SUMMARY

Investment and fixed price sale of carbon credits prompts FID for Entropy's second phase at Glacier gas plant. [Image credit: Advantage Energy]

By Dale Lunan

Advantage Energy said December 20 the Canada Growth Fund (CGF) had entered into a C$200mn strategic investment agreement with its Entropy carbon capture and storage (CCS) subsidiary.

The strategic investment comes nearly two years after Brookfield Renewables closed an investment of C$300mn in Entropy. 

Alongside the capital investment, CGF has also entered into a fixed-price carbon credit purchase agreement (carbon credit offtake agreement, or CCO) for up to 1mn tonnes/year – a first in global carbon compliance markets.

The CGF is the arms-length federal financing agency tasked with underwriting carbon contracts for differences to assist in the development of CCS projects in Canada.

The initial project to benefit from the CCO will be the Glacier Phase 2 CCS project. CGF will take an initial 185,000 tonnes/year of carbon credits at an initial price of C$86.50/tonne, or a total of 2.8mn tonnes over the 15-year term.

With the CCO in place, CGG has absorbed the carbon pricing risk for the project, Advantage said, and it has taken a provisional final investment decision on the project, which is expected to capture 137,000 tonnes/year of CCS.

“By creating a large-scale CCO to guarantee long-term carbon pricing and adding $200mn to our existing Brookfield funding for third-party projects, Entropy has a clear path to accelerating growth and reducing emissions, right here at home,” Entropy and Advantage CEO Mike Belenkie said. “While we will remain a global CCS developer, we believe our projects are likely to advance much more quickly in Canada than any other country in the world.”

Phase 1a of the project, at Advantage’s Glacier gas processing plant west of Edmonton, is already capturing more than 12,000 tonnes/year of carbon, while Phase 1b, to capture an additional 16,000 tonnes/year, is expected to be commissioned before the end of the year.

Beyond Glacier Phase 2, CGF and Entropy intend to enter into separate CCO agreements for other Canadian projects, on terms that are expected to provide similar investment returns. Once the initial 600,000 tonnes/year of carbon credits have been deployed, CGF may make available an additional 400,000 tonnes/year of CCOs for additional Entropy Canadian CCS projects.