Driving CCUS deployment – time to be cautiously optimistic?

Last week I was in Paris for an IEA workshop on ‘the role of CCUS for a cleaner and more resilient energy sector’. This event assembled experts and key figures in carbon capture, usage and storage from industry, academia and government, with a view to informing the IEA’s forthcoming Energy Technology Perspectives 2020 – a report on the status of various clean energy technologies, last released in 2017.

This new edition is expected to have a special focus on CCUS, and how we can make this technology – so beloved by climate models – part of the solution in the real world.

The workshop agenda itself reflected how priorities in CCUS have changed in the last few years. Although research into new and more efficient ways of capturing CO2 still rumbles on, the most pressing concern for the sector is how to drive deployment of the technologies which are ready now. This is all about how government policy can create a viable and enduring business model which will allow the private sector to get some return on investing in either CO2 capture or storage. One of the workshop’s morning sessions focused on an approach which seems to be increasingly favoured around the world, in which a shared infrastructure for transporting and storing CO2 is established and then charges emitters for its use.

This model is typified by Norway’s ‘Northern Lights’ project, which aims to collect CO2 by ship from emitters around North-Western Europe, before piping it out to a storage site in the North Sea. Shell, Total, and Equinor are involved and expected to make a final investment decision this year, to be shortly followed by the Norwegian government’s own decision. Although the government are investing heavily in the infrastructure, the business case for the companies who will run the project apparently relies on finding more CO2 from beyond the two Norwegian plants already signed up; so far, they have drummed up considerable interest from industries throughout the region. “How much will it cost to use?” came the inevitable question, and their aim is to be in the 35-50 euro/t range by 2030. To pay for this, emitters will need some kind of government subsidy, around which there appears to be much greater uncertainty, though most ideas resemble the UK’s ‘contract for difference’ scheme. Norway seems determined to finally get this done, having given the project the kind of flagship name that you would think they would be reluctant to waste. We also heard from similar plans for installing shared CO2 infrastructure in the Port of Rotterdam, which will see final investment decisions from commercial backers and the Dutch government in late 2020 and 2021. Here there was some interesting ideas around solving another thorny issue for CCS, involving the creation of an insurance market to deal with the long-term liability for the stored gas. Both projects could be up and running in 2024.

A key feature of these projects (and others, such as the proposed ‘industrial clusters’ in the UK), is the need to oversize the infrastructure in the hope that it will get used by many emitters. This ‘chicken and egg’ problem seems to require a fair bit of government backing to get things started. However, there are murmurings of discontent that ‘Big Oil’ is getting rather a good deal out of this, helped by government to charge other people for their CO2 and improve their green credentials at the same time. Advocates of a ‘more stick and less carrot’ approach argue that these companies should be obliged to store a proportion of the carbon they extract from the ground. While we may end up with something like this in the long term, for now the ball is very much with the oil and gas companies, who are the only ones with the engineering expertise to make this happen.

In the US, they are also talking about putting in some large-scale CO2 infrastructure, potentially to connect up big emission centres in the North-East with the oil fields of the South-West. However, here the tables are turned, as CO2 is a valuable commodity for enhanced oil recovery enthusiasts like Occidental, who are leading the charge with a new wave of capture plants. This new enthusiasm is of course greatly helped by the much lauded 45Q tax credit policy, which puts a value of up to $50/t on CO2 stored. Unfortunately, the effect of this law – introduced two years ago – seems to be currently muted by the slowness of the IRS in firming up some of the details, and the timeline and price still leaves CCS challenging for the power sector. Another US policy generating much excitement is California’s Low Carbon Fuel Standard, which puts a significant value on transport fuels with a reduced carbon footprint.

In the afternoon, the workshop entered more controversial territory, as the discussion turned to CO2 utilisation and negative emissions (through biomass-enhanced CCS and direct air capture). Both these topics still seem to elicit strong opinions on the role they can play in decarbonisation, and a surprising lack of consensus, given how long the debate has raged. However, both topics are certainly on the rise in climate strategy around the world, and I will try to address them in a future blog.

For now, we can say that the mood in the CCUS community is cautiously optimistic, with many veterans of the scene having been through previous waves of hope and failure. I have no doubt that this year’s ETP report will play a vital role in pushing the case for this vital technology, while allowing policy makers to understand the real options that are now available for driving its deployment.