Why all the sudden talk about carbon capture and storage (‘CCS’)? It seems the phrase is back ‘en vogue’ once again, despite little changing about the underlying capture technology.
So what gives?
It turns out that the recent focus around climate initiatives and drive to reduce emissions has been spurring a more serious investigation of carbon dioxide sequestration projects, with many incentives realigned to drive projects forward.
While significant historical feasibility studies have been performed in the past two decades and numerous pilot projects have been initiated with the federal aid of grants and subsidies, it seems this time is a bit different.
Regulation has finally caught up to rhetoric and there are now more significant financial incentives to sequester various greenhouse gases (read: there is finally someone to pay the bill).
You might be wondering – why would anyone do that and what took this long?
The History
As it turns out, the long progression toward implementation of major carbon capture and storage projects has been a windy road. Some of the largest initial projects like PetraNova, an NRG initiative demonstrating post-combustion capture for coal generation, could rightly be labeled failures and wastes of taxpayer funding after being abandoned prematurely due to economic concerns.
In the case of PetraNova, the project began with a DOE grant and the intent was to use captured CO2 for enhanced oil recovery projects, with Houston-based Hilcorp Energy going as far as building an 80-mile pipeline to transmit the CO2 to West Ranch oilfield.
However, this project relied heavily on the state of the crude oil market to thrive. As crude prices faltered, the price operators were willing to pay for CO2 for enhanced oil recovery projects dropped accordingly, and with it, the returns of projects like Petra Nova.
State of the Market
Today, the project remains mothballed awaiting the day when financial incentives outweigh the unwieldly operating costs. For a CCS project, separation and capture can exceed $50/metric tonne.
The current bevy of major carbon capture and sequestration project announcements are being spurred by increasingly lucrativecarbon credits. States with low carbon fuel standards (LCFS), like California, as well as tax relief from the federal government under existing and proposed enhancements to the EPA’s 45Q program are driving most activity. The latest news out of Washington DC suggests that improved 45Q credits are being negotiated as part of the larger Infrastructure Investment & Jobs Act.
A key feature of credits associated with state-level LCFS provisions is that earning them requires demonstration that a facility can permanently store CO2, a requirement that is not easily met without significant capital expenditures and a lengthy approvals process.
Despite the difficulty in certifying a site, the door is open wider today for CCS projects to become a force in the drive to reduced emissions. It remains to be seen which companies will lead the way.
Andrew Schaper is a professional engineer and principal of Schaper Energy Consulting. His practice focuses on advisory in oil and gas, sustainable energy and carbon strategies.
For consulting or media inquiries, please contact info@schaperintl.com. To learn more about Schaper Energy Consulting, visit our website here.