1. National Energy Technology Laboratory 1 Project Financing & Technology Deployment Division, Office of Major Demonstrations, Strategic Center for Coal 2 Benefits Division, Office of Program Performance & Benefits July 2014 ECONOMIC IMPACT OF CCUS DEPLOYMENT International Workshop on Public Education, Training, and Community Outreach For Carbon Capture, Utilization, and Storage Venkat K. Venkataraman 1, Thomas Sarkus 1 and Charles Zelek 2

2. CCUS will provide another option to help mitigate the impacts of climate change cost effectively. We performed an assessment of the potential role of CCUS technologies in alternate future energy-economy scenarios. Objective of this Analysis: Evaluate the potential role and economic impacts of carbon capture, utilization and storage (CCUS) in the U.S. energy economy under three alternative future scenarios – Performed this assessment using two energy-economic models The National Energy Modeling System (NEMS) The National Energy Technology Laboratory/West Virginia University Econometric Input-Output Model (NETL/WVU ECIO Model) Question: How Might CCUS Impact the Future Energy Economy? 2

3. What is NEMS? 3 NEMS is an acronym for the National Energy Modeling System, the custom made software developed by the Energy Information Administration (EIA) for nationwide energy market forecasting. The results from NEMS are published yearly by EIA in its Annual Energy Outlook (AEO) reports. NEMS is also used to study Congressionally directed scenarios, like the implementation of a Clean Energy Standard in service reports for Congress. NEMS results are also often used to perform regulatory impact analyses by federal and state agencies. Although NEMS is publically available, it is not generally run by outside entities. Still, its outputs provide valuable information for other models.

4. All scenarios use AEO 2014 final release as their basis – EIA assumptions for research and development assumed This includes 840 MW of carbon capture demonstration projects It also assumes CCUS technology cost reductions over time due to domestic and international RD&D Scenarios: Reference Case (Reference) – EIA AEO 2014 reference case – No modifications made $10 Carbon Price Case ($10 Tax) – EIA Greenhouse Gas $10 Carbon Tax Side Case (GHG10) – $10 Carbon tax introduced in 2015 – Carbon tax escalates at 5% (real) per year $15 Carbon Price Case ($15 Tax) – $15 carbon price begins in 2020, escalated at 5% per year – No new nuclear builds until 2025 – EIA low resource (low natural gas and oil) side case incorporated Scenarios Evaluated 4

5. In the $10 tax case, slightly over 20 GW of CCUS deploys In the $15 tax case, over 40 GW of CCUS capacity deploys Capture from natural gas power plants dominates the $10 tax case In the $15 tax case, where natural gas is constrained (via the low resource case), coal retrofits dominate NEMS Results: Capacity Additions 5 Source: OnLocation, Inc. for NETL

6. Nearly 225 million metric tons of CO 2 is captured per year by power plants in the $15 tax case, and nearly all captured CO 2 is used for enhanced oil recovery Captured CO 2 comprises approximately 18% of the total reductions in CO 2 emissions (relative to the reference case CO 2 emissions) from the power sector in 2040 NEMS Results: Carbon Captured 6 Source: OnLocation, Inc. for NETL

7. EOR enabled oil production doubles by 2040 in the $15 GHG tax case And the overwhelming majority of CO 2 for EOR is sourced from power plants NEMS Results: Enhanced Oil Recovery 7 Source: OnLocation, Inc. for NETL

8. What is the NETL/WVU ECIO Model? 8 Designed to estimate the national and regional economic and employment impacts of energy technology deployment and operation over a corresponding NEMS forecast period An ECIO model combines the capabilities of econometric (EC) modeling with the strengths of input-output (IO) modeling. – The IO component is used to determine industry supply requirements and in some cases primary factor demands. – The EC component determines final demands, primary factor demands, factor prices, primary factor supplies, and their relationships within the U.S. – There are feedback effects between the two models that ultimately lead to a convergent result.

9. Directly measures the economic impacts of the following: – Construction of coal-fired power generation plants Scrubbed pulverized coal Integrated Gasification Combined Cycle (IGCC) without CCS IGCC with CCS – Construction and O&M of CO 2 pipelines and saline storage sites Reflects the economic impacts of the following: – O&M associated with coal-fired power generation plants – Retrofits of existing coal-fired power generation plants for CCS – Increased production of oil via EOR sites – Technical substitution effects of electricity price changes and their influence on prices of other commodities as well as the consequent representations of inter-industry structure Does NOT measure (directly or indirectly) the economic impacts of: – EOR site construction and O&M (we are working on adding that capability) – Construction of non-coal power generation plants What Impacts Does the NETL/WVU ECIO Model Consider in These Cases? 9

10. Economic Impacts of CCUS in the $15 Tax Case 10 For Relative Comparison: Total Employment in Illinois (2012): 7,492,570 Total Compensation of Employees in Illinois (2012): $391 billion Total GDP in Illinois (2012): $704 billion Employment Impact: 2.0 million job years (cumulative) Income Impact: $150 billion (2010$) GDP Impact: $684 billion (2010$)

11. How Do We Overcome the Barriers to CCUS to Enable These Impacts to Become Reality? 11 Major Demonstrations are a key part of an integrated research, development and demonstration (RD&D) program that contribute to DOE's strategic theme of "Promoting America's energy security through reliable, clean, and affordable energy."Promoting America's energy security through reliable, clean, and affordable energy. NETL Demonstration Projects

12. DOE’s Major Demonstrations Program Current Program Objectives and Targets 12 Clean Coal Power Initiative (CCPI-3) – Demonstrate next generation technologies from coal-based electric power generating facilities that capture/sequester, or put to beneficial reuse, minimum of 300,000 tons per year of CO 2 emissions – Minimum coal or coal refuse energy input: 75% (Closing 1); 55% (Closing 2) – Attain 90% CO 2 capture efficiency in treated flue gas (Closing 1); 50% (Closing 2) – COE increase < 10% for gasification; < 35% for combustion & oxy-combustion (targets) Industrial Carbon Capture and Sequestration (ICCS-Area 1) – Demonstrate advanced CCUS technologies, at industrial sources, that may produce heat, fuels, chemicals, H 2 or other useful products with or without electricity production – Demonstrate sequestration with 1,000,000 tons per year of CO 2 emissions FutureGen 2.0 – Demonstrate oxy-combustion repowering with >1,000,000 tons per year of CO 2 emissions sequestered in a saline aquifer

13. Major CCS Demonstration Projects Project Locations and Cost Share 13 CCPI ICCS Area 1 FutureGen 2.0 Southern Company Kemper County IGCC Project Transport Gasifier w/ Carbon Capture ~$2.01B – Total, $270M – -DOE EOR – ~3.0 MM TPY 2014 start Southern Company Kemper County IGCC Project Transport Gasifier w/ Carbon Capture ~$2.01B – Total, $270M – -DOE EOR – ~3.0 MM TPY 2014 start NRG W.A. Parish Generating Station Post Combustion CO 2 Capture $775 M – Total $167M – DOE EOR – ~1.4 MM TPY 2016 start NRG W.A. Parish Generating Station Post Combustion CO 2 Capture $775 M – Total $167M – DOE EOR – ~1.4 MM TPY 2016 start Summit TX Clean Energy Commercial Demo of Advanced IGCC w/ Full Carbon Capture ~$1.7B – Total, $450M – DOE EOR – ~2.2 MMTPY 2017 start Summit TX Clean Energy Commercial Demo of Advanced IGCC w/ Full Carbon Capture ~$1.7B – Total, $450M – DOE EOR – ~2.2 MMTPY 2017 start HECA Commercial Demo of Advanced IGCC w/ Full Carbon Capture ~$4B – Total, $408M – DOE EOR – ~2.6 MM TPY 2019 start HECA Commercial Demo of Advanced IGCC w/ Full Carbon Capture ~$4B – Total, $408M – DOE EOR – ~2.6 MM TPY 2019 start Leucadia Energy CO 2 Capture from Methanol Plant EOR in Eastern TX Oilfields $436M - Total, $261M – DOE EOR – ~4.5 MM TPY 2017 start Leucadia Energy CO 2 Capture from Methanol Plant EOR in Eastern TX Oilfields $436M - Total, $261M – DOE EOR – ~4.5 MM TPY 2017 start Air Products and Chemicals, Inc. CO 2 Capture from Steam Methane Reformers EOR in Eastern TX Oilfields $431M – Total, $284M – DOE EOR – ~0.93 MM TPY 2012 start Air Products and Chemicals, Inc. CO 2 Capture from Steam Methane Reformers EOR in Eastern TX Oilfields $431M – Total, $284M – DOE EOR – ~0.93 MM TPY 2012 start FutureGen 2.0 Large-scale Testing of Oxy-Combustion w/ CO 2 Capture and Sequestration in Saline Formation Project: ~$1.78B – Total; ~$1.05B – DOE SALINE – 1 MM TPY 2017 start FutureGen 2.0 Large-scale Testing of Oxy-Combustion w/ CO 2 Capture and Sequestration in Saline Formation Project: ~$1.78B – Total; ~$1.05B – DOE SALINE – 1 MM TPY 2017 start Archer Daniels Midland CO 2 Capture from Ethanol Plant CO 2 Stored in Saline Reservoir $208M – Total, $141M – DOE SALINE – ~0.9 MM TPY 2015 start Archer Daniels Midland CO 2 Capture from Ethanol Plant CO 2 Stored in Saline Reservoir $208M – Total, $141M – DOE SALINE – ~0.9 MM TPY 2015 start

14. CO 2 Capture from Industrial Sources Low Hanging Fruit Globally, industry accounts for 40% of energy-related CO 2 emissions — mostly in developing countries* Many industrial facilities are large point sources In some plants, CO 2 is already being captured in order to produce the desired product (e.g., H 2 /NH 3 ), and additional capture cost is not incurred CO 2 concentration in treated stream may be high or nearly pure Often located near potential storage sites Demonstration of capture and compression technology, as well as CO 2 storage experience, is applicable to coal-fired power generation Hanson Permanente Cement Kiln, Los Altos, CA, 2008 * Global CCS Institute, Klaas van Alphen, 2010, http://www.ieaghg.org/docs/General_Docs/Summer_School/VAN_ALPHEN_-_Industrial_Sources_-_secured.pdf Photo Source: kqedquest on flickr - http://www.flickr.com/photos/kqedquest/2388352316/ 14

15. ICCS Demonstration Project Summary 15 Air Products Industrial Capture; EOR Port Arthur, TX (Hydrogen plant at Valero Refinery) 90%+ CO 2 capture (Vacuum Swing Adsorption); ~925,000 tonnes CO 2 /year EOR: Denbury West Hastings oil filed Total Project: $431 million; DOE share: $284 million Operations: December 2012 (Project executed under budget) 1,200,000 metric tons delivered as of 7/14/14 Leucadia Petccoke to Methanol & Hydrogen; EOR Lake Charles, LA 700 MM gal/yr methanol, 110 MMscfd Hydrogen 89% CO 2 capture (Rectisol®); 4,500,000 tonnes CO 2 /year EOR: Denbury West Hastings oil field Total Project: $436 million; DOE share: $261 million Archer Daniels Midland (ADM) Biofuel; Geologic Storage Decatur, IL CO 2 >99% purity from fermentation reactors (dehydration & compression); ~900,000 tonnes CO 2 /year Geologic Storage: Mt. Simon saline reservoir Plant ~53% complete Operations: February 2015 Total Project: $208 million; DOE share: $141 million Archer Daniels Midland Leucadia Air Products Industrial Capture to EOR

16. Knowledge Sharing Products ARRA Regional Training Worldwide CCS Project Database Visit our website: www.NETL.DOE.GOVwww.NETL.DOE.GOV Geological and Infrastructure Monitoring, Verification, Accounting Simulation and Risk Assessment Capture and Transportation GIS and Database Water Public Outreach and Education RCSP Working Groups 16

17. 17 Knowledge Sharing Products Carbon Storage Best Practices Manuals Best Practices Manual Version 1 (Phase II) Version 2 (Phase III) Final Version (Post- Injection) Monitoring, Verification and Accounting 2009/2012 20162020 Public Outreach and Education200920162020 Site Characterization201020162020 Geologic Storage Formation Classification 201020162020 **Simulation and Risk Assessment 201020162020 **Carbon Storage Systems and Well Management Activities 201120162020 Terrestrial2010 http://www.netl.doe.gov/technologies/carbon_seq/refshelf/refshelf.html **Regulatory issues will be addressed within various BPMs

18. Barriers to CCS exist, but can be addressed through NETL RD&D The economic impacts of CCUS technologies can be significant NETL has ongoing projects to address issues of: – Cost of capture and energy penalty – Storage capacity, permanence & consequences – Infrastructure development – Data and knowledge sharing Major demonstration projects will help validate and provide confidence International partnerships are important in leveraging experience, expertise, and knowledge Conclusions 18

19. For More Information Office of Fossil Energy www.fe.doe.gov NETL www.netl.doe.gov @NETL_News Venkat K. Venkataraman 304-285-4105 Venkat.Venkataraman@netl.doe.gov National Energy Technology Laboratory http://www.netl.doe.gov/research/coal/carbon-storage 19

20. Questions? 20