Carbon Capture and Sequestration: What’s Ahead for North America in the 2020’s

 

     Recently. I attended a webinar presented by Todd Bush of Decarbonfuse.com titled Carbon Capture Outlook 2023. He provided a good overview of what’s ahead for North America in CCS and the different drivers that will be important. I am summarizing the webinar here.

     According to analysis from Princeton University using different scenarios the U.S. needs between 0.8 and 2 Gigatons of CO2 to be sequestered, presumably to 2050. The U.S. 45Q tax credits for Carbon capture and sequestration are: $85/ton for geological storage, $180/ton for direct air capture (DAC), and $60/ton for CO2 enhanced oil recovery. There is direct pay for the first 5 years. The credits are transferable. Canada, in comparison has a carbon tax of $50/ton which increases to $130/ton in 2030 – EOR is excluded. These numbers for both countries could change due to political climates, energy security concerns, or new technology.

     Decarbonfuse’s data analysis gives three potential Capex scenarios based on announced projects only, where the highest could see $33 billion in CCS Capex by 2030, although $28-30 billion is more likely. They also have a low scenario where projects are delayed and experience permitting and supply chain bottlenecks, that sees Capex dropping as low as $10 billion. However, their high scenario has Capex up to $13 billion in 2023 alone. They do not include energy related Opex in these analyses, which in some cases can be 25% or more of a project, although they predict 5-25% depending on project. Carbon capture costs vary widely for different types of facilities and by asset for facilities of the same type. They note that about half of hydrogen and natural gas projects would be under $85/ton and most ammonia, ethanol, and cement projects would be under $85/ton.

     They note that 155 CCS projects have been announced for North America through 2022 and a couple more in January 2023. This does not include micro-capture projects for things like buildings and shipping. They also do not include pilot and demonstration projects, only commercial projects. Ethanol, natural gas, and hydrogen will make up the largest number of facilities. They think ammonia, hydrocarbons (much will be LNG facilities), and biofuels can reach 50% CC equipped by 2030. Hydrogen, ethanol, methanol, and cement will be a bit under 50%. I hope I understood that correctly since that seems like a lot to me. As far as spend scenarios, it will depend on constraints which include delays, permit bottlenecks, public opposition (big in Midwest and Wyoming), and supply chain issues. Permit approval times of 18-36 months are expected. As expected, pipeline companies will take on much of the transport side and oil and gas companies will take on much of the sequestration side. Carbon utilization and carbon capture will involve many new and existing companies more specialized in those functions. Most projects announced thus far are in Alberta, the Midwest, the Gulf Coast, the Rockies, and the Permian Basin region.

     Some equipment and materials constraints include steel availability, constrained till mid-2023 nationally and till mid-2024 in the Gulf Coast. Also of limited availability is CO2 compression equipment, heat exchangers, chillers, and pipe. Availability of skilled labor is also a constraint and that will vary by region. Coordination will be required to meet project timelines.

     New business models are being developed. CCS-as-a-service is one possibility. CO2 utilization companies will be integrated into some projects. Standardization is something that will need to be pursued to maximize operational efficiencies, comparison of projects, and shorten learning curves. Modular techniques for manufacturing components will need to be pursued for the same reasons. The goal is to jump over from pilot to scale to commercialization at scale. Community support will be needed as public opposition has been significant in some areas. Cancellation of some projects may occur if costs overrun, if the political climate changes, or if more focus goes to energy security, taking from decarbonization.

     The EPA’s recent approval of a Class II injection well for CO2 sequestration is a good sign that more existing wells will be approved, making sequestration more flexible if more existing Class II wells are approved. These types of wells already inject CO2 for enhanced oil recovery. So far only a couple of Class VI wells have been approved but there are about 20 permits pending and those in Wyoming and North Dakota are expected to be approved soon.

As an addendum there are other market reports predicting the size of the CCS market going forward. The NETL's latest Carbon Transport and Storage Newsletter, (Vol 23, No. 2) notes a market report by MarketsandMarkets that suggests the CCS market will be worth $7.7 billion by 2026 (or $4.9 billion by 2027) with a compound annual growth rate of 15.1%. They also note a lot of uncertainties due to the constraints mentioned above.

 

References:

Webinar. Carbon Capture Outlook. Presented on February 1, 2023. Todd Bush. Decarbonfuse.com

NETL Carbon Transport and Storage Newsletter. Vol 23, No 2. February 1, 2023.