Getting carbon capture and storage to market
Carbon capture and storage could mitigate climate change and create new industrial revenue streams. So why isn’t it happening? Simon Critten and Prem Mahi from Mott MacDonald examine how the barriers to market could be cleared.
Materials, minerals and mining industries occupy a tricky position when it comes to decarbonisation. Although reductions can be made through increased efficiency and use of renewable energy and heat, the fact remains that carbon-emitting chemical reactions are central in many industrial processes. According to research partnership Scottish Carbon Capture & Storage (SCCS), 25% of industrial emissions are inherent to the process chemistry of key materials. This makes it difficult to achieve emissions reductions on the scale demanded to manage risks posed by climate change and deliver international commitments – such as the Kyoto Protocol, which assigns differing targets for 37 countries to reach by 2020 – and national targets such as the UK’s Climate Change Act, which commits to an 80% greenhouse gas emissions reduction by 2050, against a 1990 baseline. However, it also means carbon capture and storage (CCS) applied to these processes could play an instrumental role in reducing worldwide emissions given that, according to the International Energy Agency (IEA), industrial activities (excluding power generation) account for 25% of worldwide CO2 emissions.
With a wide range of industrial processes to which CCS would have to be applied, developing this silver bullet is no easy task. There are three stages of CCS technology to be developed to maturity – CO2 capture, compression and transport, and permanent storage. Each stage has been demonstrated in some form, but all three have not been commercially used in conjunction at a power, materials- or minerals-processing plant.
Within the capture stage, there are three possible approaches:
Pre-combustion capture - where CO2 is removed from an ore or raw material before processing.
Changes to the industrial process itself - enabling CO2 to be isolated and captured at this stage.
Post-combustion extraction of CO2 from ﬂue gases.
The complexity of each approach varies depending on individual circumstances at any plant. Simon Critten, Thermal Power Development Director at Mott MacDonald explains, ‘The sector is very diverse with many technical options being explored, but it’s too soon to select one superlative option’. Materials, minerals and mining (MMM) industries arguably face greater technical challenges and costs than the power sector, because power plants typically have a single point source emitting huge volumes of CO2, whereas MMM plants are more likely to produce more modest quantities that are spread across multiple source points or diffuse processes.
Costly capture and storage
The current costs associated with implementing and operating CCS run the gamut from expensive to eye watering, depending on the plant in question. Typically, they involve adding on new chemical plant, which requires capital expenditure and new staff, creating a parasitic energy demand. Installing CCS plant also carries considerable ﬁnancial risk. Every day of downtime could cost hundreds of thousands of pounds in lost productivity, and interruptions can cause signiﬁcant damage where plant is used for continuous or long batch processes.
The United Nations Industrial Development Organization (UNIDO) calculated that, to achieve CCS deployment in industrial applications between 2010 and 2050, investment of US$882bln in capture and US$3 trillion in fuel and maintenance costs, capital expenditure, and CO2 transport and storage, would be required. Capture plant costs may be lower in some locations. For example, developing countries building new facilities could potentially incorporate CCS more easily and cost-effectively than existing countries taking a retroﬁt approach, while countries where hydropower is cheap and plentiful may ﬁnd the additional operating costs more manageable due to lower electricity prices.
Captured CO2 is likely to be sequestered in deep geological formations, which currently compares favourably to the alternatives. Deep ocean storage is considered too environmentally harmful, and mineral storage – where captured CO2 is reacted with naturally occurring magnesium- and calcium- containing minerals – is more complex and energy intensive.
However, if suitable geological structures are unavailable nearby, costly long-distance transport of compressed CO2 over land or sea could create a further expense. Geological storage facilities will also carry their own indeﬁnite operational costs. If these transport and storage infrastructure costs must be borne by single industrial projects, they could be prohibitively expensive and a signiﬁcant barrier to realisation.
In an optimised scenario, localised clusters of CO2-emitting plants could capitalise on economies of scale by sharing transport and storage infrastructure, driving down the costs to each plant. This approach would enable the participation of small-scale emitters for whom proprietary transport and storage systems would be unaffordable. A number of such industrial agglomerations are currently proposed or being explored in countries including some Scandinavian nations, the Netherlands and the UK. However, commercial structures that enable such systems to be built and used to recover costs are yet be developed and proven.
The demonstration of successful full chain projects, and the repeated deployment of established CCS infrastructure, will help to drive cost reductions over time. There is also a small chance that future technological step changes could signiﬁcantly reduce CCS costs. For example, smart membranes could easily and cheaply isolate CO2 from ﬂue gases, or solar energy combined with battery storage could provide cheap energy, making CCS more ﬁnancially viable. But for now these ideas remain conceptual.
An unmotivated market
Currently, CCS has no business or regulatory incentive, and without one there is simply no way the market will adopt such a costly procedure. Thanks to weak and volatile carbon pricing, releasing CO2 into the atmosphere remains extremely cheap. Estimates vary greatly as to the carbon price that would make CCS viable. Sources including the USA’s Los Alamos National Laboratory have posited a minimum price boundary of €50/t for CCS to be competitive. By contrast, investment bank UBS has forecast the price of CO2 emissions under the EU emissions trading scheme (ETS) to average €7/t during 2014. Without a high, stable carbon price CCS will not get off the ground. Moreover, this price would have to be implemented globally to avoid carbon leakage, where industrial activity is simply moved to countries where emissions are cheaper. This political challenge is a major hurdle in itself.
If carbon prices cannot provide a signiﬁcant driver in themselves, the creation of new revenue opportunities could help offset CCS costs. Decarbonised products could be sold at a premium, particularly if governments increase low carbon requirements in materials, supporting the creation of market demand. However, due to the global ﬁnancial crisis it is uncertain whether the market for low carbon premium products can be developed and sustained.
More realistic is the prospect of gaining value from CO2, which at present is generally produced and treated as a waste product, carrying a disposal or pollution cost. Creating value from the use of CO2 could engender a change in emphasis that might transform attitudes toward CCS – but realising this value will require innovation, research and development.
CO2 is currently generating value in selected ﬁelds such as enhanced oil recovery (EOR), a proven technology seeing CO2 injected into oil reservoirs to maintain pressure and improve oil displacement. UNIDO reports that at least six projects are already using anthropogenic CO2 for EOR, income from which could signiﬁcantly change the current economics of CCS. Operators would need to demonstrate the permanent locking up of CO2 for it to be considered CCS, which is not always the case in current schemes. However, even if EOR is not a long-term solution, it could help to support early CCS demonstration projects.
Alternatively, with further innovation CO2 could conceivably be supplied as a saleable product for manufacturing. This could be a game-changer, offering ﬁnancial incentive for CO2 capture with a greatly diminished likelihood of it being eventually released to the atmosphere. Chemical start-up Novomer is developing methods for converting CO2 to plastics and polymers, while chemical company AkzoNobel is pursuing production of dimethyl carbonate (DMC) from CO2, which could be used in the production of petrol and diesel. Meanwhile, chemical company Yara is already selling CO2 captured from ammonia production for industrial applications, including drinks carbonation. Critten says, ‘The real challenge is the sheer volume of CO2 emitted. It’s unlikely that any market would demand the quantum of CO2 that would completely avoid emissions, so CCS would still be necessary.’
Mott MacDonald Power Practice Manager Prem Mahi suggests the materials, minerals and mining industries may be next in line for a regulatory push toward CCS. ‘MMM sectors are second in line behind the power sector for governments seeking the big solution to carbon emissions,’ he says. If governments do push in this direction, regulatory measures could include technology mandates and standards, with CCS as a condition of license to operate. Aside from the direct costs involved in CCS, the business interruption risks are so high that operators are only likely to comply if they have to by law, or if there is a major incentive.
Sector and technological maturity for CCS in industry.
Note: * The CO₂ source has a high purity and only transport and storage need to be demonstrated. Often,
these processes have also diluted flue gas combustion streams.
All data taken from UNIDO Technology Roadmap: Carbon Capture and Storage in Industrial Applications, available at: www.unido.org/ﬁleadmin/user_media/News/2011/CCS_Industry_Roadmap_WEB.pdf
Doubt and confusion
The lack of resolution surrounding CCS has seeded inertia and apathy in materials, minerals and mining industries. Critten says, ‘There seems to be a desire for CCS to happen, but there is little certainty around how a winning technology will be found and who will take on the ﬁnancial burden of early adoption’. Uncertainty also extends to policy makers, regulators and other stakeholders, all of whom may have inadequate understanding and awareness of industrial CCS applications. Simply put, CCS is not an issue for half of the world, and many countries are just not thinking about it.
This apathy is dangerous, says Mahi. ‘There’s a perception that the power sector is the biggest emitter, so it should be hit ﬁrst by the cost of CCS. But once the opportunities for CCS in the MMM sectors become manifest, there may be a jump forward in legislative drivers, and companies must be ready to respond. It could only take two or three more years of extreme weather events for government agendas to turn.’
Another reason for urgency is the carbon bubble. Estimates of hydrocarbon reserves on the books of oil and gas companies, and the potential reserves they are investing to ﬁnd, are dramatically higher than the maximum CO2 that can be emitted before exceeding the global warming target of 2°C, if they are burned. Therefore, establishing CCS could be the answer to prevent a governmental crackdown rendering these assets unburnable.
Governments have the power to cut through the inertia, taking a strategic lead in the development of CCS. They also have a role to play in ensuring adequate funding for CCS demonstration projects, especially in developing countries where ﬁnance may be more elusive. Most international ﬁnancial institutions and lender/ donor organisations have incorporated climate change into their agendas to some extent, and in many cases this is manifested in lending requirements. Climate change-related standards, guidelines and requirements are emerging accordingly, and it is conceivable that these could evolve to include CCS requirements. Industries seeking ﬁnance may need to ensure they are aware of and compliant with these.
The technological dilemma
It is useful to look ahead to the challenges of bringing CCS to market, but in reality the technology is not yet fully developed. In addition, legal questions remain to be ironed out including issues around the ownership of storage sites – particularly those crossing national boundaries – and of the sequestered CO2 itself. Clear contractual arrangements and legal delineation of rights and obligations will be essential.
Still, progress is being made. For example, the Australian government has provided funding for the CarbonNet and South West Hub CCS investigation projects, and the UK Government is investing in the White Rose and Peterhead CCS projects at coal- and gas-ﬁred power plants, respectively. A major shift toward CCS is unlikely in the short or medium term, but in the meantime MMM organisations should pursue niche opportunities, such as link-ups with EOR, wherever possible. As well as potential new revenue, such enterprises will help to develop CCS-related expertise – possibly a marketable product in itself – and equip these organisations to react swiftly to any future changes in the CCS landscape.
For more information, email Prem Mahi - firstname.lastname@example.org