Analysts: CCS Uptake Grows, But Falling Short of Emissions Goals

As energy players focus on shrinking carbon footprints in the race to net-zero emissions, carbon capture and storage (CCS) projects are gaining traction, buoyed by tax incentives, scale-up of technology and improving costs, industry experts say.

With CCS at the center and ample storage in parts of the world, the decarbonization push has potential to grow even further globally. That will, however, require stronger carbon pricing mechanisms.

CCS is capable of addressing 62% of the 40 gigatons of CO₂ being released into the atmosphere worldwide, Marius Foss, senior vice president of global energy systems for Rystad, said during a February webinar. Power generation accounts for one-third of global CO₂ emissions that could be abated with CCS, he added.

Though the number of projects in the pipeline is growing, led by the U.S., “the current project portfolio that is operational today account for only 40 megatons versus the total potential 25 Gt,” Foss said. Add projects in the pipeline and those near FID, the number rises to 110 megatons. “So, it was quite a big discrepancy.”

Data from Washington, D.C.-based Global CCS Institute in December showed there were 65 commercial CCS facilities in various stages of development globally, having grown by 33% globally over the past year. At the time, nearly 40 million tonnes of CO₂ was being captured from 26 commercial CCS facilities operating.

Large projects online include Occidental Petroleum Corp.’s Century Plant in Pecos County, Texas, which processes natural gas with high CO₂ content for EOR in the Permian Basin, and Exxon Mobil Corp.’s Shute Creek in Wyoming.

Supporting growth in the U.S., where Global CCS Institute data show has the most operational CCS facilities in the world, are the enhanced 45Q tax credit and the California Low-Carbon Fuel Standard.

Smaller projects elsewhere, according to Rystad Energy, include Qatar Fuel Additives in Qatar, Gulf Petrochemical Industries in Bahrain, and the Vijaipur Plant as well as the Aonla and Phulpur fertilizer plants in India.

However, some projects once operational have not survived.

Facing Challenges

Economics, including oil demand and prices, were partly to blame for the 2020 shuttering of the $1 billion Texas-based Petra Nova carbon capture project after about three years of operation. The project, owned and operated by NRG Energy and JX Nippon Oil and Gas Exploration Corp. with support from the U.S. Department of Energy, captured CO₂ from a power plant and sent it via pipeline for EOR at the Hilcorp Energy Co.-operated West Ranch oil field in Texas.

The carbon capture project was the only one of its kind from a coal-fired power plant in the U.S., serving as a test of proven technology at commercial scale. It was plagued by several challenges, including forced outages, shut-in of the CO₂ pipeline and operational issues such as equipment derates, CO₂ concentration in flue gas and ramping of the host coal unit among other issues, a federal report showed.

Other projects have also stalled. For some, high costs leave little incentive to pursue projects.

“The cost of capturing is still pretty high, but it has come down significantly and I expect it to continue to drop,” Foss said. “On the other side, you need some kind of mechanism or incentive to make sure that these projects are economically viable.”

The mechanism could be pricing carbon emissions, he said, noting the price has so far been too low for some projects to take off.

Falling Short

Rystad said in a report that currently carbon pricing is not enough to meet net-zero targets.

Susanne Andresen, global energy systems analyst for Rystad Energy, pointed out the insufficiency of emissions trading systems (ETS) specifically. Such systems essentially act as a cap-and-trade system, granting market participants a certain number of emissions allowances set by regulators. They also allow participants to buy or sell unused allowances.

Another mechanism for regulating emissions is a direct carbon tax.

“Some regions have introduced both an ETS and a carbon tax, while some have multiple ETS markets in play,” like in California, Andresen said before highlighting China’s recently announced ETS.

“Even if we consider really aggressive linear reduction of allowances and in other major markets, this will not be enough to meet net-zero targets,” she added. “Exclusive of China, we see that major markets will emit around 1,090 megatons of CO₂ in 2050, which as we know, 2050 is the deadline for most net-zero targets globally.”

Higher carbon pricing is needed to meet goals, according to Andresen.

“Regions that currently have carbon pricing mechanisms in place represent about 18 gigatons of carbon annually,” she said, noting it mainly comes from the energy sector and industry processes. “We estimate that’s around 49% of global CO₂ emissions. But most of these countries have relatively low carbon prices, and this is especially true for major emitters such as China, the U.S. and the EU.”

Seeing Improvement

Rystad identified the costs of emitting and capturing CO₂ as key market drivers.

Besides capturing costs, storing and transportation costs have been hurdles for CCS projects.

“It has been too cheap to emit CO₂ and it has been too expensive to capture it, which means that there is no incentive for the emitters to install CCS equipment,” Foss said. “But now we’re starting to see a level of both CO₂ pricing and also the cost of capturing to converge and get to a point where more and more applications are economically viable by themselves.”

These projects have typically been natural gas projects that use CO₂ for EOR. Foss described such projects as cheap in terms of natural gas processing and capturing.

It hasn’t become the norm globally, he added, but “in some markets—especially based on the 45Q in the U.S. and the EU system, we see prices that are making this happen.”

Costs are improving, analysts said. Plus, the scale-up of CCS technology is hastening the learning curve, paving way for CCS clusters and shared economics that reduce risks, according to Rystad.

“Prices are increasing and getting to a place where more and more projects become viable,” Foss said.

Rystad forecasts investment in the CCS market will grow at an annual rate of 160% from 2020 to 2023, driven by growth in the U.S. and Europe.

“We expect this pipeline will continue to grow beyond the visibility we see here for 2024-2026,” Foss said.