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Commercialising carbon capture and storage

Katherine Knight | 29 Apr 2016 | Comments

Carbon capture, storage and utilisation (CCUS) is something of a “buzz” technology at the moment. The recent cancellation of the CCS competition in the UK has made the headlines, the technology is making some progress in Canada and the USA, and is making leaps in the Middle East.

Carbon capture, storage and utilisation (CCUS) is something of a “buzz” technology at the moment. The recent cancellation of the CCS competition in the UK has made the headlines, the technology is making some progress in Canada and the USA, and is making leaps in the Middle East.

Leaving aside others parts of the debate around this – particularly costs around limiting emissions harmful to the atmosphere and whether CCS is the panacea for decarbonising the energy system – I want to look at what’s positive about CCUS, and where it could be going. CCS is still an emerging technology and there are certainly lessons to be learned from other projects about what works and what doesn’t.

Commercialising carbon capture technology is hugely important in order to get it up and running in more places around the world.

Many of the CCS projects in operation or construction have low capture costs (they’re attached to natural gas processing facilities for example), are located close the area of storage so long distance transport of the CO₂ is not needed, and they can take advantage of revenue streams from the CO₂ (typically revenue from enhanced oil recovery (EOR) operations).

A challenge for future projects is that one or all of these advantages may not be available, so those projects are likely to need greater financial incentives to be built. At the moment, government support is needed for CCS projects to get underway. This is happening in many places, and financial incentives are starting to play a greater role in funding CCS projects – one of the most complex is in Texas where the Summit Power Texas Clean Energy Project has a diverse set of revenue streams each with its own contract.

Let’s take a look at some of the other examples from across the globe.

North America

Canada is a great place to start. It is a global leader in CCS with strong federal and provincial government support. Funding of around C$3 billion (£1.4bn / US$2bn) has been committed for as many as six large scale projects. Three are already in operation, two under construction and one more in advanced planning. The Alberta provincial government has established a C$2 billion fund to encourage CCS demonstration plants and is set to increase its carbon tax from C£15 per tonne in 2015 to C$30 per tonne by 2017.

Boundary Dam CCS is the world’s first large scale power sector CCS plant and it has now been operating for over a year after opening in October 2015. At Boundary Dam in Saskatchewan, the carbon capture technology is attached to a 115MW coal fired power station (enough for around 100,000 homes), and is now capable of reducing CO₂ emissions by up to one million tonnes. The captured CO₂ is transported to nearby oil fields and used in EOR, generating revenue, and the Canadian government provided C$240m investment. Further investment from the Canadian government (C$120m) on top of C$745m investment from the Alberta government went into the Quest project. This project commenced operation in November 2015 and captures CO₂ from its hydrogen production process which is used to upgrade bitumen (oil sands) into synthetic crude oil, the first in the world to do so. It is also the first large scale plant in North America to store CO₂ exclusively in deep saline formation.

Their neighbours to the south, the United States, have a number of operational plants, the majority of which are involved in enhanced oil recovery. As this the main source of funding for CCS in the USA, the drop in oil price weakens the business case of using this method of funding. However, the US Department of Energy (DOE) has US$2.8 billion in place for six projects under development, one of which in Illinois is already operational. A second, Petra Nova in Texas, began construction in 2014 and is scheduled for operation sometime late 2016. This project has cost approximately US$1 billion with US$167 million coming from the DOE Clean Coal Project Initiative (CCPI). The two project owners are investing US$300 million each. The Carbon Capture Improvement Act – currently in Congress – will allow tax-exempt private activity bonds to be issued by local or state governments to help finance CCS/CCUS projects. Tax credits and tax benefits are another key part of the funding for carbon capture projects in the US.

Europe

Europe is a very different prospect, and that’s for a number of reasons. The continent is home to some of the oldest CCS projects in the world but also some of the most turbulent funding and financing. The key financial mechanism in Europe is the EU Emissions Trading Scheme (ETS). However, after a drop from US$30/tCO₂ in 2008 to around US$6/tCO₂ last year, revenues were severely impacted. So much so that a process was launched to reform the EU ETS post 2020.

In 1991, Norway introduced a tax on CO₂, which in 2013 cost 410NOK (US$40) per tonne. In 1996, carbon capture and storage began at Sleipner West in the central North Sea. It was the very first demonstration of CCS technology for a deep saline reservoir (at around 800-1000m below sea level). As of June 2015, 15.5 million tonnes of CO₂ had been injected.

The UK recently withdrew the ring-fenced £1 billion support as part of the Spending Review process. This decision was met with much criticism from the CCS community and some of the major players in the industry pulled out of projects or cancelled them completely. However, the Contract for Difference (CfD) mechanism, which helps to tackle investment uncertainty by providing a long term contract guaranteeing a consistent revenue stream for develops of all forms of eligible forms of low-carbon electricity, might be an option for operational support. Therefore, looking forward, the CfD mechanism will be the primary tool to drive the commercial deployment of CCS in the UK.

Middle East

CCS in the Middle East is new and the projects I’ve chosen to look at form part of a longer term carbon management roadmap designed to support the development of EOR technology for global and domestic use.

The Uthmaniyah CO₂ enhanced oil recovery demonstration project in Saudi Arabia is the first operational, large scale CCS project in the Middle East. This project is focused on research and development into the technology. The Abu Dhabi CCS project is set to commence operations later in 2016 and will the first project to dramatically reduce CO₂ emissions from a steel plant, and like the Uthmaniyah project will be financed via enhanced oil recovery.

Qatar has several interesting CCS related initiatives, including Qatar Carbonates and Carbon Storage research centre (QCCSRC), a US$70 million, 10 year research partnership established in 2012 between Shell, Qatar Petroleum, Qatar Science and Technology Park, and Imperial College London to build the country’s capacity in CCS and cleaner fossil fuels.

Carbon capture goes hand in hand with advances in energy storage, the rapid growth in renewable energy and energy efficiency measures. The reality is that for the foreseeable future, fossil fuels are needed to keep the lights on, and in many developing nations coal is by far the largest fuel source. In addition, CCS is the only technology capable of delivering deep emission cuts to both heavy industry and waste.

So something needs to be done to limit emissions from those traditional fuel sources and CCS is a proven way of doing that. Transitional government support will enable costs to decrease, just as it has done for industries like offshore wind.

We’ve still some way to go, but the road ahead for CCS is an exciting one.