Q3 2021: carbon capture "turning a corner"

Although not a new concept, the industry is being stimulated by pressing global climate targets and investment incentives, namely the US’ 45Q tax credit. Over 20% of global oil and gas production is covered by 2050 net-zero commitments, with CCS expected to play a role in every case, according to the International Energy Agency.¹https://www.iea.org/reports/ccus-in-clean-energy-transitions/a-new-era-for-ccus#growing-ccus-momentum Indeed, CCS is becoming “something that people are looking at as necessary, not simply studying it, and that’s really what’s turned the corner”, a director at the University of Houston told Forum.

Deployment of CCS is likely to accelerate as public and private acceptance of it grows and lower-cost capture technologies are brought to market. At present, there are three main ways in which CO2 is captured from industrial and power generation flue gas: pre-combustion, post-combustion and oxy combustion. The most common process is post-combustion, whereby an amine is used to absorb CO2 after stripping the gas of unwanted chemicals. 

An emerging process, we heard from a former associate at the US Department of Energy (DoE), involves polymeric membranes. Once the flue gas is cleansed, it is passed through a membrane enabling the CO2 to be filtered through. Amine processes can capture over 95-98% of the CO2 they treat compared with membranes that are in the 60-65% range, but experts expect amine performance will improve as more research is done. “If we are in the 90% range or so, I think that these technologies, CCS, can be competitive against renewable sources in terms of zero carbon emissions,” the specialist said.

One of the biggest barriers to widespread deployment of CCS is the cost of CO2 capture, representing 50-70% of the total cost, the Interview with the University of Houston director revealed. As we heard, the low-hanging fruit in CCS is where the cost of capture is lowest. “The industries that have low-cost carbon to be captured, those are the ones that are going to be in the money sooner than later.” For a coal plant, the cost of capture is typically USD 50-60 per tonne of CO2 captured; for a natural gas plant, USD 60-70 per tonne, the former DoE associate noted. The cost of direct air capture is significantly higher, at USD 400-500 but as high as USD 800-1,000 per tonne, with experts confident that costs will fall as technology continues to improve.

Indeed, direct grants have been vital for CCS projects, with recent examples including Norway’s Northern Lights (Longship) project and Porthos in Rotterdam. We also heard from a director at the University of Houston that the US ethanol industry is currently at the forefront of CCS, largely because of the low cost of capture (USD 20-30 per tonne). As an example of how much CO2 can be captured by CCS, over 900,000 tonnes are captured every day from the million-gallon-a-day Archer Daniels Midland ethanol refinery in Illinois, with the CO2 stored on-site in a saline aquifer. However, as the ethanol industry represents less than 4% of all CO2 emitted in the US, “that’s not going to create a needle-moving effort for global climate change”. Industrial processes, which represent 40-45% of overall CO2, offer the biggest opportunity for carbon capture. “When you look at heavy industries like refining, petroleum, petrochemicals, steel-making industry, that’s really where the big tickets are,” the expert said.

Interviews also discussed CCS in the US versus Europe, with the US having “generally better integrated with industry”, a former Hydrogen Energy International manager said. Another major influence is the 45Q tax credit for CO2 capture, amounting to USD 50 per tonne stored in saline formations or USD 35 per tonne in enhanced oil recovery (EOR) projects. “That has provided a very substantial impetus to the CCS industry in the US and has sparked quite a lot of projects,” the expert said. “There are probably about 30 projects that are currently under development in the US… that have been sparked by the 45Q tax credits.” The University of Houston director added those numbers are likely to reach USD 60 per tonne for EOR and as much as USD 80-85 per tonne for storage. “Those kinds of incentive thresholds will allow projects to pay.” 

Indeed, the biggest difference between CCS projects in Europe and the US, we heard, is that a significant amount of US CO2 storage is in EOR projects. The US EOR business produces about 300,000 barrels a day, for which about a third of the CO2 is captured, but there are no such examples of this yet in Europe, the former Hydrogen Energy International manager said. They added that the US has a broader range of capture sources, with a greater emphasis on industrial processes such as fertiliser plants — but this is changing. “Over time, there’s been a shift in focus from power plants to industrial processes for CCS and that applies in both regions.” The decrease in the cost of power from renewables has also propelled this shift.  

While CCS has hitherto demonstrated a relatively limited impact on global CO2 reduction, Interviews suggest that it is increasingly regarded as one of many ways to help the world meet its climate targets. Against a backdrop of greater awareness and stronger policy action, more projects are coming online and many more are in the pipeline. With investors also increasingly cognisant of and vocal about ESG issues, experts we interviewed believe that more companies will see CCS offering a lucrative way to offset their carbon footprint. 

However, there are some sticking points. There remains uncertainty surrounding storage, with the risk of leakage, while “very low probability”, impossible to guarantee. It has also been argued that current CCS processes are less economical than renewable sources (though one expert said it is an industry that ultimately will “pay for itself in terms of products and services”). Lastly, capturing carbon from fossil fuels keeps the coal and natural gas industries alive, which many environmental activists are opposed to, regardless of what happens to the carbon.