The essence of a CCUS hub is collective transport & storage infrastructure, supporting a range of different emitters and possibly even several hubs.
Transport and storage operators are responsible for transporting the captured carbon dioxide by pipeline, ship or other means to the storage site, where they inject it into the subsurface geology. They assume most of the liability for the captured carbon dioxide once it is handed over, and they are responsible for permanent storage and monitoring at least until the well is safely closed.
To date, transport and storage operators have tended to be large companies or joint ventures, with infrastructure and sub-surface knowledge, as well as experience in running major projects. They are often also involved in hub development, playing the role of integrator as well as operator. Where CCUS-relevant infrastructure (such as CO2 pipelines in the US) are more mature, transport and storage operators will more frequently be brought in as service providers by emitters or other companies wanting to set up a hub. And as the CCUS ecosystem evolves, companies focusing only on transport or only on storage are starting to emerge.
The business model for transport and storage operators is relatively simple – they are paid a fee for transporting and storing the CO2 emissions captured by their industrial customers. The tariff is structured to cover the operator’s investment and operating costs and provide a return on capital employed.
Since carbon prices are low and demand for low carbon products is nascent, the current business model for carbon transport and storage is likely to involve government support and regulation, depending on market conditions.
Where transport & storage operations have the form of a natural monopoly – multiple emitters using a single piece of CO2 transportation and storage infrastructure – returns are likely to be regulated and comparable to those achieved by utilities and large-scale infrastructure companies. As competition in transportation and storage services emerges, the need for regulation may decrease.
Storage liabilities are a key risk for transport & storage operators. Government CCUS regulation should be clear on carbon dioxide storage liability: who is responsible at each stage of injection, monitoring and long-term stewardship; and how risk is shared and eventually transferred to government.
The transport & storage operator will need to spend money upfront to quantify the storage capacity and de-risk it for potential customers. For example, geological de-risking may require shooting seismic and drilling wells. Upfront investment in de-risking storage will make it much easier to scale CCUS hubs, but few policymakers have focused on this to date.
The operator will also need to identify the specifications (around purity and pressure) of the carbon dioxide to be delivered to the T&S operator. Looser specifications makes post-capture compression and purification cheaper for emitters, but impurities in the carbon dioxide – such as water, nitrogen, sulphur oxide, nitrogen oxide, carbon monoxide, hydrocarbons and mercury – can have major implications, eg corrosion, for transportation and storage infrastructure.
CCUS hubs require regulations relating to permitting, standards for construction and operation of transport & storage infrastructure and storage facilities, storage liabilities, monitoring, reporting and verification (MRV) protocols and rules for third party access.
Governments typically have the tools and experience to incentivize and regulate the CO2 transportation business, but they can struggle with understanding geology and the associated storage risks.
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