Updated 5/16/2011

Commercial CO₂ Market Today.

A reliable supply of CO₂ is needed for a WindFuels plant at any scale. The long term goal is to separate clean CO₂ from fossil fuel burning power plants and use it for the synthesis of fuels and organic chemicals. While the technology to separate and clean the CO₂ at coal burning power plants develops, it is essential that we look at other viable large-scale sources of CO₂ . Fortunately, today there already is a large market for commercial CO₂ and the infrastructure to supply it.

The large-scale commercial CO₂ market today is mainly driven by demand from the beverage industry and the oil industry for enhanced oil recovery (EOR). The beverage industry has been a consistent purchaser of high purity CO₂ for decades, with total volumes of more than 300 million tons of purified CO₂ delivered worldwide in 2007.

Enhanced oil recovery (EOR) is a process that involves injecting large amounts of pressurized, relatively clean CO₂ into largely depleted oil wells. Some of the CO₂ dissolves into the remaining trapped oil deposits, making the oil less viscous, while the remaining CO₂ applies pressure to force the oil towards the surface. This allows significantly improved recovery from older oil fields, while trapping (at least for several decades) some of the CO₂ used into formations that were once filled with oil.

The first company in the U.S. to capture and sell CO₂ for EOR is the Dakota Gasification Company. They began selling the waste CO₂ from their coal gasification plant almost 13 years ago, and now sell/sequester more than 6000 metric tons/day. Most of the impurities are removed from the gasification products and sold profitably after forming other compounds. The CO₂ is piped over 300 km to southeastern Saskatchewan for EOR. The plant was close to bankruptcy before they began separating and selling CO₂, and it now generates significant revenue from the sale of CO₂ and other products. While the fields in Saskatchewan were the first, EOR is expanding rapidly.

Kinder Morgan delivers ~1.3 billion ft3/day (26 million metric tons/year) over a 1300 mile pipeline network for EOR projects.

Denbury Resources operates nearly 1000 miles of CO₂ pipeline, flooding 13 fields from their first 4 “phases” of planned extraction, with another 5 “phases” currently in the works. Denbury is currently the most actively expanding EOR player. In March 2011, they announced contracts for capturing another 315 million ft3/day – in Mississippi and Wyoming. The company is also developing 2 additional fields in 2011 and has purchased another field to be developed in the near future.

Blue Source, currently contracts over 340 million ft3/day (6.8 million tons/year).
There are several dozen other companies that have EOR operations and are building out CO₂ pipelines ranging from small companies with only one oilfield to Occidental Oil and Gas – the world’s largest user of CO₂. As the price of oil remains over $100/bbl and new field discoveries continue to dwindle, we expect more of the depleted fields will be outfitted with EOR technology – further pushing development of a national CO₂ pipeline network.

A conversation with the management of Dakota Gasification Company in 2007 indicated that the price of dry, pressurized 96% pure CO₂ was then contracted for ~$35/ton, and beverage-grade CO₂ was then $75/ton. In a recent (May 11, 2011) conversation with Ray Hattenbach, VP of Blue Strategies (a spinoff of Blue Source which focuses on the capture, transportation, and utilization of CO₂) we learned that the typical contract for food-grade CO₂ at the plant gate is now $20-$25/ton. This is most often contracted from a biofuels plant, but sometimes from ammonia plants. (This gives us a very good indication of the price of the primary separation system combined with the cost of scrubbing the critical impurities from the CO₂ to the ppm level or lower.) In a separate conversation with staff of Kinder Morgan CO₂ company, the opinion was that the CO₂ would likely be free, or the emitters might pay us to take the CO₂. In both cases the expressed opinion was that the primary cost would is the delivery cost – whether it be by liquefaction and trucking, or by compression and piping.

This gives considerable weight in Windfuels plant siting to the local CO₂availability issue. Pipelines may cost as much as $400,000/mile for short distances. If this cost were amortized into a 20-year financing at 7.5%, then that would work out to $0.77/ton/mile for a 20 MW WindFuels plant. The cost for compression would add ~$1.50/ton.

The energy needed for compressing the source gas (from the final scrubbing operation, perhaps using activated charcoal absorbers) at ~2 atm to the desired ~130 atm required for piping works out to ~0.9 MJ/kg-CO₂. So for a 20 MW WindFuels plant, so the initial CO₂ compression is ~250 kWh/ton CO₂. Every 50 miles or so of pipeline, there would need to be a boost compressor that adds an additional ~$0.35/ton amortized capital costs and requires an additional ~50 kWh/ton CO₂. This energy may cost ~$40/MWh, as it represents a constant use rather than a variable demand that can be scheduled only for off-peak hours (see our energy market discussion to understand our projections for very low priced off-peak electricity for our electrolyzers). The CO₂ will be delivered to the WindFuels plant in a supercritical state at not less than 110 bar (1600 psi) pressure. With plentiful waste heat on site available, this CO₂ could be heated prior to expansion through a turbine, allowing a highly efficient recovery of most of the compression energy plus extremely efficient conversion of the added waste heat. So as long as the distance is not too great and waste heat is available, the actual energy penalty for compressing the gas can be negative. (This is basically how a gas turbine power plant works.)

Cost of CO2 Pipeline for 20 MW Windfuels Plant	Miles Piped	Cost of piping CO2 for 20 MW Windfuels plant, $/ton
	10	$ 9.20
	20	$16.90
	30	$24.60
	40	$32.30
	50	$40.00
	60	$48.05
	70	$55.75
	80	$63.45
	90	$71.15
	100	$78.85
	110	$89.90
	120	$97.60

Obviously, the math works out differently for different sized WindFuels plants, as the cost for laying pipe is typically constant. So the amortized price/ton for piping the CO₂ will change dramatically as plant sizes increase or decrease.

It may be more cost effective to truck the liquid CO₂ from the emitter to the WindFuels plant for smaller WindFuels facilities. This cost ~$40/ton in amortized equipment costs, liquefaction, and loading/unloading expenses, amortized costs for CO₂ storage, as well as ~$0.20/mile/ton-CO₂ in trucking costs and boil-off.

For very small WindFuels plants (2-5 MW), it will likely be sufficient and more cost effective to simply contract with a national gas company for delivery of the needed CO₂. Their contract prices for the food industry are usually between $75-$100/ton.

The CO₂ Market of Tomorrow
The largest source of high purity CO₂ for at least the next 4 decades will likely be natural gas wells. Depending on local requirements, delivered natural gas must have CO₂ concentrations below 1-2%. However, gas that is pumped out of the ground naturally has CO₂ concentrations between 3-30%, depending on the source. The highest CO₂ concentrations are found in shale gas and in coal bed methane. Government regulations require that the CO₂ must be separated. Currently, the natural gas is piped from the wellhead to a natural gas processing plant, where it is cleaned to very low contaminate levels, and the CO₂ is separated out. This clean CO₂ is then often exhausted as waste, while the natural gas is piped into people’s homes for clean high-efficiency heat. But that leaves hundreds of millions of tons of moderate-pressure CO₂ being exhausted after separation and preliminary cleaning.

The CEO of one GTL company with substantial shale-gas holdings expects this CO₂ to become available before long at negative price at the gate from these natural gas processing plants. Advantageous siting near one of these plants could reduce the cost of CO₂ by $20-$40/ton compared to that offered at the plant gate of a biofuels facility or ammonia plant, as the separation and preliminary cleaning expenses are already spent.

The growing pipeline network for CO₂ that is being built by the EOR industry represents another possible source for CO₂. EOR fields will eventually become too depleted for EOR. As these fields run dry there will be tens of thousands of miles of CO₂ pipeline that has already been built, with their large-scale compressors and boost compressors that are already installed, and separation units that are already operating at power plants and GTL or CTL plants. This infrastructure will have long since been paid for through the extraction of oil at the original EOR fields, and the compressors will still be used to keep the pipelines pressurized for current projects. . The WindFuels plants would likely pay only for the marginal compressor energy required along with a hook-up charge and a few $/ton of profit to tap into one of these underutilized pipelines for CO₂ . Siting the WindFuels plant close to a CO2 pipeline should provide EOR-grade CO₂ at $25-35/ton. This would then requiring further cleaning, at an additional cost of ~$10-$20/ton.

As the effects of climate change are better understood and accepted by government officials, it is likely that CO₂ emissions may be penalized in some way. Either via carbon emissions taxation or a carbon cap and trade system, exhausting CO₂ may become a financial burden in the future economy. Consequently, this burden will become a financial opportunity for those that can re-use or recycle the CO₂.

***Bio-fuel initiatives, both private and public are expected to allow the ethanol industry to continue to grow. The Energy Independence and Security Act of 2007 calls for biofuel production targets to increase between 1 and 2 billion gallons/year for the next 12 years, and 3 billion gallons/year thereafter. . If this is upheld, this would equate to a supply of between 4 and 8 million additional tons of clean ($20-$25/ton) CO2/year until 2020, and 12 million additional tons/year of clean CO₂ thenceforth. This CO₂ alone is sufficient for 80-240 new 20 MW WindFuels plants, each producing 2.5 million gallons of gasoline, diesel, jet fuel, and other chemicals per year. There are also tens of millions of tons of CO₂ from fertilizer (ammonia) production, cement production, oil refining, GTL/CTL, hydrocracking, metal smelting, and plastic/chemical production facilities that have yet to be tapped. WindFuels plants will generate a demand for this CO₂, bringing further investment opportunities for developing the pipelines.

Once all current clean sources are exploited there is the post-combustion CO₂. It seems doubtful that any power plant built after 2018 will be built without CCS capability. At that point, there will be an oversupply of CO₂ in the market keeping CO₂ prices low even as WindFuels are ramped up to the terawatt scale. Market forces at that point will decide the prices of CO₂, which may then be a traded physical commodity.

WindFuels deployment will begin in a world with a well-developed infrastructure for CO₂ separation, capture, and delivery. There will be a vast and growing pipeline network that any new WindFuels plant can connect to, and a quickly growing fungible pool of CO₂ sources that will be eager to sell their CO₂.

References:

Universal Industrial Gases
http://www.uigi.com/index.html

Enhance Oil Recovery
http://en.wikipedia.org/wiki/Enhanced_oil_recovery

Dakota Gasification Company
http://www.dakotagas.com/Products/index.html

Blue Source
http://www.xmission.com/~ghgworks/3c-capture-storage.html

Storing CO₂ with Enhanced Oil Recovery, DOE/NETL-402/1312/02-07-08
http://www.netl.doe.gov/energy-analyses/pubs/Storing%20CO2%20w%20EOR_FINAL.pdf

EIA, Energy in Brief: Biofuels.
http://tonto.eia.doe.gov/energy_in_brief/biofuels_use.cfm