The Current Economics of Carbon Capture and Storage
Angus Gillespie, GLG Council Member and Manager, European Affairs at the Global CCS Institute
As climate concerns mount, controlling greenhouse gas (GHG) emissions has become a priority of governments, businesses, and the public. Fortunately, techniques involving carbon capture and storage (CCS) are on the verge of a long-expected takeoff in usage.
Growth of CCS
Over the past year, the world has seen a 30% jump in potential CO2 capture capacity, according to data from the Global CCS Institute, which says 27 large-scale projects are now in operation across the world. Large projects each capture about a million tons of CO2 a year, on average, and four more are under construction, with over 100 in development. But the number of projects might have to rise by about a hundredfold to meet the demands for net-zero carbon emissions as defined by the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA). Much work remains to be done.
The Components of CCS
Economics, more than technology, is the key issue in adopting CCS techniques, and a good way to get a handle on it is to look at the components of those techniques along the CCS supply chain — capture, transport, and storage or utilization — separately.
Capturing carbon is a basic technology that’s been around approximately 80 years and involves recovering CO2 from other gases through separation, which is usually based on a chemical process in which the CO2 is absorbed into an existing compound. Later, the compound is heated or frozen to release the CO2, which is then recycled.
Carbon capture is particularly important for industrial manufacturing and other so-called hard-to-abate sectors — think steel and petrochemicals — that require the intense or rapid heating that only hydrocarbons can currently provide. Some industrial processes, such as cement making, even release CO2 from the raw materials used in the manufacturing process. For these businesses, carbon capture and storage will be the only significant way to make deep, meaningful reductions in their carbon footprint.
After the carbon is captured, it’s then transported. Usually that’s by pipeline. Lately, shipping is becoming a viable method of transportation, which is helpful for countries like Japan and South Korea, which produce considerable emissions but don’t have room for storage. Japan, for example, could perhaps ship its CO2 to Indonesia, which has ample storage facilities.
Finally, there is storage or usage. Geological storage has been the principal way CO2 has ended in the value chain. It is injected into reservoirs or saline aquifers and stored securely. It also is used in mature oil fields to improve recovery rates. But utilization — which is the “U” in CCUS — is still a relatively small part of the overall picture; most captured CO2 ultimately goes into geological storage. Using captured carbon economically in other processes awaits technological development.
The Cost of CCS
To get an idea of the cost of CCS overall, the capture stage typically accounts for about 75% of overall costs, or about $75 to $80 a ton, measured in U.S. dollars. But the range is enormous, and it’s principally the wide range of costs that differentiate activities that are most and least suited to carbon capture. Of the costs in addition to capture, transportation accounts for about 15% of the total, with storage accounting for 10%.
How much does building and operating a CCS facility over its lifetime cost? I estimate it’s about $90 to $100 a ton, on average, with wide variations. That cost also includes transporting the CO2 once its captured. A very loose rule of thumb would be that $1 billion of CapEx would result in about 0.7 million tons of CO2 captured every year. For most industrial companies, CCS is a mitigation technology. It therefore becomes commercial when the cost of carbon regulation exceeds the cost of the technology. Because the underlying technology is not complex, a CCS facility has a useful life of between 20 and 40 years.
Currently, about 30 million tons of CO2 are stored every year. The expectation for 2050 is that somewhere between 3,000 and 4,000 million tons will be stored. To get to that level, we will need about 100 projects coming online each year across the world over the next three decades.
CCS has had a lot of false starts over the past 15 years, but I think this time the tide seems to have turned given the infrastructure being installed in Europe and the commitment of the U.S. and Canadian governments to reward CCS through tax policy. Signs point to this being the time for CCS to take off.
About Angus Gillespie
Angus Gillespie is currently Manager, European Affairs at the Global CCS Institute, as well as Low Carbon and Renewables Executive at Edzell Climate Economics Ltd. Earlier, he served as Vice President CO2 at Shell and held positions at Scottish Hydro-Electric and Scottish Power. He graduated in economics from Stirling University and received a master of business administration degree from Heriot-Watt University.
