A recent article
by DNV-GL titled: CCS Needs to Start With a Bang, Not a Whimper - Why is carbon capture and storage so urgent right now?
says the same thing that we often hear
“Cost is the key barrier for Carbon Capture & Storage (CCS) deployment.” The article depicts a story often told of this technology – with carbon unpriced or underpriced “the non-abatement alternative is, and has always been, the cheaper option.” So how do you make a business case out of CCS?
In Saskatchewan retrofitting Unit 3 of the Boundary Dam Power Station had the benefit of both government funding as a first mover. The carbon dioxide (CO2
) is either stored in a deep saline reservoir or sold for enhanced oil recovery (EOR). And today, Saskatchewan believes that the project is paying dividends. Our recent Shand CCS Feasibility Study
shows that second generation CCS can bring the cost of capture down to USD$45/tonne. With a 67% reduction in cost, a CCS facility built based on lessons learned can see costs being reduced more and more.
So, with costs coming down, business cases look even better. This blog outlines the various types of business case models considering both the capture and the storage/utilization sides that an entity may choose when developing CCS. Models are explained into two parts of the process:
- Emissions Being Cleaned Up – CO2 Capture (Models A,B,C), and
- CO2 Permanently Stored (Models 1,2,3)
EMISSIONS BEING CLEANED UP – CO2 CAPTURE
All industrial facilities release CO2 as part of their emissions. Emissions from fossil fuels, cement, iron and steel, or other large sources can all be cleaned up using post-combustion capture technology already in place today.
Model -A- Clean Up after Yourself
Model A represents a company who captures its own emissions. SaskPower used this model at its Boundary Dam 3 CCS Facility. In that case, Canadian coal regulations were looming, and at the time analyses showed that compared to natural gas prices, CCS would allow the coal plant to extend its life economically, while also having deeper cuts to greenhouse gas emissions. Due to its first-of-kind nature, the project was government subsidized, and was paired with Model 1 below to generate income from the sale of CO2
to an oil field for EOR (with the backup of having its own storage site as well). Other project developers may consider business Model A to simply clean up their emissions; to avoid carbon taxes; or if the CO2
content of the emissions is near pure and easier to capture, therefore reducing costs.
Model -B- The Janitor
We like to call Model B “The Janitor” because essentially the emitter would pay an outside party (CO2
-capturer) to clean up their emissions. However, the amount that would be paid to the CO2
-capturer would likely not suffice to cover the cost of clean-up. So economically, with a price on carbon, that price would have to be higher than the cost to ‘hire the janitor’ in order for the emitter to act. Model B is most useful, therefore, when paired with a secondary income from a CO2
off-taker such as Model 1 or 2 below.
Model -C- Sustained Supply
Model C represents a constant input of CO2
from the emitter. This can occur in two scenarios: First, when a CO2
-capturer purchases CO2
from an emitter to sell on the market to an off-taker. The CO2
-capturer may want a supply guarantee to avoid a penalty with its off-taker. The second scenario would occur if the capture design required a minimum or constant CO2
input level. A problem factor comes when the emitter is a power plant and there isn't enough power demand to generate the required level of emissions.
CO2 PERMANENTLY STORED
The permanent storage of large amount of CO2 is crucial to meeting objectives of the Paris Agreement. Alongside sequestration, CO2 utilization via EOR also falls into the category of permanent storage because in both instances large amounts of CO2 stay deep underground.
Model – 1- Value in Carbon
As briefly mentioned above, business Model 1 represents a party purchasing the CO2 from the capture facility. This could be any form of utilization, but in the case of the Boundary Dam CCS Facility, an oil company purchases CO2 from SaskPower. In this instance there is value in the CO2.
Model -2- Howdy Partner
A successful model for the Petra Nova CCS Project has a CO2 off-taker (like in Model 1) and paired it with a secured interest in the CO2 provided to them. We call Model 2 “Howdy Partner” because (a) it was proven in friendly Texas, but more importantly, (b) having a partnership places a direct investment in the outcome and output of the CCS project.
There are logical and essential business models in utilizing CO2
in ways other than EOR such as value-add products like adding CO2
to concrete or other notable processes. However, as Imperial College London’s Dr. Niall Mac Dowell highlights in his article
“The role of CO2
capture and utilization in mitigating climate change”, utilization other than EOR “should be encouraged when and only when CO2 is useful as a cheap feedstock, or when it can robustly and reliably shown that the CO2
-derived product can reasonably displace the incumbent product, that is, deliver the same service at the same price, and also not result in an increase in the emission of CO2
associated with delivering that service.” Dr. Mac Dowell also has an informative graph that shows these processes can only reduce minimal amounts of CO2
Given the findings of that article, the need to reach mitigation targets, and the simple fact that the large-scale storage doesn’t have the front-and-centre marketability of other utilization opportunities, the end-use models are critical business considerations for large-scale permanent CO2 storage. EOR is one method of recouping costs, however, not all locations can find profit in this way – which leads us to Model 3.
Model -3- The Garbage Man
We call Model 3 “The Garbage Man” because the off-taker gets paid to be the ultimate end point in storing away the CO2
. This concept is gaining interest for countries looking to limit emissions. For instance, a new hub
at the Port of Rotterdam plans to create a CO2
transport hub to serve the Netherlands’ industrial facilities with the potential to expand to serve industrial plants in other countries looking to dispose of their CO2
such as Belgium, Germany or the UK. The pipeline network would transport the CO2
for injection in depleted oil and gas fields in the North Sea. It is a prime example of how non-EOR CO2
hubs can exist for storage. However, there is criticism that this can only exist if the price of carbon increases or there is significant subsidizing of development.
BUILDS BETTER BUSINESS CASES
So how can these models be combined? Let’s go back to Boundary Dam 3 CCS Facility. When the project was developed it was decided to take a full-scale approach to permanent storage of CO2. This means not only did it integrate a CCS facility into an existing coal plant (giving 30 years of clean life to the asset) but it also took the CO2 and used it for EOR with the backup option to permanently store it.
project, also owned by SaskPower with research overseen by the Petroleum Technology Research Centre, acts as a reservoir to store CO2
if the off-taker doesn’t need or want the CO2
produced. Therefore, CO2 won’t be emitted if the oil company doesn’t buy it. To date, Aquistore has stored 197,000 cumulative tonnes of CO2
safely and permanently.
The Shell Quest CCS Project
in Alberta, Canada uses this same sequestration option without the benefit of EOR. Even without EOR, the project makes a profit on its operations because of the provincial carbon price. The project has an operating cost in the mid-$20 per tonne and with a provincial carbon price of $30 per tonne it means the carbon price pays for the costs to operate.
Business models coupled with market shifts can actively ensure a pickup in deployment. Creating a variety of CCS incentives or subsidies (mentioned more in our Summary for Decision Makers on Second Generation CCS
) drive market shifts. And ultimately, and ideally, what we can achieve is more large-scale CCS facilities, which means more emission reductions, and a cleaner industrial future.