New trends bolster chance of successful deployment of carbon capture and storage

The United States leads the global deployment of carbon capture and storage (CCS) technologies. A progressive policy framework and sustained government support have launched the roll-out of the next generation of CCS facilities. With impacts of climate change becoming ever more devastating, and the need to eliminate emissions as soon as possible, these are welcome developments. However, reaching net-zero emissions climate goals will require a 100-fold scale-up of CCS facilities between now and 2040, demanding further supportive policies and mechanisms.

With a value on carbon in place, new trends and initiatives to overcome further barriers including green financing, CO₂ infrastructure networks, and capture cost reductions provide increased optimism for the technologies’ pressing success.    

An innovation-driven economy and policy leadership on both the federal and state level have bolstered CCS deployment in the United States.

The overhauled 45Q tax credits remain the most progressive CCS-specific incentive globally. California’s Low Carbon Fuel Standard CCS Protocol — with credits trading close to $200t/CO₂ — is arguably one of the most innovative. As a result, a plethora of new facilities is underway; they include new technology applications on cement and fertilizer plants, as well as direct air capture (DAC) at scale. Hubs and clusters able to store 50 million tons of CO₂ per annum by connecting multiple sources of CO₂ and achieving economies of scale are defining of the next wave of CCS facilities.

Cutting-edge policies have also propelled first-movers forming fresh partnerships with new market entrants and business models, such as CO₂ disposal agreements for permanent storage.

By 2040, more than 2,000 large-scale CCS facilities need to be operating to reach sustainable development goals and achieve the Paris Agreement, according to the International Energy Agency. Global access to the technology, as well as a lowest cost energy transition, are linked to the successful deployment of CCS in the United States. Removing further barriers to large-scale deployment is therefore critical, beginning by releasing the full guidance for claiming the 45Q tax credits.

Commercially available but not widely deployed technologies like CCS are risky in the eyes of investors and face difficulties securing affordable financing, a problem also known as the ‘technology valley of death.’ It comes as no surprise that many of the 19 global operating CCS plants have been supported by government grants or were financed directly by companies themselves. While further CCS deployment backed by government support will certainly help reduce the risk premium, the global investment community’s increased commitment to sustainability — such as the recent announcement from BlackRock — are a potential game-changer.

Green investment standards — either by large institutional investors or through regulation, for example the proposed EU Sustainable Finance Taxonomy — recognize the emissions mitigation value CCS brings. Indeed, as a recent report from HSBC found, aligning capital allocation and climate ambition through rewarding the environmental aspects of clean energy technologies like CCS in the project assessment process significantly shifts the risk profile.

Furthermore, in Congress, lawmakers have now moved to discussing the need for constructing CO₂ infrastructure networks as critical investment multipliers and enablers for further CO₂ reductions and capture.

The United States already has more than 5,000 miles of CO₂ pipelines — more than any other country in the world. Yet, experts estimate that this capacity needs to triple by 2030 to meet climate ambition. Most of the currently existing pipelines connect single sources of anthropogenic CO₂ with single geologic sinks. However, CO₂ transportation networks can connect multiple sources of CO₂ with dedicated, large-scale geological storage. This not only has the advantage of achieving economies of scale and reducing multi-party risk but also lowers the barrier to entry for new participants by offering them to tap into available infrastructure.

A good example of the role of CO₂ infrastructure is the Northern Lights project in Norway, which envisions becoming a CO₂ infrastructure hub for Europe. The network is not only supported by the EU as a project of common interest but has also raised interest and signed Memoranda of Understanding with stakeholders from across Europe. Nonetheless, building infrastructure networks is risky for first-movers as it requires large upfront capital investment to build the pipelines larger than their starting capacity. This is necessary to enable growth of the amount of CO2 transported and achieve economies of scale. Government support is thus essential as it not only helps to reduce risk but also signals long-term commitment to decarbonization and carbon capture deployment. At the same time, stakeholder concerns and considerations such as land use and conservation must be taken into account.

Cost is often cited as a hurdle to CCS deployment. Policy, enabling deployment of CCS, is a central driver for cost reductions. After all, learning-by-doing captures efficiencies.

Policy has also led companies to search for synergies throughout the energy and industrial value chain. For example, Svante, a capture technology provider, and Climeworks, a DAC company, have joined forces aiming to reduce cost and increase capture by capitalizing on synergies between point-source and direct air capture. Research, development, and deployment initiatives at the U.S. Department of Energy focus on cost reductions, and proposed policies seek to advance standardization reducing fixed cost.

Some experts also argue that additive manufacturing could become crucial. In combination with new corporate commitments to carbon neutrality, like Microsoft’s recent announcement, these developments compound to game-changing innovation offering a promising outlook for cost reductions.

Climate change is a global problem requiring collective action. It has devastating and unequally distributed effects. Clean energy innovation leadership by governments reduces emissions at home and abroad through enabling access to lower-cost technology globally. The continuation of the current U.S. leadership role for CCS building on initial policy and project progress is hence vital to an equitable global net-zero emissions transition.

Lee Beck is a Women Leaders in Energy fellow at the Atlantic Council’s Global Energy Center and is the Senior Advisor for advocacy and communications at the Global CCS Institute. Follow her on Twitter @_Lee_Beck.