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Why Have So Few Carbon Capture Projects Been Fully Funded?
The short answer ... it hasn't been done commercially "at scale" before now.
Carbon capture and storage (CCS) technologies have been touted as crucial for mitigating climate change by reducing carbon emissions. Governments and investors worldwide have committed to investing in CCS projects to reduce carbon emissions, with dozens of publicly announced CCS projects in 2022. However, despite the press, few have reached Final Investment Decisions (FID) or even Front-End Engineering Design (FEED). Why? With so much money available and tremendous political will, why aren’t we seeing sequestration hubs popping up everywhere?
Enhance Oil Recovery (EOR) utilizing CO2 has been around for 50+yrs, however EOR utilizes primarily geologic sourced CO2 for injection into wells to encourage additional oil production. Unlike anthropogenic (man-made) CO2, geologic sourced CO2 tends to have very high purity (97-99%) and homogenous flow characteristics. Anthropogenic CO2 purity varies by source (LNG, refinery, ethanol, power production, etc..) and require scrubbing and filtration to achieve pipeline quality. Geologic sourced CO2 also tends to come from a single location (Jackson Dome, Southwest Colorado, Arizona, etc..) providing a single on ramp to the transportation system. Multiple on-ramps are required due to man-made CO2 offtake locations. Not least of the challenges is maintaining dense (critical phase). In order to carry enough CO2, transportation systems require the CO2 to be pressurized (1060 psi for 100%purity) and undergo a phase change. This phase is called dense phase (it’s somewhere between a liquid and a gas, but behaves more like a liquid). Maintaining balance between multiple on ramps and off ramps is challenging.
One of the major challenges facing CCS and CCUS projects is the mid-stream transportation model. While the cost of capture and injection is high, the transportation model has not been executed to date. One of the reasons for this is that the product itself is entirely different, than oil, gas and water. Non-food grade CO2 does not have any product value…the only value is the tax value provide under 45Q. This poses an extremely challenging business risk as project economics hinge solely on government subsidies. Additionally, there is a lack of precedence in contracting anthropogenic CO2 sources which naturally concerns investors due to unknown risk exposure. Issues like meter accuracy, custody transfer, abandonment liability weight heavily on the investment community.
Why are Investors even considering CCS?
1. Financial Interests
The IRA allocated over $22 Billion for CO2 and Hydrogen Project development with another $8-10 Billion in additional supplemental subsidy packages.
2. Unrivaled Impact
It is the only long-term, proactive solution to reducing CO2 in the atmosphere. Agricultural projects, such as reforestation, typically store carbon for under 100 yrs and then release the majority back into the atmosphere. CCS has the potential to put trillions of tons of CO2 into “forever” storage. Regardless of energy source (traditional or renewable) there is a carbon impact, CCS is to date the most efficient way to offset that impact.
CCS projects are technically achievable and financially viable; it’s all about risk mitigation. Successful execution of the CCS business is more reliant on detailed technical understanding. Being able to understand the linkage between technical and commercial, and how to use both tools to mitigate risk is absolutely critical.
PCS has been in the CO2 Sequestration and Infrastructure space for over 15 years, with services that span from upfront advisory and design to contract negotiation assistance and project execution oversight.
PCS® CO2 Sequestration and Infrastructure Team
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