Securitisation of a portfolio of solar installations – technical due diligence considerations

At the Solar expo and conference held in May, I attended a very interesting talk by Jackson Moore, from DNV-GL.  This looked at the securitisation of a portfolio of solar energy projects, and some of the key items to consider when conducting the technical due diligence on bundles of hundreds, if not thousands, of small scale projects.

Now my experience of technical DD work has been on large scale projects (>5MW) where a lot of focus and energy has been given to reviewing the individual project’s merits and risks, to advise interested parties (often the lenders) on the associated risks and opportunities.  The project details and aspects are interrogated and weighed up individually.  It takes time, and thus has a consulting cost associated with it.  For smaller projects, where the budget or project financial model may not allow for extensive transaction or consulting fees, it doesn’t make sense to drill down into each project’s finer details, and the bundling of projects into a larger portfolio of similar projects makes sense.

Risk profile

For me, and possibly for anyone else who has followed, to any extent, the mortgage-based crash in the US that led to the implosion of the financial system in 2008, the securitisation of debt products triggers a warning bell.  Bundling of small debt packages without conducting adequate inspection of the individual projects increases the risk to the lender, as there is not as much scrutiny on the risk profile of each project.

The aim though is to mitigate this risk through having a broad portfolio of projects.  This portfolio will have projects with varying technologies, geographies, installers, owners and other project make-up that help to prevent an overexposure to any one type of project risk.

The lack of inspections worsens the overall risk profile, but the broad range of projects, and the size of the portfolio, aims to address this.

Mitigating against technical risks

While it isn’t possible, or rather feasible, to inspect all individual projects, there are due diligence tools and techniques that can be used to further improve the portfolio’s risk profile.  The main action to be taken is to scrutinise the individual processes used by project developers in the design, installation, commissioning and operation of these smaller facilities.  Processes to be reviewed include:

  • energy modelling;
  • performance guarantee methodology;
  • supplier selection criteria and qualification processes;
  • testing procedures;
  • vendor list management;
  • design and construction quality assurance procedures; and
  • contract development and review.

Let’s look at some of these in more detail.

Energy Modelling

The methodology used in modelling facilities’ performance and anticipated energy output should be a well thought out process.  The methodology should clearly outline how, for example, shading losses will be calculated (using satellite imaging/visual assessment/onsite monitoring etc).  The methodology for determining other technical inputs and assumptions (such as uncertainty values) will also need to be defined and, importantly, the developer should also indicate how they will ensure that their employees are adhering to these processes.  Do they have an internal quality assurance procedure and is this being implemented.

The technical due diligence team would review the procedures and methodologies to comment on their appropriateness, but it is also recommended that a statistically sample of projects is audit and analysed to determine if the methodologies are being followed correctly and if the internal QA procedures are being implemented.

Technical review

Each project will have aspects of it that are unique, and designed according to the relevant local conditions.  However, it is recommended that factors that are likely to be consistent across projects are reviewed for their suitability.  For instance, it would be possible to agree on a short list of Tier 1 module suppliers that may be appointed.  Or an approved list of competent installers, each with an appropriate and demonstrable track record.

This allows for a single review of technical project issues to be applied to a wide range of projects.

Design and construction quality considerations

The main word here is documentation.  As with the energy modelling procedures used, all design, installation, commissioning and operating procedures should have rigorous quality assurance processes in place, to ensure that project activities are carried out according to a suitable standard.  The procedures themselves should be reviewed, but it is very important that the developer is able to provide evidence that the implementation of the procedures has been checked thoroughly.  Documentation such as inspection notes, sign off sheets, certificates or punch lists should be available on each project, and it should be clear that the developer has interrogated these, and is in control of the overall project quality, for each individual project.

This allows the technical DD team to review a sample of the projects, identifying if there appears to be any issue with the developer’s internal quality assurance procedures and processes, or the implementation thereof.

Off-take contracts

There are any number of potential pitfalls when it comes to contracts in energy facilities.  Off-take contracts outline the rights and responsibilities of both the solar facility provider and the customer.  What is most important if projects are to be bundled together, is that these contracts are standardised.  This could either be through standardised Power Purchase Agreements (PPAs) or leasing agreements.  Either way, the terms should be the same across all the projects.  Contracts can therefore be reviewed once, and all projects should have the same type of contract risk associated with them.

In addition, the performance guarantee outlined in the off-take agreements should be relatively low (based, for instance, on a P90 yield assessment or better).  This makes it easier to assess the risk of underperformance, and mitigate against payouts across the project portfolio.

Recommendations for the various parties

In summary, below are some of the recommendations for key stakeholders to improve the overall feasibility and risk profile of their portfolio of projects:

Project developers
  • energy modelling procedures are incredibly important and should be followed carefully
  • all processes and activities are to be documented accurately and thoroughly
  • only projects which are known to have followed the approved processes and procedures should be submitted as part of a portfolio
  • only approved suppliers and vendors should be used
Installers
  • quality of installation is of paramount importance and should be put above anything else
  • the project documentation should be in place and captured accurately
  • if the quality is found to be sub-standard it is likely that the installer will not be included as an approved contractor in subsequent funding rounds
Financier
  • the emphasis should be on process based review, as opposed to individual project reviews
  • a statistical sample of projects should be reviewed to ensure that the processes are being followed and implemented appropriately
  • the increase in risk associated with not carrying out a review of each project should be tempered by the overall portfolio of projects

Note:  I have referred to project developers in this post, but this is interchangeable with project owner or sponsor.  Jackson referred to project sponsors in his talk, but I lean towards the term developers.

Solar PV guidelines and checklists

About a year ago I posted about a “five minute guide” I wrote while still at Arup in Cape Town.  This aims to flag some of the key technical things to consider if you, as a building owner or manager, are considering installing solar PV on your roof.

I came across another resource today; a checklist produced by the Interstate Renewable Energy Council, in the US.  This list aims to provide consumers in America with a series of questions or items to check when going ahead with a solar installation.  The aim is to have informed customers, asking the right questions and entering into a contract with a good basis of understanding.  This will hopefully result in service providers being held to an acceptable standard, and a reduction in the number of complaints being made against industry parties.

It’s quite a long list, and may be quite complicated for a layman.  It also suggests asking the installer for various bits of documentation; and it’s quite possible that the average homeowner may receive such documentation and not know if it’s adequate.   But it may be quite a good resource for larger consumers to implement, particularly where both PPA and leasing options are available.  You can find the checklist here.

IREC_Checklist

Akon’s lighting initiative in Africa

There has been a lot in the press about Akon launching a programme to provide lighting solutions to countries in Africa – Akon Lighting Africa.  This is not new news, but it has, ashamedly, passed me by without giving it its due attention.

So, in summary: the main aims of the programme are to fast track the electrification of countries with dismal access to electricity.  The priority for the moment is on lighting, in order to:

  • help scholars and students study;
  • extend the productive hours during the day to reduce the burden of (primarily) women carrying out household chores;
  • promote economic development through the provision of electricity;
  • improve the safety of communities through the installation of neighbourhood lighting; and
  • to improve indoor air quality through reduced combustion of fuels to provide lighting.

In order to achieve the electrification targets, they will focus on the following: “100,000 street-lamps, 1,000 solar micro-generators and 200,000 household electric systems.”  The initiative also aims to develop skills through training on the installation and maintenance of the systems.

The map below shows where they’ve been focusing their attention.  I am quite surprised that South Africa is on the 2016 expansion plan, as, in comparison to other sub-saharan countries, the country has achieved considerable electrification of households.  This can be improved upon naturally, and a shift in the energy source can from Eskom (the national utility) to distributed and independent renewables would of course be of benefit.

 

 

AKON_Projects

Much is always said about how Africa can leapfrog energy technologies and avoid the carbon intensive energy sources causing so much trouble in the North and the widespread adoption of cellphones is referenced ad nauseum.  This programme represents the actual realisation of this goal, particularly if it can transition from a grant structure to a self sustaining market.

A reminder to all reading this: Africa is not a country.  It’s massive, expansive, diverse, multicultural, international and complex.  Programmes that aim for Africa need to recognise this.

Energy storage from submerged buoyant devices

The other day I read an article about how a Canadian utility was using balloons filled with compressed air to store energy.  Air in the balloons is pressurised when there is an abundance of electricity, and this air is released when there’s a shortage.  It’s similar and yet opposite to a pumped hydro system.  You can read about this here.  This got me thinking as you’d need balloons that can inflate and deflate and withstand various levels of pressure.  You’d need pipes that transmit the air to and from the balloons and you’d need pumps and turbines to fill the balloons and then harness the energy in compressed air.

What if the balloons stayed constantly buoyant but what changed was their level under water.  What this would mean was  that you’d need an anchor, a buoyant device, and something which could act as a winch and a dynamo.  Would this be easier?

Buoyancy_device

Clearly you’d need the equivalent of ‘head’ with pumped storage, so the depth of the water would be adequate to give the system a good amount of kinetic energy.  No point setting this up in one meter of water.  You’d also need to ensure that there’s nothing around the surface of the water that it would interact with; if you’re driving a boat with an outboard you wouldn’t want to go around popping people’s balloons.

The material used for the chain or rope would need to be able to withstand moving backwards and forwards, without deteriorating too quickly.

I’m naturally not the first to think about this.  Someone filed a patent in America.  Hopefully they’ve done something about it, because there’s nothing more useless than someone blocking technology development with a patent that they’re just sitting on.  Especially if it’s not rocket science.

Someone has also picked this up at the University of Sharjah, UAE, with a paper published in 2015 and that the efficiency of the system is just under 40% (not great, but also not terrible if it’s relatively cheap and can be scaled).  They say the compressed air system they tested (not under water) had a much higher efficiency of over 84%.

The thinking is that it could be particularly useful with offshore wind installations, as it could be set up right next to the turbines, storing energy when there’s an abundance of wind, and releasing energy when there’s an abundance of demand.

It’s an interesting concept, and I’d be keen to hear if there are any applications of it or if anyone’s seen any more studies on it.

As a last note, there are other buoyant technology that are being looked into, some of which are being researched by the University of Innsbruck.  Their research would make use of the empty space in offshore platform or wind turbine pillars/support structures.  In these applications water would be pumped in and out of the structures.  Interesting all around.

Sustainable resource consumption in small, remote communities

The City of Cape Town has released a couple of versions of the Smart Living Handbook.  The aim of this book is to provide some tools and information on ways that Capetonians can change their actions and habits to live more sustainably.  It is divided up into four main themes; waste, energy, water and biodiversity.  I think I’ve talked about it on Energy Ramblings before, but I’ve been mulling over it a bit during the last few weeks of my travels.

I met with an NGO called People and the Sea (PatS) last week when in Malapascua, and this week, while in El Nido, I have been staying with a couple who have been involved in community upliftment activities here.  Many of the environmental and societal challenges that are being faced here are reminiscent of those faced in Cape Town.  People living in extreme poverty, necessitating the over-exploitation of the natural environment and prioritising the need to live over the protection of fragile ecosystems.  Absolutely understandable but no less difficult to observe as an outsider.

A woman with one flip flop on walked past me last night, holding a piece of paper, asking for assistance.  The paper read only “Imagine how I am living.”  Possibly one of the most powerful that I have seen; asking for empathy, perhaps, over money.

So this has me thinking about how the four themes of the Smart Living Handbook could apply around the world, in these small communities.  An academic exercise perhaps, but one that could possibly be of help to those looking to embed themselves within communities and invest their time in addressing issues that I get to flit past on my travels.

Waste

A few years back I was venting about the littering habits of people in South Africa, and that this seems to be a trend repeated the world over.  A friend of mine responded by pointing out that nothing will change without giving people access to education and a way out of poverty.  At the time, filled with righteous indignation, I scoffed and probably said something stupid and spoilt in response.  His comment stuck with me though, and has been playing on my mind as I travel through some parts of the world where there is a clear deficit of wealth and access to education.

There is waste everywhere in the Philippines.  Plastic on the beaches, on the paths, in the water, blowing in the wind.  Plastic, plastic, plastic.  I’ve found it incredibly upsetting, and my husband and I have climbed out of the water after a dive or snorkel with handfuls of rubbish.

Part of me thinks that addressing how waste is handled is one of the hardest activities in a small and remote community.  The type of waste is symptomatic of some of the living constraints experienced.  As pointed out by Axelle at PatS, local houses are small, and there is not much space for storage containers.  Containers themselves cost money, and they are not a priority if there’s not space for them in the first place.  The result of this is that consumable products are sold in tiny sachets.  Milo, washing powder, soup, shampoo, pretty much everything that people with space would have stored in big containers in their vast pantry or bathroom cupboard.  They’re also cheap, and easy to purchase with the few pesos that may be going spare at any particular time.  The ‘buy in bulk, safe in bulk‘ concept is one of unexpected privilege.

And it’s these sachets that I’ve been fishing out of the ocean.

Plastic is part of the culture here too.  Axelle told a story of being served a meal on a plate with a plastic bag over it so that the bag could get thrown away to avoid the need for washing the plate.  They were also offered bags for the hands so that they wouldn’t get their hands dirty.  The concepts of single-use and disposal of items are therefore strongly embedded.

Lastly, the handling, removal and treatment of waste requires infrastructure and sustained municipal services.  From the suitable placement of bins to the utilities required for the removal of waste and the ultimate treatment of waste (recycling/waste to energy/landfill).   The cost of the services is not negligible and they are therefore missing in a lot of these communities.  On Boracay, which is a big town, catering to loads of tourists, there were no bins on the beach.  In the smaller communities we have seen rubbish heaped on the beach because there is nowhere else to put it.   Any wind or storm naturally whips the rubbish into the ocean.

So what can be done?  It’s an enormous hill to climb, and it needs to be climbed the world over, with massive effort in distributed, small communities.  The scale of the issue is ginormous and not to be solved in a day.  I’ve jotted down some thoughts on possible actions (warning: I am aware that they are super simplistic, made to sound quick and easy, and they would naturally need to be fleshed out and tailored to suit the community at hand, but this is, after all, just a short thought piece):

  1. community engagement on the impact of waste on the environment, and on the economic sustainability of the community (massive waste → reduced tourism  → less community income)
  2. identification and classification of the type and proportion of waste items being generated
  3. assessment of current disposal methods and habits
  4. user separation of useful waste (especially organic waste)
  5. user separation of hazardous waste and the identification of methods of dealing with this waste
  6. establishment of accessible bins
  7. engagement with municipality over waste collection (not easy)
  8. engagement with communities over possible substitution of products to minimise resulting waste (could the distribution of storage containers make any difference?)
  9. periodic clean up programmes by the community – good for removing waste but also keeping the waste issue in the collective consciousness and possibly showing the positive impact that other programmes may be having, to keep up energy levels and commitment
  10. distribution of education materials in local schools / education programmes focused on students, instilling good habits from an early age

Side note – clearly I’m considering only solid waste and not waste water.  This is another aspect relating to a community’s resilience, important to consider, but not covered in this post.

Energy

As I’ve mentioned in previous posts, many households here don’t have access to electricity.  If they do, a number of these houses are built with wood, boards and woven natural materials (roofs included).  Not suitable for roof mounted solar modules (particularly during stormy seasons).  I have, however, seen a lot of micro-scale renewables installations in the remote villages in the Philippines.  Tiny solar panels, connected to a battery and a light.  Or solar panels connected to street lights.

I’m not going to spend too much time on energy, because it has been discussed a lot and there are a lot of programmes focused on just this, so here in short are some small energy interventions I have come across which may be suitable for small, remote communities:

  1. solar powered portable LED lights as mentioned above – like the Waka Waka lamp.
  2. The coke bottle light (Moser light) is an incredibly cheap and easy option, good for lighting dark households in dense communities during the day
  3. A spin off of this light is the Liter of Light, which has open sourced a solar street light technology, also making use of soda bottles.
  4. For places doing any kind of pot / stewing cooking (rice, curries, lentils etc), products like the Hot Box, known by various names depending on the manufacturer, is an eco cooker, using the thermal insulation properties of polystyrene, or the like, to cook food without the need for fuel.  Get a pot boiling, take it off the heat, place it in the hot box and let it cook itself.  They are very low tech, easy to make and a good livelihoods project too.
  5. Basa Magogo is a technique developed in rural communities in South Africa, used in coal cookers, improving the efficiency of the stove and allowing the same amount of cooking to be done with much less fuel.  Good for communities still relying on coal or the like for cooking.

The introduction of street lighting is also important in reducing crimes in communities, benefitting the most vulnerable amongst these communities.  You can read about some of the principles behind the City of Cape Town’s Violence Prevention through Urban Upgrading programme here.

The energy section of the Smart Living Handbook has some very handy tips for saving energy that I’m not going to repeat here.  But naturally, saving energy wherever possible should be a priority.

Water

I have drunk so much bottled water since being in the Philippines that I feel quite ashamed.  This naturally links to the waste topic above.  I can afford bottled and filtered water; many cannot.  This was an issue in Malapascua, where the quality of the local water was inadequate but filtered water needed to be brought from the mainland at an obvious expense.

It rains so much here, and when it rains, it literally pours.  There is enough fresh water.  A lot of the buildings and resorts that I’ve seen have water tanks installed to capture and store rain water, but there seems to be a constant message of ‘tap water is not potable.’  In a place with so much rain falling, and with such a high water content in the air, it’s hard to imagine water being an issue.

I’m not going to look into major infrastructure solutions as this is not the intention of this post and the smart living handbook focuses mostly on saving water in a setting where water is a service provided by a municipality.  This is not necessarily appropriate for smaller, more remote communities.  But here are some ideas or concepts to consider:

  1. Is there anything that is compromising an otherwise good water source (e.g. waste water, pollution, leakage)
  2. Where water is provided at a municipal level, is the water being used appropriately (i.e. not for watering the garden), are products available to allow for the efficient use of water (e.g. low-flow shower heads) and are there programmes in place to minimise leakages?
  3. There’s a lot of work and research that has gone into distributed water generation options and a number of technologies exist.  Here is a list of fifteen that I found; they range in complexity and scale, and would need to be considered in context.
  4. One of these technologies that I came across in South Africa was by a company called Dew.  It’s not the only manufacturer of this type of technology, but it stuck with me as I hadn’t heard of it before, and because it is a standalone piece of technology, that can provide water from the atmosphere anywhere where water vapour condenses on the side of a cold drink.  Water is condensed from the atmosphere, and I think they use wind power, but solar is also a possible energy source.  It is treated to ensure the water is clean and to improve the mineral content and taste, and is then bottled.  It’s a closed cycle, when reusable water bottles are used.  The amount of water that can be generated is naturally dependent on the water content in the atmosphere, but the technology is good for distributed installations.  There are obvious benefits associated with reduced energy required for cleaning ground water, and less waste from a reduced dependency on bottled water (where bottles are reused).  It’s an investment option, but one that can benefit a community for years, address health concerns relating to water quality, create sustainable livelihoods and improve the water security of remote communities.

Biodiversity

The focus on biodiversity can be read as protection of the natural environment from human developments. However, addressing the underlying inequality and poverty prevalent in remote communities can help to reduce the burden on natural services.

One of the challenges that I’ve come across in the Philippines is around fishing practices.  Dynamite and cyanide fishing techniques that have been used around here are naturally incredibly destructive and very short term options for catching fish.  I asked Axelle if people where using these practices to meet the demands of a greedy multinational type figure, but she said that the fishermen were mostly looking to provide food for the community.  Cyanide fishing looks to catch fish for aquariums, and it just boggles the mind that this practice is being used.  Consider my mind boggled.

Ignoring the rest of the world demanding their own Nemo in their fish tank, let’s look at responding to the need for food and other ways biodiversity is impacted:

  1. The Smart Living Handbook has some tips on how to start a garden.  This is particularly relevant where the soil is substandard.  I am a massive fan of small scale farming initiatives, and to me it doesn’t make sense to be importing things that are incredibly easy to grow (like tomatoes and spinach, they grow like weeds) from other islands or towns.  Localising food production helps to improve the community’s autonomy and resilience, reduces the pressure on natural systems to provide food, and can present opportunities for the creation of sustainable livelihoods.  This is also linked to waste, in that the organic products separated by the user can be an input into the gardens.
  2. I’m a big fan of worm farms and bought one for my parents one Christmas.  The little worms work all day for you to turn organic waste into worm wine, which can be diluted and poured over gardens or farms as fertiliser.  They present a livelihoods opportunity: I’ll pick up your organic waste, feed it to my worms and then sell worm wine to farms to support them growing fruit and vegetables that they can then sell or use to support their family.
  3. Friends of mine started a company called Cangro, focusing on teaching farming principles in schools.  They use an upside down paint can, and grow fruit and vegetables in them.  Have a look, it’s a brilliant concept.

Personal rant on dogs and cats: I am a big fan of having pets, and recognise the value that they bring in terms of companionship, love and affection.  However, cats, in particular, are incredibly destructive.  To lizards, to birds.  Their faeces is home to some nasty parasites; it’s pretty nasty stuff.  Left to their own devices (where they are not ‘pets’) they can breed like rabbits, and from what I’ve seen, they tend to end up being quite inbred and live pretty horrible lives, with leaky eyes, warped tails, mangy coats, mewing for scraps and they are often clearly underfed.  Dogs don’t look all that much better and there seems to be an outbreak of mange on Malapascua.  I don’t know how hard it is to set up neutering and spaying services in a community, or other options to control their numbers, but if it is at all feasible, it must surely be the humane thing to do.  A lot of these animals are heartbreaking to look at and can’t be good for the local environment.

Geothermal energy facilities – how do they work

This post looks at three main methods of harnessing geothermal energy; a) to use the heat directly to serve a heating function, b) to use the geology as a heat source or sink and c) to use the heat to generate electricity.

a) Direct use of geothermal (heat) energy

Heat from the geothermal springs is used to provide heat as a service where needed.  This could be for heating buildings, drying food or for other applications that require heat.

This is fairly easy to understand, and is not dissimilar to applications of solar thermal energy.

b) Geothermal heat pumps

The earth’s crust temperature remains fairly constant, regardless of atmospheric temperatures.  This means that on hot days the earth can be used to deposit unwanted heat and on cold days, it can be a source of heat.

The ground then becomes the sink or source of the heat exchanger in geothermal facilities.  Water (or other fluid) can be directed through a series of pipes underground.  There needs to be a difference in the temperatures between the fluid and the ground.  If the fluid is warmer (i.e. on a hot day), the ground will act as a sink.  If the temperature is cooler (i.e. on a cold day) the ground will act as a source, and heat will move from the ground to the fluid.  This fluid can then be integrated into, say, a building’s air conditioning system.

c) Geothermal electricity generation

1. Flash and double flash

Flash (39%) and double flash (19%) accounted for nearly 60% of all installed geothermal electrical generation capacity in 2013, so I’ll cover this first.

This facility type uses pressurised hot water (>180ºC).  The water is delivered to a steam separation chamber.  Here, the high temp water is separated rapidly (‘flashed’) into steam and water.  The steam is used to power a turbine, and the water (called brine as it will be a solution of water and various minerals) is returned to a reservoir.  If it’s returned to the same geothermal source, it will heat up to repeat the cycle once more.

If this brine is still at a high enough temperature, the same process can take place again, effectively re-flashing the water, separating once more into steam (to power a turbine) and a more concentrated brine (to be returned to the reservoir).

Here’s a schematic showing the basic layout, from Energy Almanac, that I pinched:

Geo_Flash

2. Dry steam

This one is the simplest to understand, and accounted for 25% of all geothermal electrical facilities in 2013.

Underground water is heated to such an extent that it exits the reservoir as steam, and this steam goes directly to the turbine to generate electricity.  ‘Spent’/condensed steam (aka water) is returned to the reservoir as with flash systems.

There would be heat recovery systems in place to increase the overall system facility.

Here’s another pinched diagram:

Geo_dry

3. Binary systems

These systems, making up 14% of global installed capacity in 2013, are better at making use of water at a lower temperature.  They also keep the ground water in a closed system.

Moderate temperature water enters a heat exchanger, where energy is transferred to a substance with a lower evaporation temperature.  This substance vapour is then used to drive a turbine to generate electricity.  Two different types of fluid are used (i.e. binary systems).

It’s good to know that this system can be integrated with the flash and dry systems above, as the condensed water from the high temperature systems still has usable energy available, and, when integrated with a binary system, two different turbines can be powered in different loops.

In for a penny, in for a pound – another knicked pic:

Geo_binary

4. Enhanced geothermal systems (EGS)

This is similar to the CCS technology post that I did, which looks at injecting CO2 into depleting oil reserves to maximise output.  Like that, water can be injected into a geothermal reservoir where there may not be any water reservoir (dry rock), or where there may not be much permeability in the rock.

Once the water is heated and then delivered to the plant, the same technologies as listed above would apply.

Global geothermal capacity trends

Edit: I’ve replaced the pie chart below as the version I posted yesterday had a glaring error (flash type had been totally left out).  Apologies.  Fixed now…

This is the first of a series of posts that will be focusing on geothermal energy. This is of interest to me as I’m travelling through the Philippines, and, as you can see from the graphs below, Philippines is second on the list in terms of installed capacity.

I’d been to an energy conference in Johannesburg a year or so ago focusing on energy security in Africa and geothermal in Kenya and Ethiopia came up a lot. The interest of these countries to pursue geothermal is, I think, demonstrated by the sudden increase in capacity in Kenya between 2013 and 2014, where they go from 237MW to 600MW; they’ve also got a number 22 projects in the pipeline, totalling nearly 1GW.  Ethiopia has plans to increase their capacity to over 1GW in the early 2020’s.  Tanzania is also looking to get in on the action.

All of the data below have been taken from Geothermal Energy Association’s Annual reports which you can find here.

Geothermal_Developed Geothermal_Developing Geothermal_New

Geothermal_technologies

As with all projects making use of naturally occurring resources, developers are tending towards locations with abundant thermal resources, preferably with underground water sources, proximity to demand and suitably regulatory arrangements.

Over the next few posts I’ll be having a look at some of the different technologies that are used, to try and sum up some of the key technical aspects/considerations and possibly challenges that exist around this technology, but what is clear is that geothermal capacity is increasing, year on year.

Challenges surrounding CCS

As mentioned in a previous post earlier this week, the IEA’s CCS roadmap had a number of targets and plans laid out, with priorities on actions required before 2020. They mention that a number of these are not where they had hoped by 2014, and there has been a delay in pushing CCS projects and programmes forward.

There are big challenges associated with CCS projects. Their size and scale leads to complexity, as does the requirement to integrate numerous stakeholders, technologies and systems, along a number of value chains. On top of all of this, there is a lack of understanding as to why CCS is important, and discussions around whether there is even a need to reduce or remove CO2 emissions does not help.

So what, at a very high level, are some of the key challenges that are being encountered?

The scale of CCS required:

It’s estimated that, in order to reduce global emissions by 10% (keeping in mind that the IEA targets 14% by 2050), the volume of CO2 needed to be captured and stored annually is roughly the same as the volume of oil produced.  This is not an insignificant target, and it is likely that the majority of centralised power systems will need some form of carbon capture technology installed to achieve this.  This means retrofitting or incorporating into new builds, and there are naturally impacts on energy generation efficiency.  There is also a lot of work required to move technologies forward, and to prove the effectiveness and efficiencies of the capture, transportation and storage technologies.

R_DProgress

[Source: IEA Technology Perspectives 2015 presentation.]

Integration of many individual technologies and processes in a single system

The targets are big, the infrastructure required is vast and the CCS system encompasses the capture, transportation and ultimate storage of CO2; three unique, distinct and technically complex sectors, all with their own regulatory hurdles and policy related challenges.

There are also a number of stakeholders who are involved or need to be consulted to get CCS projects off the ground. The public and private sectors need to work together, as public and private infrastructure interfaces are impacted, and government policy leads to changes in private sector spend and operations.

Costs

The cost of separating carbon is largely dependent on the industrial or power generation process involved. This capture and compression process can be responsible for around 70-90% of the overall CCS expense. Costs relating to transportation are impacted by the need for new infrastructure and storage costs can vary greatly, depending on the nature of storage being pursued.

There is a lot of emphasis within the CCS sector on the importance of R&D and on large scale demonstration projects in order to a) improve the predictability of costs associated with CCS and b) bring those predictable costs down.

The financial case for CCS is also largely driven by carbon pricing, and the inclusion of CO2 emissions in power prices or in the input costs for industrial processes.

CCS Cost_pricing

[Source: IEA Insight Series 2014, CCS Legal and Regulatory Review]

Awareness and public interest

A lack of concern by the public on the seriousness of climate change will naturally lead to a lack of understanding as to the value of CCS, and the urgency related to the permanent removal of CO2 from the industrial and power sector processes. Motivating for the allocation of funding to research and development and to demonstration projects will be harder where there is not public support, particularly given the high R&D and capital costs associated with CCS technologies.

Capturing carbon – the basics

In order to store the carbon, you first need to capture it.  There appear to be three main ways to separate the CO2.  This post is not intended to be a thorough technical discussion; I am neither qualified nor inclined to go into the detail, however, it’s interesting to have a basic understanding of what happens where.

Generating gases with CO2 concentration:

CO2 is typically captured in one of three stages of fuel combustion: flue-gas separation, oxy-fuel combustion or during pre-combustion.

  1. During flue-gas separation, or post-combustion capture, the gases resulting from burning fuels includes various gases, including N, CO2, H20, SO2 etc.  The assumption is that the fuel combusts by reacting with air.  This means that there’s a high concentration of nitrogen component in the flue gas.  In order to separate the CO2, the Nitrogen will need to be removed => energy required.
  2. In oxy-fuel combustion, the fuel is burnt with oxygen (or as near to pure O2 as possible).  This removes the nitrogen prior to combustion, meaning that the concentration of CO2 is much higher in the exhaust gases, making it easier to separate.  Naturally, there would have to have been effort involved prior to combustion to separate the oxygen from the air => energy required.
  3. Pre-combustion capture “involves reacting a fuel with oxygen or air and/or steam to give mainly a ‘synthesis gas (syngas)’ or ‘fuel gas’ composed of carbon monoxide and hydrogen. The carbon monoxide is reacted with steam in a catalytic reactor, called a shift converter, to give CO2 and more hydrogen.” [source: IEA Clean Coal]  What results is a mixture of gases with a much higher concentration of CO2 than in post-combustion processes.  This can be cheaper to operate than options 1 and 2, however the capital costs can be higher.
CO2 capture[Source: hindawi]

Separating the CO2:

Once there is a gas with a high enough CO2 concentration, there are a few ways to separate the CO2.  This short document, produced by the CO2 Capture project, outlines three methods of removing CO2 from mixed gases; namely separation with

  • sorbents/solvents;
  • membranes; and/or
  • cryogenics.

CO2 Capture project

 

What happens to CCS captured carbon

Geological storage:

Carbon Capture and Storage or Sequestration typically conjures images of the injection of carbon into a suitable underground cavity, with appropriate geological characteristics.  The CO2 captured is then permanently trapped within these cavities.  As shown in the diagram below, there are a number of types of cavities or geological structures that can be used.

IPCC Geological storage

Source: IPCC Special report on SRCCS

Options 2 and 4 above make use of CO2 as an input in an industrial process; namely to assist with the recovery of oil, gas or coal bed methane.  CO2 is injected and the pressure assists in forcing more fuel upwards.  Effectively this is storing CO2 to assist with accessing more fossil fuels which will result in more CO2.  However, the use of CO2 helps to decrease the net emissions in the overall process, based on the assumption that the oil would have been accessed in the first place.  If pressurised CO2 is injected into the cavity after the completed depletion of the reservoir, it could also be considered to be a net sink.

Option 3 involves the injection of CO2 into a saline, or brine, solution.  This is water that is rich in minerals, and unsuitable for agricultural purposes.  This may not be suitable for areas aiming to access geothermal potential of underground water deposits.

Mineral carbonation:

This involves the formation of stable carbonate materials through controlled chemical reactions with calcium or magnesium compounds.  The output of this process can be used in construction or building projects, and the carbon is permanently trapped.  There are naturally challenges associated with this process, not least of which is the mining required for the minerals to be used as inputs to the process.  The capture of carbon and the chemical process itself requires energy.  The IPCC considers that such a facility would require 60-180% more energy than a power facility without carbon capture or mineral carbonation processes.

IPCC_Mineral carbonation

SOURCE: IPCC SPECIAL REPORT ON SRCCS

Industrial applications:

CO2 is used as an input in a number of industrial processes.  The potential for diverting CO2 captured and using this in such processes is being explored.  One of the key considerations relates to the resulting industrial output, and whether the CO2 remains permanently stored therein.

Excluding CO2 as an input in enhanced oil recovery (discussed above), CO2 is also used as a reagent in fertiliser manufacture, methanol production or is used for other applications, such as a refrigerant, in fire extinguishers, in soft drink carbonisation, in plastics production or in algae cultivation.  As the IPCC indicates in their special report on CCS (link above), “as a measure for mitigating climate change, this option is meaningful only if the quantity and duration of CO2 stored are significant, and if there is a real net reduction of CO2 emissions. The typical lifetime of most of the CO2 currently used by industrial processes has storage times of only days to months. The stored carbon is then degraded to CO2 and again emitted to the atmosphere. Such short time scales do not contribute meaningfully to climate change mitigation.” 

Given that nearly half of all carbon capture and storage is expected to be within the industrial sector (including EOR), it is important that the effectiveness of the solutions are considered and monitored.  Particularly as the IPCC states that, “in view of the low fraction of CO2 retained, the small volumes used and the possibility that substitution may lead to increases in CO2 emissions, it can be concluded that the contribution of industrial uses of captured CO2 to climate change mitigation is expected to be small.”

 

IEA_CO2_captured uses

 

[Source:  IEA Energy Technology Perspectives 2015 presentation]

Where this becomes important is in the cost of the overall CCS system.  Where CO2 is considered to be an input into an industrial process, the cost of separating carbon at a power station can be offset against its value in the process.  Storage for the sake of storage (e.g. underground storage without EOR applications) cannot be offset, unless other energy generation options are suitably priced for carbon.