Energy Analytics Energy Transition

The future of CCUS: Key opportunities and challenges in commercializing large-scale projects

byEnverus

Panel discussion with CCUS experts from Enverus EVOLVE Conference

Introduction

CCUS offers a promising solution to curb greenhouse gas emissions by capturing CO2 from industrial sources and power plants and storing it underground. CCUS has gained significant attention in recent years, and the business potential of CCUS has sparked interest in various industries and in governments, resulting in a wave of project announcements across the United States. As of May 2023, Enverus is tracking more than 250 million tons per year of announced projects. For perspective, today we have about 25 million tonnes per annum of capture capacity that is operational.

We recently hosted a panel discussion about the key opportunities and challenges in CCUS at the Enverus EVOLVE conference, featuring insights from CCUS experts:

The discussion focused on the opportunities and challenges in commercializing large-scale CCUS projects, including:

  1. The most underappreciated risks in CCUS
  2. The role of financial viability to create successful CCUS projects
  3. The importance of the carbon value chain
  4. The potential for future innovation in the CCUS sector.

Fill out the form below to watch the full panel discussion.

The most underappreciated risks in CCUS

The panelists suggested that evaluating the technical considerations, the economics and the long-term liability of projects are priority.

Basak: “There is a need to evaluate various technical considerations before moving forward with a project. These considerations include the quality of storage space, subsurface risk, proximity to transportation partners and regulatory and policy support. Not all opportunities are equal, and successful CCUS projects require careful assessment of multiple factors.”

Ash: “The economics of CCUS projects, particularly the cost of capture is an important underappreciated risk. Different facilities emit various types of CO2, and retrofitting existing facilities with capture technology can be expensive and challenging due to the lack of standardized capture methods. Additionally, a well-connected midstream infrastructure to ensure the continuous and reliable transport of captured CO2 is an important factor.”

Fred: “Long-term liability is a major risk factor. Over the last decade, the risks associated with CCUS have decreased considerably. The industry has made significant progress in geologic evaluation, risk valuation, and the availability of risk management instruments. The development of risk management pools and the increasing interest from insurance markets indicate a positive trend in risk reduction for CCUS projects.”

The role of financial viability to create successful CCUS projects

The financial viability of CCUS projects is a crucial factor that determines their long-term success.

Basak: “Regulatory support will be significant, such as the 45Q tax credit in the United States, which provides certainty for project developers. However, it is essential to look beyond short-term incentives and focus on creating a sustainable market for CCUS beyond the 12-year period covered by 45Q. The emergence of voluntary carbon markets and the potential for blue ammonia or blue hydrogen products to command premium prices provide additional avenues for financial viability.”

Ash: “There will be important for carbon markets to incentivize emitters to participate in CCUS projects. There is also a need to address discrimination against CCUS in carbon markets, as CCUS plays a crucial role in reducing emissions and should be encouraged. Proximity to customers and balancing capture costs with transportation and storage expenses will play a key role in the financial success of CCUS projects.”

The importance of the full carbon value chain

The CCUS value chain encompasses multiple stakeholders, including emitters, transportation and storage providers, and regulators.

Ash: “Emitters seek secure transportation networks and redundancy in storage to ensure uninterrupted CCUS operations. Conversely, transportation and storage providers must demonstrate their capability to handle CO2 volumes consistently and reliably. Additionally, emitters seek partnerships with reputable brands and balance sheets to mitigate their financial liability in case of any adverse events.”

Fred: “Individual states need to take on primacy in administering the Class VI program to expedite the permitting process for CCUS projects. State involvement will provide the necessary expertise and resources to handle the expected increase in project applications. The successful deployment of CCUS projects will require collaboration between governments, industries and local communities to ensure public support and overcome any public perception issues.”

Ash: “Aligning the value chain and building redundancy are essential to ensure that emitters find the CCUS projects economically viable.”

The potential for future innovation

CCUS projects, like any other technology-driven sector, will benefit from ongoing innovation.

Ash: “The potential for blue ammonia or blue hydrogen products to command premiums in the market. The success of these products will rely on making strategic bets on the emergence of a blue economy and the willingness of customers to pay a premium for a low-carbon product.”

Conclusion

While CCUS presents a promising solution for achieving emission reduction goals, it requires a comprehensive evaluation of technical, economic and regulatory aspects. The financial viability of projects, driven by supportive policies and growing carbon markets, will be crucial in attracting investment and ensuring their long-term success.

The CCUS value chain plays a pivotal role in securing partnerships and ensuring the reliable transport and storage of captured CO2. Collaboration between stakeholders and public support will be essential in overcoming challenges and driving the expansion of CCUS projects.

As the CCUS industry evolves, continuous innovation in capture technologies and market strategies will be instrumental in maximizing the potential of CCUS and accelerating the transition to a low-carbon future. With concerted efforts from governments, industries and communities, CCUS can play a crucial role in curbing greenhouse gas emissions and shaping a sustainable and cleaner world for future generations.

Want to discuss CCUS projects with our team of experts? Fill out the form below.

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