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Net-zero emissions targets and decarbonization ambitions are
driving demand for carbon sequestration solutions. CCUS covers a
group of technologies that capture and compress CO2 from large
point sources, including power generation or industrial facilities,
and store it securely underground or transport it for use in other
applications.
Most energy transition scenarios estimate that a diversified
portfolio of low-carbon solutions will be needed to meet climate
goals. CCUS is one of these solutions and is projected to reduce
between 4% to 20% of global CO2 emissions by 2050, according to
some forecasts. To achieve this goal, the industry will have to
grow at least 52 times from its current size - a historical rate of
growth for an industry that is still in its infancy. This means
that to provide the emissions reduction from Carbon Capture,
Utilization, and Storage (CCUS) envisaged in net-zero scenarios,
capture capacity will have to at least double every five years for
the next 30 years.
IHS Markit's recently launched CCUS Global Project
Tracker shows that over the past decade, only 16 large-scale
CCUS projects have started operations globally, accounting for 75%
of the current operating projects. From these projects, more than
half use CO2 for enhanced oil recovery (EOR) which makes for a
growth trend in a very niche sector. Over the same timeframe, 20
large-scale projects have been canceled or suspended, mainly from
the power sector, largely due to high capital costs and the lack of
carbon storage regulation in some regions.
The recent wave of decarbonization targets has activated the
pipeline of large-scale CCUS in different sectors. The IHS Markit
CCUS Global Project Tracker database includes 23 projects
under construction, financing, and design that if completed, could
double the operational capacity by 2026 and keep the industry on
track to meet net-zero target expectations. There is very limited
visibility after that.
Most of the upcoming projects are either in the power sector or
the industrial sector and are moving away from the oil and gas
industry, which has historically been the lead sector developing
new carbon capture projects. Despite the momentum the industry is
experiencing, it's important to highlight that most of the projects
in the active pipeline are in sectors that have had high
cancelation rates in the past.
The high costs associated to carbon capture from the industrial
and power sectors has been the main reason for the high cancelation
rate. The small number of operating projects, especially in these
sectors, make costs estimation a challenging task due to the lack
of information and limited scale.
Long-term success reliant on policy decisions, cost
reductions and improved efficiencies
Cost estimates vary significantly based on individual plants
owing to the diversity in operational conditions and the type of
products produced. Parameters such as purity of CO2 stream, capture
technology, plant size, process design, plant utilization, energy
prices, and location will have a direct impact on the project
economics. As the number of CCUS projects increase, there will be a
cost reduction, mainly in the capture segment, driven by next
generation technologies and learning rate from process
optimization, which could further accelerate the growth rate of the
industry. A better understanding of these parameters would improve
costs estimations of upcoming planned projects.
The next five years will be critical for the success of CCUS as
a key decarbonization tool to achieve net-zero. Although it seems
the industry is on-track to double global capacity in the next five
years, most of the announced projects are still in early stage of
development, with 85% of projects in the active pipeline in the
pre-FEED phase. Thus, it remains to be seen if the nascent CCUS
industry will be able to maintain the substantial rate of growth in
line with current net-zero scenarios, and overcome multiple
challenges - most critically to secure financing. Further research
on technology and costs is critical for the development of new
business models required to attract long-term and high-CAPEX
investments for the industry to move forward.
To understand the topic of carbon sequestration
further, including its opportunties in the power generation and
industrial sectors - register for our upcoming
Carbon Sequestration Webinar.
Posted 04 June 2021 by Edurne Zoco, Ph.D., Executive Director, Clean Technology & Renewables, IHS Markit and
Paola Perez Pena, Principal Research Analyst, Clean Energy Technology, IHS Markit
