Is the carbon capture and storage (CCS) renaissance finally here?

Introduction

If you are a bit of a carbon capture and storage enthusiast like myself there recently was a lot of good news. The UK has pledged to support several large scale projects with a good infusion of budget. The Inflation reduction act recently launched in the US also places a strong emphasis on CCS applications with increased support via tax breaks and direct investments in certain technologies like direct air capture. Within the European Union, some large projects of common interest, as they are called, in the Netherlands and Norway also received their funding and final investment decisions.

How did it start?

This is a great uptick for CCS. After an initially promising start in the early 2000’s the developments were more or less halted after the mid-2010’s. Back then the focus lay on transplanting and upscaling capture technology that was already being applied in natural gas processing and chemical industry to the power sector. Following the rationale that it would be opportune to keep capitalizing on existing fossil fuel assets like coal fired power plants by adding technology instead of completely dismantling them. However, the complexity, scale, ever lower electricity price from renewables and public opposition killed that completely. Apart from some key large scale demonstration plants like Boundary Dam 3 in Canada, nothing got built at scale. 

What changed?

So what changed? The realization that although for power the developments of renewable electricity led to such low prices that it did not make sense anymore to apply CCS, this is a completely different matter for heavy industry and the chemical sector. These were and still are hard to abate sectors. Fuel switching and CCS are in point of fact the only option to quickly decarbonize these sectors against reasonable costs. 

Most efforts on decarbonization have gone into the generation of renewable power and electrification. This has been hugely successful but electrifying heavy industry is complex and requires a complete rebuilding of existing installation. And I am not even talking about the strain on the electricity grid if this should take place. Fuel switching to for example hydrogen or biomethane is also possible and might even be preferred. But the amount of biomethane generated in the entire Netherlands is only enough to provide a few percent of the power needed for the Tata steel plant in the Netherlands. Hydrogen has great promise but is just starting and also not available in the quantities and price range required. Adding CCS technology to the existing operations is currently the only feasible option apart from total rebuilding.

In addition, with the emerging Hydrogen economy the generation of blue hydrogen is also increasing at least in the prevalent scenarios. Blue hydrogen is made from natural gas cracking and the CO2 is captured and stored to make it low carbon. Even if only relatively small quantities of blue hydrogen will be produced it is still large enough to also kickstart a new era of CCS.

What about the price?

But probably an even more important dynamic has changed the relative price. CCS is costly and usually between 60-120 euro per ton. But both the penalties and the incentives have changed in such a way that the technology becomes attractive for the industry. The current ETS price hovers around 90 euros per ton and the continued subtraction of free emission rights and inclusion of new industries is driving this price up. The Inflation Reduction Act is increasing the incentive for CCUS to 85 dollars per ton and providing direct finance to novel technologies like direct air capture and blue hydrogen. With these cost and incentive price ranges, most CCS applications are in the range of cost effectiveness, thus stimulating additional uptake. This is I believe reflected in the current projects coming online and in the planning stages.

So, there may be a bright future for CCS around the corner. The prevailing argument amongst some that CCS lengthens the life of fossil fuel-based industries is also valid and we should therefore always keep in mind that CCS by nature is a transitionary technology. Newly built steel plants and chemical plants are better off electrifying as this is more scalable and future proof, while blue hydrogen is always only a Kickstarter to fully renewable green hydrogen application. But we need to do something now and we cannot wait for new technology to emerge and be built only once the existing industry is ready for a new investment cycle.