&W, American Air Liquide, Inc. and Utility Advisory Group

Clean Environment Development Facility (CEDF) replicates PC utility boiler and environmental control equipment (WFGD), now equipped for oxygen andflue gas recycle

Bituminous testing successfully completed, campaigns now underway include Saskatchewanlignite and sub-bituminous (PRB) coals.Pilot work indicates readinessfor at-scale demonstration by end of Q2, 2008

Oxy Coal Pilot Plant Operations

Non-Technical Challenges

$ Assets / $ Revenue

• Power Generation is capital intensive• Huge “risk premiums” now present

– Fluor estimates as high as 60% to 90% – EEI/Brattle report infers 25 to 40%

• Very difficult to estimatecommercial unit costs

– Extensive design work needed– Design work needs at-scale

demonstration• No effective public policy to get

demonstrations “on the ground”• Debate centers on

“commercial readiness,” reality is stillat pilot scale

• Policy proposed to require capture to create market pull; “second things first”from technology provider perspective

• Confidence in the core technology• Assurances and guarantees

the plant will operate as designed • Emission levels that are acceptable• Confidence that the plant

is safe to operate • Protection from premature

obsolescence• Evidence for projecting a suitable ROI

and cash flows using the technology

Product Development PathwayProduct Development Pathway

FundamentalDevelopment

PilotPhase

DemonstrationPhase

CommercialDeployment

• Fully validate technology to satisfaction of owner, stakeholders and interested parties

• Fully optimize and integrate the process design and operating practices

• Value engineer the design for capital efficiency

• Develop methods and practices required to engineer an early adopter, full scale configuration

Why Demonstrate?A demonstration project enablescommercial deployment by providing:

A demonstration also provides theexperience required to:

SCPC MEA KS1 IGCC Oxy-S Oxy-U WildCard

50%

75%

100%

125%

150%

175%

%

Avail. Avail. Demo

* SCPC = Supercritical Pulverized Coal; Data obtained from various sources.

Demo Demo AdvancedDemo

Cost of Electricity, Percent of Base SCPC*Many

“Wild Card”Technologies

?

Carbon Capture Technology Costs Generally Uncertain Today Comparative Range indicates Options of Similar Cost

Source: Chart Courtesy of Dr. Jonathon Gibbins, UK

“Lev

el o

f Sup

port

”

Time7 to 8 years4 to 5 years

Commercial Plants with Control(Carbon Charges)

At-scale DemonstrationFive Projects at $261 M each, ~ $1.3 B5M tpy storage levels(Sponsored projects)

Early AdoptersFive projects at $675 M each, ~ $3.4 B15M tpy storage levels(Incentives andmarket pull)

““RolloutRollout””

How Long Will All of this Take?

Plant Efficiency Improvements Reduce CO2 Emissions —Increased Steam Temperature Provides Greatest Value

CO

2Em

issi

ons,

met

ric to

ns(3

) /Meg

awat

t-hou

r

Net Plant Efficiency, %

0.60

0.70

0.80

0.90

1.00

30 35 40 45 50

1950s - 1980sBoiler Fleet

Current SCPC (1)

Units (~1100F)Targeted USCPC (2)

Units (~1400F)

17%Reduction

30%Reduction

State/Regional Actions to Promote Carbon Capture and Sequestration

•Need consistent state/regional rules for carbon capture and storage/use, coherent with Federal policies, such as liability for stored CO2.

•Need state/regional public-private partnerships to promote development & demonstration of CCS, emphasizing projects using Western coals.

•Need constructive solutions for PUC denials of applications for new plants based on cost of electricity which include cost increasesassociated with CCS.

•Make transparent the management, reporting of CCS initiatives/projects to gain public support.

•Move forward with advanced, high efficiency coal plants designed to accommodate carbon capture when commercially viable.

Public Policy and CCS Deploymentfor GHG Mitigation

When meeting with policy makers, invariably asked four questions:

1. What is the technology?2. What does it cost?3. When will it be ready?4. How do we deploy it?

When we deploy

• At-scale demonstration of technology• Validation of technology at

commercial scale by “early adopters”

Enable demonstration projects to occur recognizing that these projects are essential and are the critical steps on the pathwaySelect multiple technologies to deploy and develop to reduce risk of any individual technology failure

How we deploy

Coal + CCS will be ready for widespread deployment, or “rollout” in commercial form only after completion of two key steps:

Conclusions

Promising Technology Options to Reduce CO2 from Existing Coal-fired Power Plants: Precombustion Technologies

– Paul Jacobson, Evergreen Energy, Precombustion Innovation Alliance

Preparation

Upgrading

Treatment

“Pre-combustion” solutions expand our view of the coal-fuel

cycle.

Coal Preparation is used to clean coal before it is burned.

WetDry

Chemical

Headwaters cleans coal and reclaims coal waste.

Coal Upgrading raises efficiency and lowers emissions.

Moisture

Structure

Efficiency

CoalTek uses electromagnetic energy to improve coal.

Cowboy Coal uses heat to remove water and mercury.

Evergreen Energy uses heat and pressure to change coal structure.

Great River Energy uses waste heat to raise efficiency; lower emissions.

Coal Treatment uses additives to change how coal burns.

Reagents

Sorbents

ADA-ES uses activated carbon injection to control mercury.

Options for the Legal and Regulatory Framework for CCS

– Kipp Coddington, Alston & Bird

Key CCS Issue Areas• Jurisdiction

– Montana or Federal? Over which aspects?– Which State agencies?

• Liability– Must be addressed– What role does Montana want to play?

• Ownership– How do new regulations fit with current state property

rights structure?• Cost

Questions?

Thank you

NextGen Energy Council

www.nextgenenergy.org