A Carbon Capture and Storage Update
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Before launching into an update on the current state of carbon capture and storage (CSS), let’s look at where we are. Currently, about 40 million tons of carbon dioxide or CO2 are captured and stored globally every year. The vast bulk of that — perhaps 95% to 98%, as estimated by the Global CCS Institute — either goes immediately into geological storage up to two kilometers under the earth’s surface or, as an interim step, is used first for enhanced oil recovery (EOR) and then permanently stored. The small remainder of captured CO2 is earmarked for utilization, with most of it used to make urea for the manufacture of fertilizer.
Of the CCS projects currently operational, nine involve direct geological storage and 21 first involve EOR. Of the 170 or so projects under development around the world, however, about three-quarters are based on geological storage rather than EOR, largely because of policy incentives in North America and Europe, where about 90% of these projects are located. Only 10 projects are active in the rest of the world.
When you look at global CCS activity over the last dozen years or so, there was a drop-off in 2015 and 2016 as renewables came onto the scene in a bigger way as the basis for power sector decarbonization and the economics of using CO2 for oil recovery began to look less favorable. Several recent developments, however, are now improving the long-term prospects for CCS.
Carbon Capture and Storage Drivers
One major driver for the increase in CCS activity has been positive changes in developed-market government policy. Many more people in both the public and private sectors have come to see CCS as playing a critical role in reaching the goal of net-zero emissions.
Another important driver has been the recent rise of CCS networks based on third-party provision of transport and storage services. As more industrial organizations, power generation companies, and hydrogen manufacturing companies need to focus only on the capture part of the CCS supply chain, more are likely to become involved in the total CCS effort. The UK recently announced it was allocating an additional £20 billion to support CCS networks. That is very encouraging for CCS.
A third driver has been the push for greater use of hydrogen, which can be produced commercially in two ways. So-called “green” hydrogen refers to the gas being produced through electrolysis, which is a relatively new and currently expensive technology, while “blue” hydrogen uses methane reforming, which then requires capturing and storing the CO2 created in the manufacturing process for the hydrogen to have low-carbon status. For companies interested in blue hydrogen manufacturing, the potential returns look very attractive, at least in the short to medium term.
Two final drivers are the likelihood of stronger incentives to encourage direct air capture of CO2, which involves removing the gas from the atmosphere, and improvements in the depth and robustness of suppliers across the entire CCS supply chain. Direct air capture is still relatively expensive for widespread use but could become competitive in the future as economies of scale drive unit cost reductions.
Realistic Optimism for CCS
While there are undoubtedly grounds for optimism, there also is the need to be realistic: We would need to see a 100-to-200-fold increase in project numbers for CCS to meet carbon reduction goals. Ironically, perhaps, the chief stumbling block to greater CCS is not technology but rather the underlying economics. The technology at the core of CCS, gas separation, is a basic, almost 100-year-old chemical-based process in which amines are passed through the gas and attach themselves to CO2 molecules. The greater the concentration of CO2, the cheaper the cost of extracting it. The associated major growth issue facing CCS involves scaling the technology to a level at which it has never operated. Again, that is a commercial challenge, not a technical one.
Currently, depending on CO2 concentration and distance to a storage site, the cost of CCS can range from as little as $30 a ton for some industrial processes to perhaps $700 a ton for direct air capture. Assuming an average unitized cost of about $300 a ton across all applications, a present value that considers capital and operating expenditures over an asset’s life cycle period, the issue becomes one of how the cost can be commercially justified. In many ways, the answer depends on whether policy incentives come in the form of a carrot or a stick.
Europe largely favors the stick approach in its carbon policies through Emission Trading Systems (ETS) or taxation. Investing in CCS could reduce or even eliminate exposure to CO2-related costs. The U.S., in contrast, tends to favor the carrot approach, using tax breaks or direct payments to encourage investment in low-carbon technologies, including CCS. Both policy approaches work, and their continued strengthening are the reasons North America, Europe, and the UK will probably continue to lead progress in CCS. Having been involved in this effort for several decades, I can’t think of a time when things looked as bullish for CCS as they do now.
About Angus Gillespie
Angus Gillespie operates his own consulting firm, Edzell Climate Economics, which specializes in issues dealing with carbon management and renewables. Previously, he worked with the Global CCS Institute and held several executive positions at Shell, most recently as Vice President CO2, where he worked with the executive team to develop and launch a series of CO2 initiatives and oversaw its CCS strategy and investment program. Earlier, he served as Vice President, CO2 Strategy, and as Vice President, Strategy & Portfolio, Future Fuels & CO2.
This article is adapted from the GLG Teleconference “Carbon Capture, Utilization, and Storage — Key Projects and Industry Implementation.” If you would like access to this event or would like to speak with experts like Angus Gillespie or any of our approximately 1 million industry experts, please contact us.
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