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Carbon Capture: Part 1

An introduction and a look ahead

In this five part overview, we discuss the conditions that would make carbon capture economically attractive, the status and cost of carbon capture technologies today, and how they are likely to progress. Irrespective of one’s political views, there is likely a substantial investment opportunity in the area of carbon capture.

Dave Johnson coal-fired power plant, central Wyoming / By Greg Goebel

Summary and Outlook

The growing resources available to support carbon capture technologies along with domestic and foreign policy changes and increasing levels of public support make it likely that we will see significant commercialization of carbon capture technologies in the next 10 years. Carbon capture technologies fill one of two roles: 1) reducing CO2 emissions from industrial processes, making them more carbon neutral, or 2) removing CO2 from the air, acting as a negative emissions technology (NET).

Large projects (>1 million tonnes of CO2 per year) that reduce emissions by capturing CO2 from industrial sources and non-utility power plants will be a steady but slow area of growth, given long project timelines and the large quantities of capital required (>$500mm). With only the existing US tax credits to incentivize carbon capture, such projects will be led by large corporate entities (likely oil & gas majors), rather than electric power utilities or midsize companies.

At a carbon tax level of $50–60 per metric tonne of CO2, removing CO2 from the emissions of large industrial facilities could be cost-neutral with today’s technologies. Liquid amine scrubbing technologies will likely remain the technology of choice for CO2 capture from large industrial sources, unless there is significant process innovation around solid adsorbents or membranes. Svante, a leader in carbon capture process innovation, is a possible disrupter, and research continues into fluidized beds and other types of processes that could make CO2 capture with solid materials more cost effective for gases with high CO2 contents (5–30% CO2).

The cost of directly capturing CO2 from air has the potential to fall significantly due to innovations in solid materials for CO2 capture, material heating and cooling strategies, and optimization of carbonation technologies. This field is currently led by new companies rather than large established ones: specifically Climeworks and Carbon Engineering are currently deploying carbon capture plants. Business model innovation may enable “crowdsourcing” or corporate funding of capturing CO2 directly from the air if capture costs can be reduced to $100 per metric tonne or less. In all cases, the ability to site carbon capture systems near pipelines, storage sites or other CO2 users is critical.

If small scale CO2 capture plus utilization or chemical conversion technologies mature, CO2-to-products plays at smaller scales of 10,000–100,000 metric tonnes of CO2 per yr could become an area of rapid growth. These technologies require either very low capture costs ($40/tonne or less), or the ability to use non-pure CO2.

Introduction

The discussion around climate change and possible solutions is evolving rapidly. In the US, an increasing number of large companies (Microsoft, Delta, Nestle, and Stripe to name a few) have made public announcements supporting renewable energy and climate change solutions. Tree planting, regenerable agriculture, and CO2 capture from the air receive significant attention in the mainstream media. We believe that CO2 capture is poised to become a huge economic opportunity if carbon markets develop.

For carbon capture technologies to make a significant impact on global CO2 emissions, they would need to capture gigatonnes of CO2 per year scale (1 gigatonne = 1 billion tonnes = 1 trillion kilograms.) The scientific community estimates that the world’s yearly CO2 emissions (attributed to humans) are roughly 35 gigatonnes per year (Gt/yr). [1] Emissions from the US energy sector alone account for 5.3 Gt/yr. [2] For an accessible description of where these estimates come from with primary sources, I highly recommend a recent article by Ryan Orbuch of Stripe.

How does the scale of impactful CO2 removal compare to the scale of money that might flow into this area? If a carbon tax appeared overnight at the level of Microsoft’s recently publicized internal carbon tax — $15 per metric tonne of CO2 — removing a gigatonne of CO2 per year would be a $15B opportunity. (For context, Microsoft estimates that their direct and indirect activities produce 20mm metric tonnes (mt) of CO2 annually, which means that offsetting their current emissions would cost them $300mm/yr.)

Why is now the right time for this technology? The amount of capital funding for climate-related technologies has increased dramatically, as has the level of public attention (which corporations are increasingly leveraging for branding and other reasons). Research and development (R&D) programs under the US Department of Energy (DOE) and Advanced Research Projects Agency-Energy (ARPA-E) that began in the late 2000s and early 2010s have invested billions of dollars and raised the level of technical readiness of several technologies to the stage where they can be demonstrated at large scale in the real world. [3] California recently changed regulations to extend fuel credits to carbon capture. The situation is similar in Europe where the European CO2 Test Centre Mongstad (TCM) is also testing many new technologies. Regulatory bodies in Europe are signalling that carbon pricing is around the corner (and already exists for the airline industry). The stage is set for a few companies (who are able to rapidly scale and execute) to break out and gain significant traction if the cost of CO2 capture from power plants and industrial sources can be reduced to $40/mt CO2. [4]

The range in costs for capturing CO2 is huge: from nearly pure industrial sources of CO2, costs can be as low as $20/mt of CO2 captured. The cost of capturing CO2 from power plant emissions is currently $80–100/mt of CO2, and a small-scale Climeworks facility that currently captures CO2 directly from air reports costs less than $600/mt of CO2. With the exception of industrial capture from pure sources (a very mature technology), these costs will fall as additional facilities are built and scale increases. Due to regional variations in regulatory environments, demand for CO2, and existing infrastructure, pockets exist where even direct air capture of CO2 may be commercially viable. This is illustrated by the recently announced engineering study between Oxy Petroleum and Carbon Engineering to capture CO2 from air and combustion gases in the Permian Basin, where it can be used directly for enhanced oil recovery (EOR). [5]

The next post in this series covers current CO2 markets and other drivers for carbon capture technology.

Notes

  1. Source: 2019 National Academy of Sciences Consensus Study Report
  2. Source: US EIA reported CO2 emissions in 2018
  3. Since FY2010, Congress has provided more than $5 billion total in appropriations for DOE carbon capture and storage (CCS)-related activities through the Fossil Energy Research and Development (FE R&D) program, with a focus on coal-fired power plants. The annual amount going to CCS-related R&D each year has increased since 2017; Congress appropriated $727 million for FY2018, and both House- and Senate-passed bills for FY2019 to match or increase this. Source: a Congressional Research Service report (2018).
  4. This assumes CO2 transport costs of less than $10/mt CO2 and that companies are able to receive the 45Q tax credit of either a) $35/mt CO2 while avoiding a $5–15/mt CO2 purchase cost for EOR, or b) $50/mt CO2 sequestered.
  5. Carbon Engineering press release, May 2019

Last update: 13 March 2020

Prime Movers Lab invests in breakthrough scientific startups founded by Prime Movers, the inventors who transform billions of lives. We invest in seed-stage companies reinventing energy, transportation, infrastructure, manufacturing, human augmentation and computing.

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