Emissions-free steam: Keeping it simple
Alberta, like many other jurisdictions, strives for a net zero economy by 2050. With over 250 million tonnes of annual carbon emissions (about the same as Spain), this will be a huge undertaking. A lot of the emissions come from industrial heat and steam - far more than those from electricity generation or transportation. Globally, industrial heat is a two trillion (!) dollar market.
In Alberta, the oil and gas industry’s steam and heat demand dominates, used for:
In-situ oil production
Oil Sands Mining
Upgrading
Processing & Refining
Yet the lack of cost-effective, scalable decarbonization solutions is weighing on producers’ cost of capital and share prices.
A new pathway is opening up however - Electro-Thermal Energy Storage (ETES), “heat batteries”. They take cheap intermittent electricity, convert it into heat at 99% efficiency, and store it in ETES units that provide steam as and when needed with only minimal losses. Emissions-free. The technology is extremely simple: basically it’s a big “toaster in bricks”. And it can be de-risked cheaply, creating another “egg” in the decarbonization basket.
Rondo’s Heat Battery (rondo.com)
ETES Technology providers have already secured venture funding from large oil & gas companies, including Shell, Aramco and SABIC.
The technology is well suited for Alberta oil & gas applications.
Why haven’t we seen it earlier? Three things need to be true for ETES to be competitive, and all three have just come true in the Alberta market:
1) Carbon emissions must be economically relevant
Not the case 5-10 years ago, but certainly true now with a carbon price, possible emissions cap and requirements from investors, insurers and other stakeholders. Without any carbon price, gas-based steam generation with unabated emissions will usually be cheaper than ETES. But as we will see below, the required carbon price to be commercially viable is far lower than for alternative decarbonization paths. And depending on how the AB power market develops, ETES may even beat unabated gas-based steam generation soon (highly likely if power prices are allowed to become negative with new market rules).
2) Power must be cheap intermittently.
This was the case periodically in the past, but not reliably so. With the massive scaling of intermittent renewables, intermittent low/zero dollar power is becoming a structural feature in the Alberta market, as well as wide-spread curtailments during peak production hours. For more detailed analysis, see our “Alberta-Power” series (Part 1 explaining history and structural changes in the AB power market, Part 2 providing statistical analysis, Part 3 outlining resulting opportunities). Important to note - average power prices don’t necessarily need to be cheap, just 6-8 hours per day need to be cheap on average. Curtailment-avoidance for capital-intensive, low Opex assets creates significant opportunities for ETES. Looking to areas that already have high renewables penetration (Alberta is rapidly approaching that same point, see Part 1 of Alberta-Power): Oklahoma had over 2,000 hours of negative power prices last year, and South Australia over 3,000 hours.
3) Reliable, scalable ETES technology must be available.
Simple is good, simpler is better. Previously, heat storage was often complex, for example using molten salt systems that tend to have high O&M costs and can be problematic from a safety perspective. These systems still have their place, but what really improved is the advent of simple high temperature storage that uses crushed rock, bricks or steel slag balls as storage medium.
The Technology
The technology is simple, and it can be employed as a drop-in addition or replacement to gas-fired steam boilers or Once Through Steam Generators (OTSGs) in most cases. Two technology providers that are particularly interesting for oil industry applications are Rondo Energy, based in California, and Kraftblock, based in Germany.
Rondo Energy uses electric resistance heating (“Toaster”) to bring bricks up to 1,500C temperature. An industrial blower then blows air through the structure. The hot air enters a boiler or OTSG, generating steam. Rondo has two standard size heat batteries that store 100 MWh and 300 MWh respectively. (For comparison, the largest Tesla Megapack lithium-ion grid battery stores 3.9 MWh, albeit as electricity). Their pilot facility is operating at the Calgren Ethanol plant in Pixley, California, and they recently concluded agreements to construct two large heat batteries at Diageo factories in Illinois and Kentucky.. Rondo is funded mainly by large industrial companies, including Aramco, SABIC and Rio Tinto.
Rondo’s operational heat battery pilot at the Calgren Ethanol plant in Pixley, California (rondo.com)
Kraftblock uses material made out of steel slag to store heat up to 1300C. The technology is already in use in a PepsiCo factory in the Netherlands, and a large project is under construction at a steel plant in India. Kraftblock’s system can be used both for waste heat recovery or for ETES applications, using industrial blowers and electric resistance heaters to charge the storage medium with hot air, and then discharge using the same blower. The Kraftblock system is freely scalable in a containerized way above a minimum size of 4 MWh storage capacity. Kraftblock’s last funding round was led by Shell Ventures.
Kraftblock’s system at PepsiCo Broek op Langedijk, Netherlands (Kraftblock’s ETES unit inside the small building in the left corner, providing heat to the PepsiCo factory on the right; kraftblock.de)
Challenges
Nothing is without challenges though, and here are the main ones:
Transmission costs: Alberta’s electricity transmission costs are currently high for intermittent users, and interruptible capacity may be challenging to access. Whilst improvements are on the way, this may present a challenge at least in the short term - unless the heat user has access to nearby or self-generation. At Arder Energy, we have developed a concept that works particularly well for assets with on-site cogeneration, avoiding grid costs.
Technology Readiness: Whilst ETES technology is simple and in use in other countries and industries, it is not yet demonstrated at scale in Canada or in the oil & gas sector. Grants and tax credits are readily available for demonstration plants however, minimizing the financial exposure of demonstration facilities.
Competing technologies: The main decarbonization pathway currently pursued by the oil & gas industry is Carbon Capture and Storage (CCS). CCS is very well suited for applications with high-concentration CO2 streams, however tends to be highly expensive for post-combustion capture and for smaller and more remote facilities. CCS cost per tonne of CO2 avoided tends to be in the range of CAD 140-240+ / tonne. ETES is significantly cheaper in most applications. But it’s not an “EITHER/OR”, it’s an “AND”. ETES is another tool in the quiver which can lower total decarbonization costs on portfolio basis, and provide solutions where CCS does not work, and vice versa.
ETES is ready for large-scale demonstration projects in the Alberta oil and gas industry. CCS and Small Nuclear Reactors face significant challenges to warrant derisking a further alternative. And a sizable pilot would cost only a fraction of what is being spent on just FEED for CCS annually. In other words, ETES is another egg in the basket, and a cheap one to derisk.
Arder’s goal is to be a solution partner to industry and a scaling partner to technology providers. We have spent months reviewing concepts, challenges and opportunities, and look forward to help with deploying this promising technology.
Other information sources
If the above sounds too good to be true, or if you want to learn more about the subject here are some further resources
Overview articles by: Economist, Wall Street Journal, Financial Times
If you are interested in exploring opportunities, or if you want to discuss the pros and cons, please get in touch!