A blog post

Major Texas project to move forward despite loss of stimulus money

Posted on the 29 September, 2015 at 9:28 pm Written by in Uncategorized

Christa Marshall, E&E reporter
Published: Wednesday, September 23, 2015

Developers of a major carbon capture project planned in Texas say they are moving forward with their coal initiative, despite having to forgo more than $100 million in Department of Energy funds because of a deadline this month.

Summit Power Group’s Texas Clean Energy Project — which envisions a coal plant near Odessa, Texas, capturing and storing more than 90 percent of its CO2 — is expected to miss a Sept. 30 deadline to commit stimulus funds allocated by the 2009 American Recovery and Reinvestment Act. That means that $104 million will have to be returned to the U.S. Treasury by DOE, according to Laura Miller, Texas director of projects for Summit Power. However, the project will move ahead with help from grants, debt and private equity, including $487 million in new investment tax credits (ITCs) that the Department of Energy helped obtain from the Internal Revenue Service earlier this year, Miller said.

“The federal government’s recent actions to support our project though other means — such as recommending to the IRS that we get additional investment tax credits — reinforce its strong support for both [carbon capture, use and storage] technology and for TCEP. We have a project that is stronger financially than it was six months ago. We are just doing what is necessary and taking the time to do it right,” Miller said in an email.

Summit Power is hoping to achieve financial closing by year’s end, which could allow a groundbreaking in 2016, she said.

The Texas Clean Energy Project is one of a handful of DOE-funded projects envisioning the capture of the majority of the carbon dioxide from a large-scale coal plant. One of those projects, FutureGen 2.0, was scrapped in February, increasing speculation that other proposals might face a similar fate this year with the September deadline looming.

Hydrogen Energy California — another big planned project — lost its Recovery Act funding this summer (Greenwire, July 10).

Along with Summit’s TCEP, there are two other commercial-scale CCS projects on coal plants moving forward in the United States — Southern Co.’s Kemper County project in Mississippi and NRG Energy Inc.’s Petra Nova project in Texas. Both Kemper and Petra Nova are under construction and expected to be the first large-scale coal power plants with CO2 capture ever to be operational in the United States.
Projects rely on using CO2 for enhanced oil recovery

All three projects rely on enhanced oil recovery to cover the high costs associated with CO2 capture. In the more than $2.5 billion Summit project’s case, captured CO2 is expected to be injected underground in the West Texas Permian Basin.

Gasified coal would be used to generate 200 megawatts of electrical power from the plant and produce commercial byproducts from the coal gasification process, including urea for fertilizer. Summit Power’s decision was first reported by the Odessa American after an Odessa Chamber of Commerce event last week, where Miller disclosed that the project has a new long-term agreement with United Suppliers to buy its urea.

John Thompson, director of the fossil transition project at the Clean Air Task Force, said the Summit project is distinctive in part because it has “an interesting business model,” where the CO2 capture process will create multiple byproducts for sale. The contractors behind it also have guaranteed the price and will pay the difference if things go over budget, indicating they have high confidence in the technology, he said.

“It erodes the view this isn’t ready for prime time,” he said. While coal plants are not being built in the United States, it’s important to perfect capture technology because of heavy coal use in places like China and India, he said.

For Summit Power to break ground, construction contracts need to be signed to secure needed debt and equity to reach financial closing, Miller said. “Intense negotiations” occurred all summer among three lead contractors in three countries and generated positive momentum, she said. “We continue to push forward on the negotiations and are laser focused on getting a project we can actually build, for the cost we expect,” she said.

The Export-Import Bank of China is the project’s sole debt provider, an agreement forged three years ago (ClimateWire, Sept. 13, 2012). The Texas Clean Energy Project was awarded $450 million in government funds, most of which was not stimulus funding and has not been lost. The ITC funds — which Miller first disclosed at the Odessa Chamber of Commerce last week — would be available after construction begins. In addition to the $487 million, the project also received $324 million in tax credits in 2013, according to Miller.

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