Making a Business Case for Large-Scale CCS

In a world dedicated to having both a safe, clean, environment – represented in the COP21 Paris Agreement; and having economic progress – evident with the desire and drive for growth and prosperity, a consolidative and deployable approach that holds both these qualities with integrity, is needed. “There is no silver bullet to a 2-degree-or-less future. We need to stop putting carbon dioxide (CO₂) into the atmosphere, and for that we need to fire off at least three bullets at once: energy efficiency, renewables, and carbon capture and storage (CCS),” as citied in the DNV-GL article by Kaare Helle and Anne Louise Koefoed.

Shifting away from the world’s dependence on fossil fuels for secure and reliable energy has been a slow process. In fact 81% of the world’s energy supply is still sourced from fossil fuels (Total Energy Supply by Type, IEA). This has been the situation for over 30 years. As long as it is in the mix, CCS is needed to close the emissions gap. Experts from governments and industry continue to stress that carbon capture is nothing new – in fact it is well understood and operating, so the barrier to mobilization is not the technical know-how, but rather due to a lack of policy or policy uncertainty.

In a climate of ambitious emission reduction targets, CCS has been proven to be a reliable and adaptive technology which will realize significant cost reductions – in a study spearheaded by the International CCS Knowledge Centre, next generation CCS plants could see capture capital cost reductions of 67% per tonne of CO₂, bringing the cost of capture down to USD$45/tonne.

Business Models for CCS

With technological certainty and reductions in risk and cost, policy drivers can be supported by strong business cases for CCS. For example, in Saskatchewan Canada retrofitting Unit 3 at the SaskPower Boundary Dam Power Station (BD3) had the benefit of federal and provincial government funding as a first mover; saw the retrofit add three decades of operation to an aging power plant, rather than decommissioning it; and, the sale of byproducts including CO₂ to offset the cost of capture. At BD3, which has now captured almost three million tonnes, CO₂ is either stored in a deep geological sandstone formation or sold for enhanced oil recovery (EOR) where it is ultimately stored permanently in the depleted oil reservoir. As a first out-of-the-gate, BD3 is a pioneer project and a point of pride for Saskatchewan and Canada offering critical lessons for the world in areas of CCS, engineering, and emission reductions.

There are various types of business case models considering both the capture and the storage/utilization sides that an entity may choose when developing CCS. This article explains models in 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 CO₂as 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 -B- The Janitor

Model -C- Sustained Supply

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 CO₂stay deep underground.

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 BD3 CCS Facility, an oil company purchases CO₂ from SaskPower. In this instance there is value in the CO₂.

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. In Model 2 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 CO₂associated 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.

In Model 3 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.

COMBINING MODELS

BUILDS BETTER BUSINESS CASES

So how can these models be combined? Let’s go back to BD3 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.

In Alberta, Canada the Quest CCS facility, which is operated by Shell has over four million tonnes of CO₂permanently stored, 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.

The Alberta Carbon Trunk Line (ACTL) is another example combining models to build a better business case. It brings together multiple partners using proximity and the notion of a hub, the ACTL will aim to maximize the opportunities for capture, utilization in the oil fields, and permanent sequestration. ACTL will consist of a 240 km pipeline that can transport up to 14.6Mt of CO₂ per year at full capacity. The CO₂ in intended to be transported from capture plants at different industrial facilities and then either injected into depleted oil reservoirs for permanent storage or sequestered directly into a permanent deep geological storage site.

Coupling Models & Policy

Climate change is a formidable challenge that requires a formidable, collaborative approach along all avenues for emission reductions. CCS needs to be an active part of the toolkit now and into the future. To reach our collective commitment in the Paris Agreement, the value of CCS goes up, not down.

Business models coupled with market shifts can actively ensure a pickup in CCS deployment – and definitive and clear policies, through a creation of a variety of CCS incentives or subsidies will help drive market shifts.

A convergence of industries, government along with policy mechanisms, to support strong investment in CCS is imperative. Ultimately, and ideally, the world can achieve more large-scale CCS facilities, which means more emission reductions, and a cleaner industrial future.

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View the article Making A Business Case For Large-Scale CCS (PDF) as featured in the September/October 2019 Issue of Carbon Capture Journal (PDF – Full Issue)