Carbon capture is still 'not commercial' - but what can be done about it?
Many people are relying on emission trading schemes to make carbon capture and storage commercial, but it may never be enough to justify CCS investment by itself. The EU ETS has been around Eur 80 a tonne for the whole of 2022, with a peak of Eur 96. But with CO2 storage currently costing Eur 50 (Norway's Northern Lights price), plus additional costs for capture (maybe Eur 30) and transport, plus a need for a security margin and profit margin for an investor, this is not yet good enough.
Another option is the cost of CCS being driven down. We are seeing signs of it becoming a competitive market - if UK, Netherlands and Norway are competing for business to store German CO2 for example - and more companies are offering competitive services in capture technologies and above-ground engineering, such as GE Power joining the market, winning a FEED contract in Teesside.
Another option is supply of decarbonised fuels. For example, the maritime market is subject to heavy regulation to decarbonise gradually over the next 30 years, which will force efficiency improvements in the first few years, and then use of decarbonised fuels. The only possible fully decarbonised fuels are hydrogen, ammonia or nuclear. The only practical option is probably ammonia, and the only practical way to make it on a large scale is probably with gas + CCS. Shipping companies and their customers may choose to pay several multiples more than they currently do for fuel, if the only legally compliant alternative is not to ship at all.
A further option is that oil and gas companies find a way to offer commercial CCS services and account for it in their carbon footprint, thus complying with (we hear) increasingly common demands from lenders that a decarbonisation commitment is made. Offering a commercial CCS service means that the primary beneficiary of the CO2 cut, in carbon footprint terms, is the company which pays, such as steel or cement company.
But carbon footprint data includes 'one step removed' emissions. If an oil and gas company is required to account for CO2 emitted by its final customers, such as car drivers, which are several steps removed from its own operations - then it seems fair that it can add a negative to its carbon footprint if it offers a commercial CCS service. This makes it more complicated, but this stuff is already very complicated and nobody complains.
In the UK, the government could also support the development of CO2 storage services as a major export market.
In addition - all of this needs careful modelling, so investors can get as clear as possible a picture of whether, and how, the business can work.
Future Energy Partners can help you work out a business case for investing in carbon capture or CO2 storage. If you would like to discuss further, please let us know..