The high costs incurred in capturing carbon dioxide (CO2) from industrial units is proving to be the major deterrent for deploying CCS.
Industry Trends
Listed below are the key industry trends impacting the CCS theme, as identified by GlobalData.
Retrofitting existing energy assets with CCS critical for climate goals
The energy sector, which is heavily dependent on fossil fuels, is among the biggest contributors of global greenhouse gas (GHG) emissions. The entire oil and gas value chain, right from hydrocarbon extraction, transportation, processing, and end use, emits considerable volumes of CO2. Several of the existing assets around the world are likely to continue operating at least until 2040 or more. This makes it imperative to retrofit these facilities with carbon capture technologies to manage their emissions.
Retrofitting operational units with CO2 capture technologies is a very complex endeavour. Each project is unique in its design, size and have different types of installed equipment that may or may not support emission monitoring. This can complicate the installation or modification of capturing technologies, thereby leading to cost escalations. Besides, these facilities need to be supplied with additional power to operate the CO2 capture units, which may create additional challenges along the value chain. The prevailing low penetration of CCS technologies worldwide also inhibits the project economics, making retrofitting less viable for now.
Unlocking the potential of blue hydrogen
Hydrogen is touted as a potential replacement for fossil fuels in industrial applications and transportation. It can be safely transported using pipelines or in industrial containers. Unlike fossil fuels, it is a clean source of energy. However, in most cases, hydrogen is produced from steam methane reformation of fossil fuels, which can result in substantial emissions. This type of hydrogen is generally termed as grey. When these emissions are managed using CCS technologies, the hydrogen is termed as blue.
Green hydrogen, which is produced by electrolysis of water using renewable energy, is the only type that is completely emission free. The cost of producing blue hydrogen depends on natural gas prices as well as the capital spent on installing and operating the CCS unit. At present, the high costs of CCS installations are a key deterrent for blue hydrogen production.
The International Energy Agency (IEA) estimates the cost of blue hydrogen production to be in the range of $2.5-$4. These are considerably lower than IEA’s estimate for green hydrogen costs of around $4.3-$6. Blue hydrogen plants are expected to become more viable this decade with process improvements and scale.
Removing carbon from the atmosphere
Direct air capture is an emerging technology for collecting CO2 from the atmosphere. This technology deploys powerful machines to pull the air from the surroundings. This air is processed to extract pure CO2 that can be used for commercial purposes or stored permanently. The filtered air, which is largely carbon-free, is then released back into the atmosphere. Swiss firm Climeworks and Carbon Engineering from Canada are leading technology providers in this segment that is currently dominated by start-ups.
The process of air suction and filtering in direct air capture is energy intensive. Hence, these facilities need to procure their energy from a low-carbon source, ideally from renewables, to keep the net emissions of such facilities down to negligible levels. However, this can affect project economics as energy is the biggest cost component of direct air capture facilities. The costs per tonne of captured CO2 were found to be considerably high at around $600 in demonstration projects implemented in North America and Europe. However, these costs are gradually declining with technology improvements and economies of scale to around $100-300 per tonne.
The transportation sector will continue to generate GHG emissions so long as internal combustion engines continue to ply around the world. However, direct air capture units would need to be in proximity to the high-emission zones to be most effective. This could require government support in land acquisition at key locations and other subsidies to improve the project viability.
Cost remains a key barrier for CCS adoption
Traditional CO2 capture technologies are based on aqueous amine chemistry, which is the trusted approach for separating gases in industrial units, particularly in coal-fired power plants. However, these technologies, when applied for separation of CO2, have proved to be extremely energy intensive. As a result, these technologies are deemed unviable for cutting emissions in coal power generation.
CCS deployments in gas-fired power plants and petrochemical plants, too, have experienced similar cost issues. Hence, plant owners and technology providers are working on innovative ways to achieve cost reduction. One such strategy is to integrate the capture technologies within the main plant during the construction phase itself. Here, the captured CO2 can be reused within the plant itself, thereby cutting down on energy requirement as well as emissions.
This is an edited extract from the Carbon Capture & Storage – Thematic Research report produced by GlobalData Thematic Research.
