“Reaching net zero will be virtually impossible without CCUS,” the International Energy Agency (IEA) said in a recent report on the role of carbon capture, utilization, and storage in the energy transition.
Many governments, especially in mature economies, as well as all oil and gas supermajors, also seem to concur that carbon capture and storage is a critical part in achieving the emission reduction targets and net-zero goals that various countries and businesses, including the European oil majors, are pursuing.
Governments and oil firms are betting big on CCUS, but a large-scale deployment of carbon capture and storage projects is still years away.
Technology and costs continue to be significant hurdles on the road to making CCUS a vast and truly global industry capable of abating emissions not only from new energy generation, such as the production of blue hydrogen, but also from existing energy systems and from heavy industries such as cement, steel, or chemicals production.
Governments and industry need to invest hundreds of billions of U.S. dollars over the next two to three decades if CCUS stands a chance of becoming the pillar of the energy transition and “the only group of technologies that contributes both to reducing emissions in key sectors directly and to removing CO2 to balance emissions that are challenging to avoid,” as the IEA describes it in its report.
The Potential Is There
Various studies and pilot projects have shown that CCUS has the potential to become the industry that will help heavy industry and fossil fuel industries to cut emissions.
Globally, there are more than 60 operational CCS projects of varying capture capacity, with the United States leading with 28 percent of those operational projects, followed at quite a distance by China, Canada, Japan, and Australia, Wood Mackenzie said in a report on the North Sea potential to net-zero last month. Related: Democrats Want Permanent Ban On Offshore Oil Leasing
Most recently, Norway has just launched the Longship project, which includes funding for the Northern Lights joint project of supermajors Equinor, Shell, and Total to capture CO2 from industrial sources in the Oslo fjord region (cement and waste-to-energy) and shipping of liquid CO2 from these industrial capture sites to an onshore terminal on the Norwegian west coast. The government funding is US$1.8 billion (16.8 billion Norwegian crowns) out of the total US$2.7 billion (25.1 billion crowns) project costs.
“For Longship to be a successful climate project for the future, other countries also have to start using this technology,” Norway’s Prime Minister Erna Solberg said.
Government Support Is Critical
The Norwegian project goes to show what analysts have been saying about CCUS all along: government support and sponsorship is critical for getting this industry off the ground, and large-scale deployment is essential to achieving meaningful emissions reductions on a global scale.
To overcome those constraints, governments and industries need to improve technologies, but they also need to cut costs to make CCUS feasible and not so cost-prohibitive.
“A significant scale-up of deployment is needed to provide the momentum for further technological progress, cost reductions and more widespread application in the longer term. Without a sharp acceleration in CCUS innovation and deployment over the next few years, meeting net-zero emissions targets will be all but impossible,” the IEA said in its report.
“The rapid deployment hinges critically on a massive increase in government support, as well as new approaches to public and private investment,” the Paris-based agency says.
Big Oil has embraced CCUS as one of the pathways to emission reductions, as many European majors have pledged to become net-zero businesses by 2050 or sooner. Shell, BP, Total, Equinor, and ENI are all working on and investing in carbon capture and storage projects.
Investment Is Critical Too
However, the industry and governments need to invest hundreds of billions of U.S. dollars over the next three decades in order to make CCUS the game-changing emission-cutting industry that the IEA envisages today.
The UK alone will need around US$78 billion (60 billion British pounds) in investments in CCUS over the next 30 years, and even higher investments in offshore wind and green hydrogen, if it is to build a net-zero energy system, WoodMac’s Chairman and Chief Analyst Simon Flowers said.
Commercialization is still some way off due to technical challenges and the need for the carbon price to be at least double today’s carbon price, according to the energy consultancy. Related: The Secret Behind America’s Most Valuable Energy Play
“Significant policy incentives such as carbon taxes and the development of CCUS clusters are likely needed to help CCUS be competitive,” WoodMac said in its report about the potential in the UK Continental Shelf.
Globally, the world will need CCUS to reduce emissions from existing infrastructure as renewable energy and electric vehicles (EVs) are not enough to curb the effects of climate change on the planet. Without the right policies and support, large-scale CCUS could be a nearly impossible task, according to WoodMac.
“Emissions will continue increasing unless there is an incentive to rationalize the carbon-heavy assets or retrofit with carbon capture and storage — a herculean task without an appropriate tax on carbon,” Prakash Sharma, head of markets and transitions for Asia-Pacific at Wood Mackenzie, said.
“If the world is to achieve the Paris goal for global warming, green hydrogen and CCUS will have to be part of the solution, and that means sustained policy support. Attracting the investment to lift these technologies from the demonstration phase to full commercialisation needs higher carbon prices and, ultimately, a coherent, global carbon policy,” WoodMac said in its Energy Transition Outlook 2020.
Industries and governments recognize that CCUS could play a pivotal role in the energy transition, but a lot more efforts, policy support, government funding, corporate investments, technology improvements, and cost cuts are needed to make CCUS the game-changer in the fight against climate change.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- The Next Couple Of Months Are Crucial For U.S. Oil
- Where Will the World’s Next Giant Gold Discovery Be?
- Is U.S. Shale Finally Bouncing Back?