A New Dawn for CCUS After Five Decades of Ups and Downs
The world is on a quest for solutions to decarbonize its economy. More than 70 countries and over 1,200 companies have set a net-zero target, according to the United Nations. To limit warming to less than 2°C, emissions of hundreds of gigatonnes of carbon dioxide (CO₂) would need to be prevented and removed from the atmosphere.
Carbon Capture, Utilization, and Storage (CCUS) is recognized as one of the key technologies to achieve these climate goals, tackling emissions from energy and industrial sectors, as well as removing CO₂ from the atmosphere. However, despite the critical importance of the technology and substantial development to date, CCUS deployment has been slower than anticipated.
For further information on the CCUS market and its technologies, please refer to IDTechEx's report "Carbon Capture, Utilization, and Storage (CCUS) Markets 2023-2043".
CCUS Status vs. Ambition
Despite the near fourfold growth in the past 20 years, the current deployment of CCUS is still limited. CCUS capacity growth has been around 2.3Mtpa of added capacity since 2010, with annual capture capacity reaching 41Mtpa of CO₂ in 2020. This is 86% short of the ambition the International Energy Agency (IEA) set a decade prior - see figure below. The current global CO₂ capture capacity is equivalent to 0.1% of overall emissions.
Global CO₂ capture capacity (in million tonnes per annum) operational, announced, and expected by year. Source: IDTechEx, (underlying data from IEA, Global CCS Institute, and CATF). Note - the radius of each circle has been scaled based on the capture capacity it represents. Dashed circles represent expected capacity. Source: IDTechEx
After years of a declining investment pipeline, there has been significant acceleration in the sector for the past two years, with multiple announcements of new integrated CCUS facilities. Most of these are in North America and Europe, but projects are also planned in Australia, China, Korea, the Middle East, and Chile. Still, the industry needs to grow more than 35-fold by 2030 to reach the capture capacity required for net-zero emissions as per the IEA's Net-Zero Emissions (NZE) by 2050 Scenario (IEA, 2021).
The CCUS Landscape has Seen a Vast Change
The first industrial large-scale CCUS project commenced operation about 50 years ago at the Val Verde natural gas processing plant in Texas, US. Instead of being vented, the CO₂ captured was compressed and transported through a pipeline and then injected into the SACROC field for enhanced oil recovery (EOR). Natural gas processing plants supplying CO₂ for EOR became the standard of the CCUS industry, with some of the largest integrated CCUS projects in the world being a combination of these two. Notably, the Century Plant in the US and the Santos Basin Pre-Salt project in Brazil, each capable of capturing up to 8.4 and 8.7Mtpa of CO₂, respectively. Europe was the second continent to see CCUS projects appearing, with Norway's Sleipner project for dedicated storage purposes in 1996.
After a plateau during the 2000s, the number of CCUS projects in operation has taken off since 2010, but the CCUS industry saw high-profile project cancellations and government funding programs that failed to deliver. IDTechEx's research indicates that more than 60% of proposed projects have been canceled on average, notably in the power sector. The failure of the Kemper County carbon capture facility in 2017 and the mothballing of the CCS retrofit unit at the Petra Nova plant in Texas in 2020 have brought into question the CCUS industry's ability to deliver large-scale projects that are profitable and low carbon.
Delays have also been commonplace. The CCS component of the Gorgon Facility came online some two years behind schedule, and Lake Charles (US), Teeside Low Carbon (UK), and the Drax facility (UK) have all suffered years of setbacks.
A number of factors contributed to these obstructions, but they were mostly due to economic reasons (fluctuating markets, insufficient financial support), technical issues (flow assurance, solvent degradation, insufficient storage capacity), and lack of public acceptance. Additionally, as the western world has moved away from coal, many large-scale projects of coal power plants that were meant to be fitted with CCS capabilities never came to fruition.
In the last decade, the CCUS industry focus shifted from power towards industries considered 'hard to decarbonize' (for example, the cement and iron and steel industries), the emerging hydrogen economy, as well as new negative emission technologies (NETs).
The Momentum Behind CCUS is Building Up
There has been great momentum behind CCUS in 2022, with projects, new policies, and funding announced. Building up to this year's developments, the UN's Climate Change Conference (COP26) in November 2021 reinvigorated net-zero targets and fostered multi-country partnerships in CCUS. That same month, the US passed the Infrastructure Investment and Jobs Act, providing a combined US$15 billion to support CCUS and low-carbon hydrogen production.
Nearly 20 additional projects were announced in 2022 alone, which, if developed successfully, will add more than 90Mtpa of new CO₂ capture capacity. However, many of these projects have not yet passed the final investment decision (FID), so their future is still uncertain.
Important advances have also happened in licensing and permitting for geological CO₂ storage throughout 2022. The industry has seen an increase in licensing activity in Norway, Russia, and Australia. As well as the UK launching the first-of-its-kind CO₂ storage licensing round, which consists of 13 areas across the North Sea made up of saline aquifers and depleted oil and gas field storage opportunities.
With the enactment of the Inflation Reduction Act (IRA) in August 2022, the US is set to substantially increase the support for carbon capture technologies in the coming years. The IRA brings improvements to the 45Q tax credit incentive for carbon sequestration, which has played a crucial role in expanding the adoption of CCUS in the United States since 2008. Sectors that have previously been unable to consider such technologies because it was cost prohibitive can now rethink their decarbonization strategies. The full impact of these credits is yet to be seen. The industry may see a sharp increase in announcements from 2023 onwards in the US as developers rush to meet the 2033 eligibility deadline to commence construction.
CCUS as a Transitional Technology
In many industries, CCUS is considered a transitional option to get carbon-intensive assets to their end of life or to serve as a stepping stone to more sustainable technologies that are still under development. Some of these key CCUS applications include:
Hard-to-abate sectors with inherent process emissions such as cement, iron & steel, and chemicals. Renewable fuel switching and efficiency improvements will not be enough to decarbonize these industries.
Blue hydrogen production, where CCUS safely disposes of the CO₂ produced during traditional steam methane reforming. Blue hydrogen is set to play a key role in creating new markets for hydrogen as a clean energy carrier, acting as a bridge for green H2 once electrolyzer capacity catches up.
E-fuels production, where CO₂ from emissions can be converted into hydrocarbons using renewable energy. E-fuels can take care of legacy internal combustion engine vehicles while electric vehicles gain market share and of long-haul transportation (planes, ships, trucks), while battery technology advances and becomes lighter.
Ultimately, CCUS can create a demand for captured CO₂ until carbon prices are sufficiently high. CO₂-EOR has been an on-ramp for CCS and, more recently, for DAC and may continue to do so alongside other emerging uses of CO₂ as a feedstock for chemicals, fuels, and building materials. For further information on CO₂ utilization, please refer to IDTechEx's report "Carbon Dioxide (CO₂) Utilization 2022-2042: Technologies, Market Forecasts, and Players".
CCUS as an Enduring Technology: Carbon Dioxide Removal
While point-source carbon capture may play a crucial role in the energy transition, Carbon Dioxide Removal (CDR) may be needed beyond that. CDR is present in every credible, long-term climate scenario to take and maintain the world at the net-zero level of emissions. Given its potential, there has never been more focus on removing CO₂ from the atmosphere using NETs such as Direct Air Capture (DAC). Venture capitalists have poured more than US$1 billion into the nascent DAC industry in 2022, with the biggest slice of the pie going to Climeworks' latest funding round worth US$650 million - more than the total amount invested in DAC in the past five years.
DAC players are racing to drive the cost down to US$100 per net tonne of CO₂ removed and to reach the gigatonne scale of annual removals. Both milestones are complementary, as scale and cost will likely evolve in tandem. Standardizing a robust methodology for monitoring, reporting, and verification (MRV) of carbon removals will be essential to achieve those goals.
It is an exciting time to be in the carbon removal space as the sector abounds with investments, dynamism, and hope. Startups, early buyers, research institutes, and policymakers are collaborating to advance the technologies and the conditions for market consolidation. For more information on the CDR market, see the new IDTechEx report, "Carbon Dioxide Removal (CDR) Markets 2023-2040: Technologies, Players, and Forecasts".
Will CCUS Finally Take-off?
The fundamental role of CCUS is to provide an infrastructure capable of securely and permanently isolating millions of tonnes of CO₂ away from the atmosphere. CCUS will be critical in enabling the level of decarbonization required to achieve the net-zero emissions targets stipulated in the UN Paris Agreement. But for this, it needs to scale.
Despite the fair level of maturity, carbon capture technologies remain largely costly, energy-intensive, and underdeveloped. Questions remain around the willingness of governments to ensure a
proper price for carbon through cap-and-trade or other incentive schemes and of investors to financially support large-scale CCUS projects. Meeting CCUS' ambition to slow down climate change requires a step-change in policy and coordinated worldwide action that is shaping up, but it is yet to be fully realized.
Challenges in CCUS. Source: IDTechEx
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