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Costs for every component of the carbon capture, usage, and
storage (CCUS) value chain vary greatly across industries and
regions based on the purity of the carbon dioxide (CO2)
stream, capture technology, plant size, process design, plant
utilization, location, type of transportation, type of storage, and
cost of capital. As a result, a large range of cost is associated
with CCUS, and the cost outlooks vary greatly depending on the
final industry application.
Levelized cost of CO2 avoided (LCCA) assesses the
CO2 capture system as a carbon mitigation option, it
considers investments, operating costs of the system, and the
additional CO2 emissions as a result of operating the capture
system. It also facilitates comparison between different
decarbonization technologies (i.e. renewables, hydrogen) and
industries (power, industrials), which is critical to optimize the
selection of the best decarbonization solutions for each project
and industry and support the achievement of Net-Zero commitments by
2050.
A new report from the Global Clean Energy Technology
team at S&P Global Commodity Insights provides a detailed
analysis of the LCCA for carbon capture, utilization, and storage
projects in key industries between 2020-50. It provides detailed
data on the LCCA trends by industry and region and the key cost
drivers based on S&P Global Commodity Insights CCUS activity
forecast. This blog includes a summary of the main conclusions and
implications of this recently released report- Levelized cost
of CO2 avoided for carbon capture, utilization, and
storage—Long-term outlooks report.
Overview of CCUS project developments
CCUS projects in natural gas processing facilities have been the
main driver for capture capacity growth in the past 10 years. The
commercial need to remove CO2 from the produced gas to
meet pipeline specifications coupled with the opportunity to
monetize CO2 for enhance oil recovery (EOR) operations,
and the low cost of capture made these projects attractive.
Currently over 90% of the operating projects are associated to
industries with low cost of capture. Capture cost rise rapidly as
proportion of CO2 in the flue gas decreases, natural gas processing
and ethanol production have one of the lowest costs of capturing
due to the high concentration of CO2.
Recent climate pledges and improved government support have
incentivized new industries to consider CCUS projects. The current
pipeline shows a significant increase in projects in the power
generation sector and heavy industries with traditionally higher
capture costs compared to natural gas processing. In fact, close to
40% of the projects in the pipeline are associated to projects with
high capture costs, which will bring new challenges to the
industry, increased risk, but also cost reduction opportunities. A
clear example of this trend are the Hydrogen-related projects,
since low-carbon hydrogen is at the core of many of the proposed
CCUS clusters.
Carbon Capture, Utilization, and Storage: Cost
drivers
The cost drivers for CCUS projects will vary significantly by
final industrial application, thus understanding the cost drivers
for each sector will be relevant to develop the right strategies
for cost reduction in the next decade, although CCUS hubs and
improvements on capture technologies will overall contribute to
cost reductions each of them will have a different effect in each
sector.
On average, CCUS projects for high CO2 concentration
streams are less expensive than projects for low CO2
concentration streams, since the former avoids the capture cost and
only needs compression, dehydration, transport, and storage. As a
result, any cost reduction associated to capture technologies will
not affect this type of projects, instead economies of scale from
CCUS hubs will have a more significant impact.
Projects with low CO2 concentration are typically
more expensive since these projects will require to have a capture
system (purification unit) that could take up to 65% of the capex
investment. Projects with low and high CO2 concentration
have different key cost drivers. While high CO2
concentration projects are more impacted by transport and storage
cost, low CO2 concentration projects are primarily
impacted by the increase in capex and opex from the capture
system.
The impact and risk each cost component has in a CCUS
project could play a significant role to identify key cost
reduction opportunities by industry:
Levelized cost of CO2 avoidance - Long-term
outlook
In the next decade, CCUS costs are expected to decrease at
different rates by sector, while cost reductions from projects in
ethanol production and natural gas processing are not expected,
unless they are developed in a CCUS Hub, other projects such as
power generation could see very small cost reductions. Rising fuel
prices, mature capture technology being used, small scale of
deployment, and multiple first-of-a-kind CCUS projects will hinder
cost efficiencies. In fact, projects in some industries may even
face an increase a short-term increase in cost (e.g cement).
Beyond 2030, CCUS costs are expected to have a much significant
decrease mainly driven by increased efficiencies in capture
capacity and increase in operational CCUS Hubs. S&P Global
Commodity Insights inflections scenario implies five doublings of
capture capacity between 2030 and 2050, representing opportunities
of cost reduction through "learning by doing" and economies of
scale improved by CCUS hubs. Transportation and storage segments
could benefit significantly from large volumes of CO2,
which could decrease the levelized cost of CO2 avoidance
up to 30% depending on the industry, capture technology
breakthroughs could increase the cost reduction even further but
there is still a lot of uncertainty around performance of new
technologies at large-scale.
CCUS learning rates will be driven by technology
progress and integration; the scale of deployment expected creates
uncertainty around cost reduction:
Although the levelized cost of CO2 avoidance (LCCA)
for CCUS projects have a wide range of values, natural gas
processing and ethanol production will continue to have the lowest
cost per metric ton of CO2 (MtCO2) avoided in
the next decades. These high CO2 concentration processes
are most sensitive to transportation and storage cost, and as a
result CCUS hubs will significantly drive the CO2
avoidance cost down for projects in these industries.
Low CO2 concentration processes in industries like hydrogen
production, heavy industries and power generation have different
cost drivers mainly associated to capital and operating cost of the
capture system, which means that innovation from capture
technologies and efficiency improvements will make the most
significant difference for cost reduction. However, the cost
analysis shows that current incentives are not enough for
sustainable business models in these industries. Higher ETS prices
and improvements in 45Q or other form of incentives and tax credits
would be required to open opportunities for these industries and
allow to reach large scale of deployment and steep learning rates
for CCUS technologies from 2030.