Industrial emitters

The emergence of CCUS hubs is making it easier for industrial companies in sectors like cement, steel, chemicals, fertilizers and waste-to-energy  to consider CCUS as part of their pathway to net zero.

Finding the right business model to finance carbon capture is still tough, but that is changing in some countries as carbon prices rise, new low carbon product standards are introduced and innovation funding is directed to companies in hard-to-abate sectors.  

What is the business model for emitters?

Depending on their location, emitters may be able to secure income from multiple revenue streams, including compliance (carbon) markets such as the EU ETS, tax credits, voluntary carbon markets, carbon dioxide as a commodity and low carbon product markets.  Government support to emitters typically takes the form of capital grants and operational cost funding, through a contract for difference on a carbon price, as in the UK and Netherlands, or a storage tax credit combined with a low carbon fuel standard, as in the US. Emitters are likely to recover their capex over a longer period of time than is normal for their investments. Return will effectively be regulated as opposed to market driven.

What are the pros and cons of a CCUS hub for an emitter?

A CCUS hub takes carbon dioxide from several emitting sources, such as heavy industries and power, and then transports and stores it using common infrastructure. For emitters, the hub offering opens up CCUS as a decarbonization option without them having to take responsibility for building pipelines, drilling storage wells and monitoring carbon storage. The downside is that developing a CCUS hub is complex. The value chain typically consists of a hub developer, that initiates and manages the value chain; multiple emitters who guarantee to capture and supply carbon dioxide; and a single transportation and storage company (that could serve several hubs). Many industrial emitters with different industrial processes and specific regulatory constraints need to be pulled together in a big infrastructure project. So, it is important to communicate clearly to the hub developer and/or transport & storage operator what it will take to optimize your production operations – while capturing CO2.   Multiple parties need to take their Final Investment Decision at the same time for the CCUS hub development to proceed, representing a major project development risk. Possible solutions for emitters include creating a contractual structure where the transport & storage operator guarantees to take CO2, or taking a direct ownership share in the T&S company. 

How does carbon capture work?

In the exhaust from industrial processes and fossil fuel powerplants, carbon dioxide is mixed in with nitrogen, oxygen and other gases. So CCUS first separates out the CO2. The main method currently used to do this is amine scrubbing. Flue gas is piped into the bottom of a vertical reactor vessel, where it rises up through a mist of a CO2-absorbing liquid (usually an amine solution). The scrubbed gas is released at the top, with typically 90% or more of its carbon dioxide removed. The amine then goes to another vessel where high-temperature steam takes out the CO2. Finally, the near-pure carbon dioxide is compressed ready for transport. 

In this early phase, emitters may need to test this technology on their processes. This will depend on the maturity of the capture technology and the industrial applications it has already been applied to. Testing would require additional expenditure by the emitter in the feasibility (pre-FEED) phase.

Is carbon capture a commercially viable way to decarbonize?

The exact cost depends to a great extent on the mixture of gases captured. If there is a high proportion of carbon dioxide, at high pressure and on a large scale, it is relatively easy to capture, making costs lower than for dilute or low-pressure exhaust gases. 

For industries making fertilizers or ethanol, capture cost is well below $50 per tonne; for steel it can be around $100 per tonne, rising up to around $250 per tonne for aluminium. 

Compression costs will vary depending on the capture and associated industrial process but can be high to meet pressure specifications.

Local storage and loading costs may be relevant if transportation of CO2 to the permanent storage site is to be done by truck, ship or rail.

Emitters need certainty on the specifications (around purity and pressure) of CO2 to be delivered to the transport & storage operator. The tighter the specifications, the higher the costs for the emitter. Impurities such as water, nitrogen, sulphur oxide, nitrogen oxide, carbon monoxide, hydrocarbons and mercury can have major implications, eg corrosion, for CO2 transportation and storage infrastructure and on how the CO2 behaves once it is injected into the target reservoir deep underground.

How certain is it that storage is sufficient and ready to be used?

Before committing to expensive FEED studies, the emitter needs to get a clear understanding from the transport & storage operator that the proposed reservoir has sufficient permanent storage capacity and that the injection wells will work.

What sort of risks do emitters face?

A key part of the commercial negotiations between emitter and transport & storage operator are around the allocation of risks. Emitters face project risks around technology, construction, price and operations, which are common to any infrastructure investment. For hubs, the specific project risks are around volume, leakage and multi-stakeholder project development. 

Emitters face hard-to-reduce risks include revenue risk, relating to an insufficiently high carbon price, cross-chain risks arising from the interdependency of the CCUS value chain, and long-term storage liability risk. 

What are the questions emitters should ask themselves?

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