Carbon Capture & Storage

At a crossroads

 

This latest 2016 version of the FactBook “Bringing Carbon Capture and Storage to Market” reflects the latest changes in the technology landscape. It summarizes the main research and development priorities in carbon capture and storage (CCS), analyzes the economics of the technology, and presents the status and future of large-scale integrated projects.

FIGURE 1: CCS VALUE CHAIN

CCS is a necessary and viable technology for limiting carbon dioxide emissions

As CO2 emissions and the atmospheric concentration of CO2 reach record highs, room for maneuver in mitigating the adverse effects of climate change is becoming dangerously tight. In the lowest-cost pathway to limiting the global increase in temperature to no more than 2°C (2DS Scenario), the IEA estimates that CCS will contribute to 13% of cumulative emission reductions by 2050. The IPCC, meanwhile, estimates that attempting to achieve the 2°C target without CCS would more than double mitigation costs, and may not be feasible at all.

CCS is technically viable: it is already a reality in power generation, natural gas processing, and industrial hydrogen plants, where 15 large-scale integrated projects are capturing 28.5 MtCO2 per year in order to store it in deep saline aquifers or in oil reservoirs as part of enhanced oil recovery (EOR) operations. Industry players are adamant that the individual components of CCS have been proved to be technically feasible and are ready to be demonstrated on a large scale in other industrial sectors, such as cement, steel, and pulp and paper production. Globally, CCS currently abates emissions equivalent to the CO2 output of 9 GW of coal-fired power capacity.

R&D investments in CCS are substantial (~$1.6 billion in 2013, equivalent to that in wind or biofuels). Public laboratories and corporate players – chemicals companies, utilities, and oil and gas firms – are focusing on developing efficient capture processes that would reduce CCS energy and water penalties. Innovation needs in CO2 transport are less obvious, and field demonstrations rather than lab tests are most needed to improve scientists’ understanding of how CO2 behaves when injected underground.

FIGURE 2: INVESTMENT-RISK CURVE OF CCS TECHNOLOGIES AND INTEGRATED PLANTS

CCS CAN BE A VERY COMPETITIVE MITIGATION OPTION, BUT ITS HIGH UPFRONT COSTS DEMAND STRONG POLITICAL WILL

CCS is seen as a costly technology because its high upfront costs for the project owner only bring long-term, shared climate benefits. The capture costs alone of a commercial-scale CCS project can amount to up to a billion dollars, although one such plant is capable of abating over 1 MtCO2 per year for several decades (the equivalent of taking over 200,000 cars off the roads during the life cycle of the plant). First-of-a-kind projects incur high risk premiums, and in the absence of robust carbon-pricing mechanisms (€7/tCO2 in Europe, $20/tCO2 tax credit in the US), direct public financial support is required to cover the upfront cost of large-scale CCS projects.

Yet CCS could be a cost-effective way to curb CO2 emissions: in power generation, current abatement costs range from $48 to $114/tCO2 avoided in the US, which is no more expensive than installing offshore wind or solar plants, especially if the carbon intensity of the electricity being displaced is significantly lower than that of coal (for instance, in case of high share of nuclear or hydropower capacities in the country’s power fleet).

Besides, costs are expected to decrease. With an estimated 8% capex reduction for each doubling of CCS capacity installed, CCS power could be fully competitive with other clean electricity supply between 2030 and 2040 in Europe and in the U.S. under the IEA’s 2DS Scenario. CCS is even cheaper (as low as $14/tCO2 today) when applied to industrial plants with CO2 separation already built into their processes, such as natural gas processing or steam methane reforming. Perhaps more importantly, no alternative exists for cutting emissions from industrial applications such as chemicals, steel, or cement production, a prerequisite for the construction of sustainable infrastructure. Finally, bioenergy such as woody biomass coupled with CCS (BECCS) could actively reduce atmospheric CO2 concentrations while producing renewable energy.

FIGURE 3: CURRENT COSTS OF CO2 AVOIDED BY CCS IN THE US

THE DEMONSTRATION PHASE HAS STALLED: ONLY PROJECTS RELATED TO UPSTREAM OIL AND GAS ARE MOVING FORWARD

In 2009, CCS was on top of the political agenda: declared global public financial support exceeded $30 billion through various economic stimulus packages; 70 integrated projects were in various stages of planning; and the IEA had recommended that 100 projects be storing 250 MtCO2/year by 2020. But, as of the end of 2014, the demonstration of large-scale CCS projects had progressed far more slowly than initially hoped. Final investment decisions taken since 2008 have amounted to less than $14 billion and involve only 13 new integrated projects. More concerning is the fact that very few new projects have been identified since 2012, several promising ventures have been cancelled, and almost no new firm investment decisions have been taken. As a result, committed public funding has decreased. Money spent or that remains committed to supporting CCS initiatives has been reduced from $30 billion to $10 billion.

FIGURE 4: DISTRIBUTION OF THE 22 LARGE INTEGRATED PROJECTS IN OPERATION OR PAST FINAL INVESTMENT DECISION (FID)

In reality, the financial support required for each project has been so large that governments have rarely had the political will to subsidize CCS to the extent required: proposed grants have represented $4-$30 per tCO2 avoided over the lifetime of the plant, which is generally lower than required to pay for the installation costs of CCS. In addition, depressed carbon prices in Europe, public opposition to onshore storage, and the complexity of CCS projects have resulted in promising projects being cancelled in the advanced stages of planning. Furthermore, public funds allocated to cancelled projects have not been reallocated.

CCS has, so far, been advancing at two speeds: the only projects making headway are those related to the upstream oil and gas industry, in which CO2 is either captured at a low cost from natural gas processing plants or is sold for use in enhanced oil recovery (EOR) operations. Globally, there are 28 integrated CCS projects operating or in the advanced planning stage; only one is not related to the upstream industry (a power plant without EOR), but has not reached final investment decision yet. This trend is likely to continue until 2020, as non-EOR storage projects are more complex to coordinate, depend on benign climate policies, and raise public-acceptance issues and reservoir discovery costs that can be avoided in EOR storage projects. By the end of the decade, operating CCS capacity should reach 57 MtCO2/year, 95% of which will be related to the production of oil or gas, and less than 20% to power generation.

FIGURE 5: CCS INTEGRATED PROJECT PIPELINE

CCS MIGHT ONLY PLAY A SIGNIFICANT ROLE BEYOND THE MOST OBVIOUS PROJECTS IF AMBITIOUS CLIMATE POLICIES ARE PURSUED

Growing demand for the beneficial reuse of CO2 for EOR could drive CCS forward during the present decade in the U.S. and China. Although weak oil prices may have some negative impacts on CO2 demand for EOR, it could also accelerate CCS projects in the North Sea that are viewed as opportunities to postpone the decommissioning of unprofitable offshore infrastructure. China is now engaged in CCS demonstration, and is the only country where the number of projects in the pipeline is actually growing. It is also rapidly driving down the cost of capture, having openly expressed an ambition to become an exporter of capture-ready plants.

In the long term, the IEA estimates that the contribution of CCS to climate mitigation is likely to remain marginal if only energy policies adopted and proposed as of mid-2015 are considered. CCS will only play a significant role in climate change mitigation if there is genuine determination to pay for decarbonization. Stricter carbon policies will be required to develop CCS beyond upstream oil and gas, and the enforcement of the 2°C agreement reached in Paris will be critical to the long-term success of CCS.

 

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