Plans for $2.4B carbon capture and storage project near Edmonton have been cancelled

Edmonton-based Capital Power Corp. has pulled the plug on its plans to build a $2.4-billion carbon capture and storage project at its Genesee natural gas-fired power plant southwest of Edmonton.

Up to three million tonnes of carbon dioxide per year would have been captured and sequestered at the facility near the village of Warburg in Leduc County. Company officials announced Wednesday that pursuing the project no longer makes financial sense.

It's the latest carbon capture project to fail to meet expectations, casting doubt on a technology that has garnered significant investment from Ottawa and provincial governments.

Following news of the cancellation, Federal Environment Minister Steven Guilbeault said Ottawa is not giving up on carbon capture.

"It is happening in Canada, but it's not the be-all end-all,"  Guilbeault told reporters Thursday. "We think it can play a role but it won't fix our climate change problem."

Guilbeault said the technology remains a viable method to cut industry emissions but the federal government can't fully bankroll every project.

"We're putting our money where our mouth is and I would like to see industry do the same," he said.  "There's billions of dollars of federal money to help these companies invest in carbon capture and storage."

Company officials with Capital Power say the Genesee project is technically viable but not economically feasible. The project was once slated to be completed by 2026 and operational as early as 2027.

"Through our development of the project, we have confirmed that CCS is a technically viable technology and potential pathway to decarbonization for thermal generation facilities including Genesee," company officials said Wednesday as it released financial results for the first quarter of 2024.

"However, at this time, the project is not economically feasible and as a result we will be turning our time, attention, and resources to other opportunities."

On Wednesday, Capital Power CEO Avik Dey said the company may explore CCS again in the future as economics improve. The company has set the goal of achieving net-zero greenhouse gas emissions by 2045.

"Fundamentally, the economics just don't work," he told analysts in a conference call. "Hopefully, the technology will improve, and we can revisit this when the economics improve.

"What it really is, is the technology improving so the costs come down. How do you actually build the kit so you have higher efficacy and capture rates while bringing down the capture costs?"

Alberta's electricity grid is heavily dependent on natural gas, and many analysts believe that offsetting those emissions will require a mix of wind and solar, hydrogen, nuclear power in the form of small modular reactors, and carbon capture and storage in the future.

In January, Capital Power said it will partner with Ontario Power Generation to assess the feasibility of developing small modular nuclear reactors to help power Alberta's electricity grid.

Carbon capture is any technology that captures carbon dioxide and injects it underground.

At Genesee, the plant would have relied on  "carbon capture,utilization and storage."

This method filters out carbon dioxide at an emissions source — such as a factory, power plant or oilsands facility.

Once captured, the carbon would have then been transported through Enbridge's open-access carbon hub, a proposed carbon dioxide sequestration hub west of Edmonton that would take carbon from nearby emitters and transport it to 3,000 metre deep storage wells.

The Genesee project, once operational, was expected to pay $5.4 million into local property taxes each year and create about 50 full-time jobs.

Industry and governments have touted the technology as an effective way to reduce Canada's carbon footprint. But critics have cautioned that the viability of the technology has been overstated.

Genesee is not the only project to flounder. Other carbon capture facilities in operation across Canada have struggled to meet their stated goals.

Since 2015, Shell's Quest project near Edmonton has stored nine million tonnes of CO2 at a lower-than-anticipated cost. But its capture rate of 77 per cent remains below the 90 per cent originally announced.

A CCS project at Sask Power's Boundary Dam continues to miss emissions targets.

Proponents originally said the coal-fired power plant in southeast Saskatchewan would capture up to 90 per cent of the plant's carbon emissions but a review has determined that the target has never been reached.  The average capture rate is instead 57 per cent, an analysis by the Institute for Energy Economics and Financial Analysis has found.

The report says capture is limited by both technical issues and the demand for carbon dioxide from the energy industry, which uses the gas to extract more oil from depleting reserves.

A recent report from the International Energy Agency said oil and gas companies need to start "letting go of the illusion" that "implausibly large" amounts of carbon capture are the solution to the global climate crisis.

In a statement, Julia Levin, an associate director with Environmental Defence, said Capital Power's decision to shelve the project should serve as a lesson that it's reckless for governments to use taxpayer dollars to subsidize carbon capture ventures.

Levin said Capital Power was given $5 million from the province and the project would have been able to access both federal and provincial tax credits.

Despite "massive subsidies," the project was still abandoned, she said.

"Carbon capture is unnecessary, ineffective and expensive," Levin said.  "The bottom line: the most effective way to deal with carbon dioxide emissions is to prevent them from ever being created."