May 25, 2011 / 4:16 PM / 9 years ago

SCS takes over California hydrogen power project

* Project to cost $2.84 billion, US DOE offered $308 M

* Project to capture 90 pct of CO2, sequester 2 mln tons

* SCS to generate power or fertilizer at plant

NEW YORK, May 25 (Reuters) - SCS Energy, an independent power producer, agreed to take over a $2.84 billion hydrogen-fueled power plant in California to move it forward through permitting and operation.

Earlier this year, the 250-megawatt hydrogen project’s original investors, BP Plc (BP.L) and Rio Tinto (RIO.L), started talking with the U.S. Department of Energy (DOE) to find a way to sustain the project upon their exit.

A spokesman for SCS, of Concord, Massachusetts, could not comment on the cost, schedule or size of the project, since the company wants to modify it by adding a facility capable of making fertilizer ingredient urea.

The DOE in Sept. 2009 agreed to invest $308 million in the Hydrogen Energy California project. SCS said the DOE grant is still active.

BP and Rio Tinto said in a release Tuesday they invested $55 million each to lay the groundwork for the project.

“Both companies are pleased to see SCS Energy develop the project in a way that will create value for its core business,” Jonathan Briggs of Hydrogen Energy California said in the release.

The project will be built in Kern County, about 117 miles (188 km) north of Los Angeles. It was originally expected to use General Electric’s (GE.N) integrated gasification combined cycle (IGCC) technology to convert petroleum coke or blends of petroleum coke and coal into hydrogen and carbon dioxide (CO2).

The plant was expected to use the hydrogen to fuel a combined cycle power plant capable of supplying electricity to more than 150,000 homes in Southern California.

It will capture about 90 percent of the CO2 produced and transport it via pipeline to Occidental Petroleum’s (OXY.N) Elk Hills oil field about five miles away for enhanced oil recovery and sequestration in deep underground geological formations.

The project was expected sequester about 2 million tons of CO2 a year.

In a report on the project in November 2009, the U.S. National Energy Technology Laboratory (NETL) said the project was expected to consume 75 percent western bituminous coal and 25 percent petroleum coke at least during the DOE sponsored phase of the project.

On its website, Hydrogen Energy California said it planned to seek permits and conduct design work in 2011, start building the project in 2012 and produce power in 2016.

The SCS spokesman could not confirm these dates.

The project was expected to create about 1,500 jobs during construction and about 100 permanent positions.

POWER OR FERTILIZER

SCS intends to integrate electric generation with urea production to allow the plant to use the hydrogen produced to generate electricity, urea or both depending on market demand.

Urea, widely used in fertilizers, is the main nitrogen-containing substance in the urine of mammals.

SCS built a natural gas-fired plant in Astoria in New York City and is seeking to build the $3.9 billion PureGen hydrogen-fueled power plant in Linden, New Jersey.

SCS will base the California plant on the PureGen design. It will use gasification technology to convert a solid fuel like coal into hydrogen and carbon dioxide. The hydrogen would be used to fuel a power plant to produce electricity or produce urea, depending on market conditions.

The CO2 in New Jersey would be piped below the ocean where it would be sequestered about 8,000 feet below the ocean floor. If SCS gets the permits for PureGen, it hopes to start construction in late 2012 or early 2013.

SCS said using the California plant to produce both electricity and urea would address the economic challenge of creating a viable business model to cover the high capital costs of the plant and its carbon capture capabilities. (Reporting by Scott DiSavino; Editing by David Gregorio)

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