ENERGY WATCH #3 - December 20, 2018
Carbon capture, utilisation and storage (CCS) has an important role to play in reducing GHG emissions as long as it is not seen as licence to withdraw from the common goal of pursuing a future based on clean fuel. The International Energy Agency (IEA), considers it essential if we are to limit the worst effects of climate change, and highlights it is a technology that has failed to live up to its potential over the years. The solution is there but how it should financed – and who pays the bill – is not clear but it needs to be rolled out as soon as possible so investors benefit from the cost-learning curve. Otherwise it will just get left behind.
In May this year, it said that “with only two large-scale carbon capture, utilisation and storage power projects in operation at the end of 2017, with a combined capture capacity of 2.4 million tonnes of CO2 per year, CCUS in power remains well off track to reach the SDS target of 350 million tonnes per year by 2030.
And yet there is a palpable sense of optimism in the sector as 2018 comes to an end. Has the technology’s time finally come?
The Global Carbon Capture and Storage Institute argues that the case for CCS is now “irrefutable” and a vital lifeline to beat climate change, in a new report, The Global Status of CCS, 2018. The world cannot meet its climate targets without CCS, it says. “It has become increasingly clear that the world will need all the technologies, mechanisms and approaches available,” says CEO Brad Page.
He adds that for the first time in many years, the past year has seen significant developments on CCS from a number of governments, including the US, the UK, the Netherlands, Norway and China. Many of them are reviving CCS programmes that were abandoned a number of years ago.
There are currently 18 large-scale CCS facilities operating around the world, with another five under construction and 20 more at various stage of development, he points out.
In 2018, more and more people started to recognise CCS for its cumulative capacity to mitigate climate change, the report says. “In the past year, countries have been incentivising investment, industry has accelerated deployment, new innovations have been unveiled, and new energy economies have emerged. CCS has proven itself as real, happening and here to stay.”
At the same time, the IPCC’s 1.5C report highlights the importance of the technology in helping to meet our climate targets. And that’s all great, up to a point.
But these same arguments were being made over a decade ago and nothing happened because governments and industry couldn’t agree on who should pay for it. Governments cancelled CCS projects because of the cost as the financial crisis started to bite, and the sector entered the doldrums.
There remains a certain amount of ambivalence about CCS, in part because in the past fossil fuel industry analysts have suggested it would obviate the need to roll out renewable energy. CCS technology should not be used to justify less effort elsewhere. It is needed as part of the solution.
Carbon Tracker says that CCS is important, but not a get out of jail free card, not least because to limit temperature rises to 2C, we would have to open one CCS plant every other day, and to get to 1.75C, it would have to be five a week – something that is patently not going to happen in the near term.
DNV GL agrees that “scale projects are needed now if CCS is to stand any chance of benefiting from the cost-learning curve rates enjoyed by other rapidly-advancing elements of the low carbon economy, like renewables and storage.”
But it adds that “our projection is that CCS will capture only 1.5% of emissions in 2050. That is another way of saying that CCS will not advance meaningfully without an extraordinary shift in commercial incentives”.
One of the main reasons for the lack of progress in CCS is that it is more expensive and more difficult than energy efficiency initiatives and renewable generation.
The failure of CCS to advance to date has been enormously frustrating. CCS is the only mitigation technology able to decarbonise large industrial sectors, particularly the steel, cement, fertiliser and petrochemical industries.
The scaling up of CCS needs to happen but progress remains glacial. For things to change meaningfully now requires a significant change in attitude and urgency from both governments and carbon emitters. It’s possible that fossil fuel producers will see a case to act in the existential threat from the rapidly falling costs of renewables and EVs – but most of them seem focused on investing in the latter technologies rather than CCS. Governments may be reviving projects, but they don’t seem much more prepared to incentivise the technology than they were a decade ago.
CCS won’t gain scale until costs come down, and costs won’t come down until more projects are built. But it won’t happen until governments commit to the technology. “Sufficient investment in CCS simply will not happen without strong and sustained government policy,” says the Global CCS Institute.
CCS requires investment in long-lived capital-intensive assets, and that won’t happen unless companies and investors are sufficiently confident in current and future policy to be prepared to commit to investing in the technology.
As the Institute says: “Policy must not only support the business case for investment in CCS, it must win the confidence of investors. Once policy confidence is in place, long-term capital investments can be made and the virtuous cycle of investment and cost reduction will accelerate.”