Companies are finding ways to reduce costs for carbon capture and storage (CCS), but significant challenges must be overcome for proposed projects to reach first carbon storage.
A nascent value chain is one of the primary difficulties CCS projects face, but permitting, financing, and sightlines to a means of making money are also factors, executives said during panels at CERAWeek by S&P Global on 23 March in Houston.
The Global Carbon and Capture Storage Institute, which tracks CCS projects, is aware of 86 projects in operation with nameplate capacity of 66 mtpa, about 50 that are under construction, and about 800 projects that could one day go into operation, Poh Boon Ung, the institute’s general manager, said.
As the institute’s CEO Jarad Daniels put it, “That’s a long way from where we were just several years ago, but again, a long way further to go.”
Different types of projects face different challenges.
“There is no ‘one size’ number out there in terms of what the price point is or what the business model is,” he said, add that what is required for deployment is “a different answer if it’s in North America or Europe or the Middle East or China.”
Katherine Rojas, senior vice president for industrial decarbonization at SLB, said modularization is one way to reduce costs and remove onsite labor requirements.
“Once you start to get to the larger projects, the gas power projects, we need to look at those a little bit differently, and then we can start to introduce what aspects of those projects can be modularized, recognizing that the whole project won’t be modularized,” she said.
George Yoshida, director of CCUS strategy development at Mitsubishi Heavy Industries, said standardizing designs can help leverage work that’s already been done. Being involved early on the technical side is also important, he said.
Gino Thielens, SLB’s vice president for renewables and energy efficiency, said collaboration makes a lot of sense and can help reduce cost and streamline design.
Money Talk
Daniels said that, while CCS technology is proven, the ability to finance projects remains a key concern.
“Investability requires a durable policy framework. And so I think one thing that would unlock a lot of deployment opportunity is policy that is durable at that price point, that on a risk-adjusted basis allows that investment to occur,” he said.
Ung said incentives such as the US's 45Q tax credit for capturing and sequestering or using carbon dioxide can help with moving a project forward.
Thielens said a project’s framework needs to have “visibility on remuneration,” which can be policy or market driven.
“If we look at the remuneration framework in the US, 45Q is great, but I think, as developers go through the process, it’s still very difficult to make an FID (final investment decision) on purely 45Q alone because it’s a 12-year cycle for credits, which is not very long when it comes to making a project finance investment decision,” he said. “The projects that we do see going forward typically rely on additional mechanisms like carbon credit generation.”
Sellable products are important for projects to succeed, Rojas said, but a carbon credit market could also help make the business case for a project.
“Some of our projects have been able to develop a sellable product, whether that’s a gas or that’s a CO2 that’s sold to greenhouses or carbon free cement. But the other piece that we really need is the carbon credit market. Because there’s carrots and sticks, there’s grants and incentives, there’s penalties, but this has to make business sense. If we could have a real liquid carbon credit market, then it would immensely help the business cases,” she said.
Ian McIntyre, 1PointFive’s senior vice president, said projects need a “real financeable commercial basis” in order to proceed or the revenue model won’t justify the capital expenditure.
“There’s a lot of pieces that come together from a commercial, technical, regulatory perspective for that project to be a success,” he said.
The value chain is critical, he said.
“We are inherently in an industry where there’s multiple pieces of the value chain, and each piece of the value chain is dependent on the other,” he said, noting those dependencies can create perceived risk around a project.
Rojas said the CCS’s nascent value chain surprised her when she entered the sector from oil and gas. In oil and gas, commercial models are clearly defined, with “each really owning their competency and the risk associated with their competency in their space,” she said.
But in CCS, she said, risk assignment seems less clear.
“There’s a little bit, at the moment, of pushing the risk to different players. And as soon as you push a risk on someone that isn’t their space and they don’t understand, they’ll automatically add a contingency,” she said.
This misbalanced risk can cause projects to stall, she said.
Asking for Permission
McIntyre said it takes a long time to work through the permitting process for projects. 1PointFive strives to submit complete and technically robust permitting packages and remain responsive to queries and feedback from agencies.
Thielens said requested revisions for permit packages take time.
“Every time you have to go through an iteration like that, it takes time on both sides, and I think that’s an improvement that can be made,” he said.
