Speaker 1 (00:08):
Good morning, everyone, and good afternoon. And thank you for joining the session today. This is the first in RBC series of navigating the energy transition. This is obviously such a complex topic. We thought that would be best to dig into one aspect at a time we're starting with carbon capture today. Um, but we'll obviously discuss the various other hot topics such as hydrogen, low carbon electricity, renewable fuels, and a bunch of other topics. We've set this up as a monthly session. I'm sure many of you like us, um, are, quite fatigued with multi-day conferences on webcast. So we thought it'd be easier to digest this way. I'm hosting this session with my colleague, John muscular runs our European utilities research team, and you'll hear from him in a second. Um, but over the course of the coming months, you'll hear from a number of, obviously analysts on various topics.
Speaker 1 (00:59):
Thanks, Barry. Um, and welcome again to everybody, , on the, on the lines and on the webcast today, as Bharara says, we're going through a series of different events, but today we're going to focus on, carbon capture, use and storage. Um, we have three speakers joining us, all of which cover different aspects of carbon capture. Firstly we have SUA and tan who is Shell's group carbon relations manager, and their representative for CCS for shell, the oil and gas climate initiative. , we then have Jason [inaudible], who is director of innovation of Drax heavily involved in Drax is a bioenergy carbon capture use and storage projects or backs for short. And then finally Steve Oldham, chief executive officer officer of carbon engineering. , Steve will be able to discuss, direct air capture technology, which is the focus for carbon engineering, as Beryl mentioned. Um, we would like to make this as interactive as possible. You should be able to submit questions online. Um, so please do that during the, during the discussion, for now I'll hand back to barrage and we'll get the initial Q and a started.
Speaker 1 (02:16):
Great. Um, so maybe we can start with you. , Suzanne, um, CCS has been talked about for quite a long time and obviously shell has been doing, a lot of work around this, particularly around the role it plays in a net zero world. So could you start my, setting the scene for us, and talking about the role of CCS in a Paris aligned, , well, why is it so important?
Speaker 2 (02:40):
Yeah, thanks. , thanks barrage and hi everyone and speakers out there. Good morning. Good afternoon from wherever you're dialing in. I think, , the key thing about CCS is, , that we've seen develop over the last little while is that every scenario from the IPC, from the I, the scientists, the experts agree that CCU S has a critical role to play for the world to achieve the Paris agreement goals of a well below a two degree world. And importantly, also I think a recognition about the role of CCS support industry growth and jobs. The other key thing that the experts are agreeing on that CCS is vital for the meaningful de-carbonization of critical heavy industries like steel cement, refiners, and chemical complexes. And so that acknowledgement of the criticality of CCU, is really quite well understood now and agreed on by the experts.
Speaker 2 (03:36):
I think that we, in order for CCS really to meet the world, you know, help the world to reach these climate ambitions, we need to really start storing CO2 at scale by 2030. So right now, in 2020, there are 51 large scale CCS facilities in operation or in development. So for example, shell operates the quest, , CCS project in Alberta, Canada that has captured CO2 from our hydrogen production and safely stored nearly 5 million tons of CO2 since 2015 to combine those 51 odd facilities will capture and store about 30 million tons per annum of CO2 when they're all built, developed, and operational, but to really meet the world, well below two degree wall, that's the, if that's the real ambition of the wall, then we need to multiply this capacity rapidly. And I really don't think we can underestimate the size of that challenge, particularly given the lead time for projects to be identified, developed, and build something.
Speaker 2 (04:32):
I'm sure that both, both, Steven and Jason will talk about in their context as well. So what does that mean? I mean, I think it really, you know, it's a point that we kind of immediate action. We've got to keep up this extensive collaboration between governments, between our shareholders, between us as industry, importantly, the investor community. And I'm happy to talk a little bit more about the role the financing sector can play, in CCUS, we need our NGOs on board. We need our communities on board because remembering that these plants and these projects are built on land usually. And so you really do need those fence line communities to support, um, the development of these projects as well, to really kind of accelerate the deployment, that, that is required in CCU S and I should also want, one other short point to make as well on that should know that, you know, Charlotte, , in April this year, we announced our ambition to be a net zero emissions energy business by 2050 or sooner. And we've been clearing that that CCRS will be an important technology to help reach our ambition.
Speaker 1 (05:37):
Great. Thanks for that color. Maybe we can turn to you. Um, Jason Drax has some ambitious plans in itself to be, to be carbon negative over time. And CCS seems to be a big part of that. You focused on the, Beck's technology. And, I wonder if you can walk us through for the lay person, what exactly that is, where you are in the stage of development and what it would take for you to scale that up.
Speaker 3 (06:02):
Thanks, Brad, and good morning, good afternoon to, to the audience. Um, so Bex is bioenergy carbon capture and storage. So it's a combination of bioenergy in our case, biomass, electricity generation and carbon capture and storage. Um, so the CCS technology that you use for backs is, is nothing new. It's no different to the CCS technology that's in use in some of the projects around the world that so-and-so dimensioned. Um, so our plans at Drax are all around, I guess, um, what two angles to backs. So you get, um, carbon neutral power and you also get negative emissions. Um, so you kind of get to foot wound to, to, um, to additive, things that the world needs in the journey towards, um, you know, a net 0 20 50. Um, so in order to get there, we started our development. We started our development on biomass in 2004.
Speaker 3 (06:55):
And we've been, um, for you and it's on a hundred percent biomass. Um, we started that journey in 2013. So two thirds of the power station now runs on biomass. Um, the other two units on coal will close next year. Um, so we're focusing very much on how do we add to that biomass technology and vexes our chosen path. Um, we have currently two pilot plants on site. So we have, one from MHI, which is, an established CCS technology, an AME based technology. Um, and we also have a pilot plant from a small UK company called C capture, which users are similar chemistry, as a solvent based technology. , but the formula of the solvent is different. The processes ever so slightly different. Um, I think one is, one is a market ready technology. Now, one is already being in use in the market.
Speaker 3 (07:45):
One is probably a future technology. Um, but when we're using both pilots at the moment that understand the interaction between those two different CSS technologies and our biomass glucose, um, so far that work is going, Brad, welcome to plan. Um, we're in the middle of pre-feed work now, for backs. So we're doing all of the pre-engineering work that covers things like, um, available space on site, how we would connect where the various energy sources, cooling sources, et cetera, for the CCS process, um, , needed. , and then next year we will move into, pre-feed sorry, into full feed, onsite Clarence work. , I'm happy to give, a brief update on, on kind of how the CCS process works, if that would be useful. Yeah, that'd be useful. Thank you.
Speaker 1 (08:41):
When you're doing that, just think about, um, what's needed for you to, to move to the next stage of development, particularly around the policy framework. I know the UK government released their consultation response on CCS recently, which was pretty favorable in terms of the headline messages, but what sort of, , incentive frameworks do you think you're going to need to push forward with that?
Speaker 3 (09:06):
Okay. So, um, I've very quick run through, um, how does Bex work? Um, so I'll have the CCS work, I guess, in, in a published world. Um, so we produce a flue gas, flue gas has, about 16% CO2 in it. Um, so we have to move the flue gas in the solvent together for the reaction to take place. So we do that in a vessel carbon absorber, it's quite a tall, thin vessel. Um, once the solvent has been in contact with the flue gas, the CO2 moves out of the flue gas and into the solvent, the solvent then carries on round its loop, sort of solvent goes round in a constant loop. It carries on around that loop into a vessel called a stripper. Um, we changed the temperature and the pressure of the solvent, the CO2 that was caught by the solvent is then released.
Speaker 3 (09:51):
Um, we compress that CO2 and then that's it, two goes off a stoke geological storage, or we use, um, the solvent now devoid of, CO2 is called a lean solvent. And that goes back into the process, um, to meet, I guess, fresh flue gases that comes through to do the same job again. So it's a, it's a constant chemical process that removes the CO2 Lucas, in terms of what we need to make that happen. So our timeline is to have our first batch Unix online in 2027, which kind of coincides with the end of the, um, current support for biomass. We're doing several things to make that, a possibility. Um, so a large parts of the cost of running a, a power station like houses, a fuel cost, and it's just the same in the back's world. So we have a, a goal to take a roundabout third out the cost of our biomass field.
Speaker 3 (10:43):
Um, and we're well on with that journey now. So where, you know, that is going to plan we're well down that path, um, we would need to start construction probably in 2023 for 2027. Start-up that 2027 status allows us to have one unit running in time for our stated ambition of being a, um, have negative company by 2030. Um, but in order to start construction, we would need to take FID early in 2023, which really gives us the time between now and then to do our engineering work pre feed work, all sorts of workflows with government to make sure that the right levels of regulatory support are in place, um, both for the TNS infrastructure. So the transport and storage infrastructure, um, which has been developed certainly in the Humber region through a vehicle called zero cabin Google partnership. Um, so that includes people like ourselves, Equinox, national grid, um, lots of other local industrial emitters.
Speaker 3 (11:41):
Um, it's probably one of the highest CO2 emitted regions in the country. So, um, lots of scope there for sort of post COVID green recovery, um, capital project growth, all geared around decarbonization. Um, so I think the government support is the key thing for us. We're working closely with government, the recent announcements about, um, consultation on business models for TNS and CCS, very helpful. Um, I think there's a call for evidence to very shortly for negative emissions or net negative emissions technologies. And we will be actively involved in that book success in that is ultimately one of the key gaps that we will need to see, um, in order to solve, press the button for, um, FID in 2023.
Speaker 1 (12:28):
Great, thank you for that. Um, and maybe Steve, you can start that patient so we can, we can bring you in, um, you're obviously looking at a different technology to, to Jason in terms of direct air capture. Um, can you just talk a little bit around how that fits in, um, how it's going to form part of the solution, I guess, alongside, um, something like backs, , and some of the challenges you face in bringing direct air capture to the market. So,
Speaker 3 (12:59):
Good morning and thank you for inviting me. So let me first talk about, you know, why direct air capture, why does it make sense? So we have to get to net zero. I think there's wide recognition of that as Sue and sat in her introductory statement. So again, to net zero, you have to stop every single emitter on the planet, every single one. And you have to collect the CO2 from that emitter. You have to take it to somewhere, you can permanently store it, and then you have to put it back underground. Again, every single emitter on the planet, every car, every truck, every play, and every boat, every chemical plant, every agricultural facility, every cement plant, it's a huge, huge undertaking. So when you look at that on a global scale and the UK is a mini version of that global problem, what you find is that you have an array of costs and array of feasibilities.
Speaker 3 (13:54):
So there'll be a series of low hanging fruit things that are relatively easy to decarbonize plants, where you can capture CO2 directly out of a chemical plant. But what about cars? What about trucks? What about planes? So what director type capture does, is it captures the CO2 directly from the atmosphere. It has two advantages. Firstly, it means you can eliminate any emission from any place on the planet of any type in any moment in time. And secondly, it allows you to address legacy emissions. So while net zero is critical, even after getting to net zero 95% of the CO2 that causes of climate change problem is already in the atmosphere. We have to deal with that too. So don't attend capture gives you a way of picking up CO2 from the atmosphere that was mentions that we can't collect or stop the ones that are expensive to stop too difficult.
Speaker 3 (14:54):
And then they non-disruptive way we can pull those emissions back down and bury them underground. So where are we up to with that technology? So behind me, you see a plant that is, entering into detailed design it's in the United States. We're building that with Occidental, um, which is an energy company in the U S it captures a megaton of CO2 per year, and that's the equivalent of about 40 million trees. It's less than a hundred acres and he's run up renewable electricity predominantly. So, um, where are we in the United Kingdom and bringing this technology all this morning, we announced a partnership with pale blue.in Scotland, which is running the acorn facility. And we're going to work with pale blue.to bring director of capture technology, which, which is, fully ready for implementation and deployment into the United Kingdom and provide this way in which you can capture any emission of any type.
Speaker 1 (15:56):
And I know it's, um, perhaps difficult to compare and contrast the, the cost of these technologies, um, because I think they're all relatively unique depending on where they're located and the, and the exact technology you're using. But is there anything you can say around the cost of direct air capture versus traditional carbon capture and storage, particularly, maybe backs. Um, and as we look at that through the, through the life cycle of the, of the assets, some of the criticisms may not may or may not be appropriate in terms of your particular plants, but some of the criticisms of direct air capture is the energy intensity of the, of the absorbance of organs, um, versus say with backs where you, obviously needed a lot of forestry to, to produce the biomass in the first place.
Speaker 3 (16:50):
So, you know, I think, um, I never liked the route of comparing a, to B, you know, I could talk about the extreme challenge of finding a forestry, around the world, , to, to produce the trees, how that banks requires, but, you know, everything has its advantages in this disadvantage. So dietary capture is more expensive than capturing CO2 from a flu stack. Of course it is CO2 from a flu stack is much more concentrated, but there's only so many food stacks. And when you run out of flu stacks, what are you going to do about the next CO2 emission? So where does that capture fits in is for those emissions that are too expensive to fix another way. And by providing a mechanism to capture any dimension from anywhere, you have a way in which you provide a, a, a worst case cap on the cost of eliminating climate change.
Speaker 3 (17:46):
So when I was in the UK, I've been to the UK, twice the last year, talking to many different government officials. What they recognize is that carbon capture can deal with a certain percentage of the problem. Backs can deal with a percentage of the problem, but then you need a mechanism to deal with all of the other CO2 emissions that you can't stop any other way, and you have to deal with legacy emissions. So that's what direct air capture gives you. It's a infinitely, scalable solution, as that's, that's not my words, that's what came out of diamond sacks.
Speaker 1 (18:23):
Maybe we can, switch gears a little bit. Um, I wanted to throw this out to all of you, but maybe starting with two, um, um, can we talk a little bit about policy, um, carbon pricing is an obvious one that would incentivize, you know, or provide more support for carbon capture, but there's also different mechanisms in different regions. So, you know, what do you envisage that you need to see from governments and policy makers to make, CCS a viable standalone business, in terms of carbon price or, or otherwise?
Speaker 2 (18:55):
Yeah. , thanks. Thanks barrage. And I think, you know, I think just closing out on Steve's point as well. I don't think it's an either or question, I think it's an end quote, answer to that. You know, I think Steve is right. There's a role for DEC does w sorry, don't direct air capture. There's a role for backs as well for CCU S , and I think it's, it's definitely not an either or the scale of the challenge of what we need to do are to help the wall to meet that, that Paris agreement goal. , it's so significant that, that it's really not a choice. Um, so, so let me come back on the policy question. So, you know, let me speak specifically about CCS for now. So it sees us is a pre-commercial technology. It's reliable, it's proven it's ready for deployment at scale, but the reality of where we are in that technology curve right now is it still requires financial support to make economic sense, you know, the rough estimates for the total cost of captures transport and storage.
Speaker 2 (19:48):
And again, I think, you know, Steve sort of highlighted this as well. It could range somewhere between, you know, an us dollars 40 to $200 per ton, because it just depends on a whole range of factors that are so specific to the, to the site. So the purity of the CO2 stream, the capture technology, the proximity to storage sites, how far you have to transport it, , as well as other vertical integration and, and you know, where possible people, you know, do utilization revenues like through high end store or recovery. So to just say that a carbon price, I think alone, I think it would have to be very, very high to dramatically accelerate the CCS deployment that's needed. And I think politically that's very unlikely into the short to medium term. So if I look at some numbers, you know, the IEA energy technology perspective that just came out this week, you know, cites some different ranges for CCU S , in hard to beat, , sectors.
Speaker 2 (20:43):
And that, you know, they're, they're looking between $80 a ton. This is dollars to $130 a time depending on the sector. So it's a wide range, and we're definitely nowhere near that in any of the schemes that we have available. Um, so it is necessary, I think for governments to step in, , , with some quite specific supporting port policies, um, to try and push this through. So in the U S you've already seen, and I think a lot of credit to the government there, or of the, what they call the section 45 Q tax credit, which effectively gives a credit for every ton of CO2 stored. Um, you know, you have different balls. Like the Norwegian government, for example, has played quite a critical role in supporting the Northern lights project, which shall is, , , , partnering along with, , [inaudible] and, , total, , which I think another key flagship project that the Norwegian government has recognized, and it's directly funding and supporting, because it separates out the transport and storage component from the capture component, , by taking obviously all the CO2 that's captured on shore, transporting it via ship into a central point.
Speaker 2 (21:49):
And then it goes by pipeline and is stored in, into the, in the deplete. It fills it off the in the north sea. And that, that kind of, I think creativity, and I think the Norwegian governments and the EU, um, commissioned sort of acknowledgement of home Portland, that project is, and that particular business model is, is now for example, something that the Southeast Asian countries are looking at, because for them very often, you know, trying to do transport and storage kind of country like Singapore, for example, which is so small, it's quite difficult. So I think that role for government now, you see quite clearly, not just through direct subsidies or through funding or through, you know, tax credits or a regulated asset base that they're looking at, for example, in the UK, I think that kind of notion that you need quite a few different policy mechanisms to get CCU S to a place where it becomes commercial, , and something that we can get more investors to financing, um, is, is quite critical.
Speaker 3 (22:46):
Can I add a comment on that? I think, um, I think it would be beneficial to describe why this plan behind me is getting built. So this plant is in the United States, , it's enabled by some innovative policy instruments around carbon pricing, , that I think, you know, the fact that we're building this plant demonstrates that successful. So it was still inside the tax credit for CO2 removal. What does that do? It incentivizes every industry that has a tax battle to find a way to eliminate its emissions. It doesn't specify a solution. It just specifies the fact that if you cut your carbon by a certain quantity, we'll give you a tax credit and everybody pays taxes. The second thing that enables this plant is California's low carbon fuel standards. So in California, they have set up a market based system where the state in, in the case of California dictates that the amount of CO2 carbon intensity in any fuel in the state has to drop over time.
Speaker 3 (23:48):
So if you're a fuel provider in California, which is, I think the fifth largest economy in the world, you have to find a way to decarbonize. And so the, the funding and the money goes to the cheapest solutions that are, um, eligible under the scheme. So the markets that's the price, the consumer barely notices because it ends up as a very small percentage of the cost of the leader of gas at the pump. So the combination of those two policies are market-based incentive that allows the market to set the price and the tax credit that incentivizes every company to find a way to get to that zero. That's what allows this multi hundred million dollar plant behind me to get built.
Speaker 1 (24:36):
That's great color. I appreciate that. I'm still sticking with you, Steve, um, overnight the press release from carbon engineering about a partnership in the UK. Um, so could you talk to us about the significance of that? It feels like the UK could be a quite meaningful player, in carbon capture. Um, but if you could give us your thoughts on that. I appreciate it.
Speaker 3 (24:57):
We're delighted to partner with pale blue dot. Um, and why do we think that UK is a good location for Derek to capture? So fundamentally for me, three things, and number one, you have access to the north sea. The north sea has the capacity for giga, tons of storage of CO2. And in Europe, there's only a small number of countries that have access to the Nazi. The UK is one of them. It is an asset for sea prostration, which can be widely used. Number two, lots of opportunity for renewable power on the east coast of Scotland. That is coast of the United Kingdom. There's plenty of, of wind and the potential for solar power. , so the availability of new, renewable electricity to power direct air capture plants is that, and then number three, you look at the skill set required. These chemical plants, they have to be constructed and operated.
Speaker 3 (25:53):
The skillset that you have in those industrial region regions is exactly the skillset that you need to operate and build these plants. We're partnered with sit down in Texas to build this plant. The same skillset is available in Scotland and Northeast envelope. So I think, I think we all think carbon capture is going to be one of the largest growth industries in the 21st century. The United Kingdom has the potential to be a real leader in that, with those core assets that I just described. So what we wanted to do is we've developed the technology. It works, we want it to bring it into the United Kingdom with a partner, , and allow the United Kingdom company to be the one that exposed that builds the plants, employing UK citizens and building a new industry.
Speaker 1 (26:41):
That's great. It sounds very, um, one, one last one thing you threw out and then we'll, I think we can open up to questions from the audience, cause there's a long list of them. Um, you wear, you wear a few hats. Um, I wanted to ask you about your role within the oil and glass, climate initiative. Um, you are the CCS champion OGCI. Um, so clearly you're passionate about the subjects. Um, when one think about the colonization, particularly around the very carbon intensive industries, like steel cement, et cetera. Um, you know, what is the role of collaboration within that? And, and also, you know, why does it make sense versus shell trying to do something alone? Um, and what what's the, I guess ultimately what's what is a DCI trying to achieve within CCS?
Speaker 2 (27:28):
Yeah, thanks. Um, so maybe just a bit of context. So the oil and gas climate initiative, it's a CEO led consortium of 12 companies is a mix of both international and national oil corporations. And we represent, I think at last check about 30% of the world's oil and gas production. So quite substantial. Um, so last year in September, we launched what we call the CCU S Kickstarter initiative. And it was really this acknowledgement about the need to facilitate large scale commercial investment in CCU S and we, when we thought about it, and we told them about the challenge of what needs to be done, um, we really wanted to focus on this notion of how do we create an enable multiple at global scale, low carbon industrial hubs. So these hubs, you know, the reason why we're looking at it that way is that it would allow us to capture CO2 from several different industrial sources.
Speaker 2 (28:20):
You bring the economies of scale where possible by sharing transport and storage infrastructure. And I think also it allows us to work with governments and with the local communities around which these hubs would be built to really try and facilitate those necessary market conditions for investment. So obviously member companies ourselves are investing in some of these hubs, and I'll talk about one in the UK in a minute, but we want to make it, , something, , also for other independent investors and people in the finance sector, for example, to also be, you know, see the financial value in investing in some of these hubs. Um, I think what's also been really lovely is, , for example, , that hub concept and the importance of trying to find efficiencies by grouping these together as in a geologic geographical location, and then the associated geological storage, , , has also been recognized for example, by the UK government, you know, in the CCS infrastructure fund that it announced, , that the chancellor here talked about in February and it's in his budget update.
Speaker 2 (29:18):
And it was clear to say the UK would allocate at least 800 million pounds to facilitate the delivery of at least two CCU S clusters, one by mid 2020s and the second one by 2030. And I think that that really important acknowledgement about the role of these clusters. And let me talk specifically about one, the net zero Teesside project in the UK, , which was something that the climate investments fund, which is a $1 billion plus fund that us as member companies have contributed to, um, , which was launched earlier this year, , focusing a, developing your case first commercial clean guessed, powerful change CCS project. But I think the important thing about that net zero T side project is it's really OEMing to decarbonize a cluster of those carbon intensive businesses around east side. Um, we have now BP and I are quinoa shell and total we've now assumed leadership of the project and we're taking it through, , past the pre, , feed process, , at the moment. And I think the reason why the UK government sees the benefit of the clusters approach is, you know, that's, your T site could enable a gross benefit of up to 450 million pounds supporting 5,500 direct jobs really think about a way of launching this green economy in Northeast England. Um, and I think given where we are post COVID and green recovery packages, I think that acknowledgement about the role that CCU S can play in really creating a powerhouse, , here in the UK, for example, in England, I think is, is a really positive sign.
Speaker 1 (30:51):
Great. Thank you. Um, I think we'll switch out to the questions we've got online and we've got about 20 or so at the moment, so we may not get through all of them, but, um, starting, maybe with Jason, who, , you've been quiet for a couple of minutes. Um, one question for you is Trax was previously involved in, in other carbon capture storage projects. Think it was the white rose project a few years ago. Um, what's different with this one, maybe that comes back to the cluster point that Susan was just talking about, and then the second one, , and you may not be able to answer, but, um, can you give some detail of the economics in the back's project, both in terms of absolute cost and cost per megawatt hour?
Speaker 3 (31:37):
Okay. Um, so I guess the white rose project was different in that it was a much smaller project. It was a full gen project. So the white rose included the build of a new plant. It was a co a predominantly, a new build Copeland, um, with a carbon capture, transport and storage system. There were five or six partners involved in that project at the time. Um, and there were various reasons, I think why that project ultimately didn't succeed, but the funding was, was pulled for that project, um, towards the end, um, perhaps a little bit ahead of its time and a little bit ahead of, you know, potentially the perceived need for that technology at that cost at that time. Um, I think the world is in a different place now, you know, we used to talk about climate change. We now talk about climate emergency.
Speaker 3 (32:25):
So I think the, you know, people are just much more attuned to, um, you know, to the point that Steve made that to hit net 0 20 50, you have to stop all emissions, but actually is that actually practical and 95% the emissions that, you know, um, that we need to become sound about are already there. So I think being able to reverse that, um, is hugely important. So, you know, organizations like the climate change committee have identified that we will have something like 90 million tons of residual emissions by 2050. Um, we need to get rid of those. We need to offset those. Um, so negative emissions technologies back to being one of them, um, you know, there's, um, sort of 50 million tons of that, um, is, is kind of slated to be removed by negative emissions technologies. Um, so I think that there's just a different environmental, perspective now on what needs to be done, much more clarity.
Speaker 3 (33:20):
Um, um, you know, we need to get this stuff done. We need to get on with it, um, in terms of costs. Um, I'm not going to answer that probably as directly as the, as the question I would have liked, um, capital costs, these are expensive projects. You know, these are big capital infrastructure projects. Um, we have to build capture equipment, um, at the power station, we have to build a transport system on show. We have to build a transport system offshore, we have to establish, maintain geological storage. Um, so these are big projects. They're not, um, you know, these are not cheap things to do. However, um, and the overalls of costs area, um, just talking about BEC specifically, there are public numbers out that which were, um, largely generated, um, I guess with the best experience people have, there aren't any large-scale Bex plants out there running, but the kind of woman, 50 pounds per, till number that's out there, um, were already very confident that we are significantly below that number. So we're aiming for a number much lower than that. Um, and all of the work we're doing so far is pointing to that's where we're going to, you know, we're going to go. So the question was right, there is a, both the capital side of this and, um, an OPEX side of this. Um, and in the case of backs, you know, the, the, the project is, very focused on reducing that OPEX costs by reducing our fuel costs. Fuel cost is a significant portion of the overall end to end cost effects.
Speaker 1 (34:54):
So the next question, I think it's quite an interesting one. And, um, I think all three touched on the same point, which was, it's very difficult to compare the full cycle costs of, of CCS. But, the question was essentially every estimate of unit costs for solar and wind have consistently overshot. And you've seen this huge deflation, in the cost of care over the last 10 years or so. Um, you know, is there any reason why that couldn't occur in CCS and how do you think about the costs evolving over the next decade as scale builds up? So happy for any of you to turn to that one?
Speaker 3 (35:35):
I can, I can add a couple of thoughts. Um, so Jason, do you want to go ahead? I'll follow you, Steve. All right. Um, so, um, yeah, I mean, so for us starting to capture technology, um, our largest operational cost is energy and the falling cost of renewable electricity is one of the things that drives down our cost structure. A few years ago, there was a, um, a government study done that projected data capture was costing a thousand dollars per time, and where an order of magnitude, less than that, the continuing fall in, in electricity prices will play a major part. So there are undoubtedly some of the factors that, that, um, helped the reduction in cost of the physical, um, solar and wind, um, collection devices. , those things have come down as an industry has been built as more competition has come.
Speaker 3 (36:32):
And we definitely expect to see that, it’s natural. When you have any large industry emerging, you will get a competitive pressure and you'll get reduction in the cost of equipment. The second thing is, brilliant minds. So brilliant minds came to solar electricity, and, um, and wind, we expect brilliant minds come into carbon capture and direct air capture. You know, I like to, I like to quote the fact that there are about 200 people working in the dietary capture industry today. That's it for a technology that is, as everybody says, widely regarded as one of the most critical to address climate change. So the UK governance announced funding to Darren to capture more and more governments worldwide will start to do so it will bring more brilliant minds and they will have better ideas than ours. And we will come up with better ideas. So we expect to see efficiency gains as this industry becomes mature, as well as just normal cost of construction and a repeat build costs coming down. So I think the answer to your question is yes, we do expect to see cost reductions coming down over time. Absolutely.
Speaker 3 (37:45):
I guess if I could just have some thoughts to that. So I think any first of cane technology when it's deployed in a country for the first candidate does just attract an element of risk or is seen to have an element of risk. And I think pricing that accordingly and getting that in the right level to enable those first time projects to get away and for sort of lessons learned to happen. Um, you know, I don't think that's something we should, we should try and hide behind. There will be some premium for the first ones, but I think that cost reduction curve is really important. Um, I think another key difference from when we've done this before, you know, um, so, describes net zero Teesside zero carbon numbers, a similar partnership. We're working with a stretch we're working with, um, you know, people at Akron or national grid, big multinational companies.
Speaker 3 (38:33):
We haven't done partnering on the scale before. I don't think to decarbonize. So, you know, you add in the engineering and project might have all those organizations, as Steve said, that brings in lots of brilliant minds. I'm sure there's multi-cam. So I think we just have a more joined up approach to doing this, and you can pick out all the best bits of project management and cost control practice by working together as a, as a group of industries across the sector. Um, so I think we, we will definitely, I think where we are on these projects and the scale of them brings a lot of focus on to that, that sort of cost profile of the early years, adding as investment comes in, as these become more mainstream as you're doing your and backs or your hundredth direct air capture. Um, you know, I think the technology will improve the manufacturing costs will drop. We will find better ways to do this. We will find cheaper materials, we'll find more efficiencies in the processes. Um, so I think there's a huge cost down opportunity over time versus the sort of first of kind of ones that we're hoping to deploy, um, this decade.
Speaker 2 (39:37):
Yeah. And maybe just two quite specific examples from our end. I think, you know, they're probably two main cost reduction drivers that we see at the moment. And I agree with everything that Jason and Steve have said, you know, I think the first one is around focusing on just accelerating the technology available today, and Jason's comments about, you know, by the number of doing it, you know, just the cost reductions that we will get by learning by doing, just putting these in place and deploying it in place. I think you'll start to see a reduction in the development costs. So for example, you know, the quest project that I mentioned in Alberta Canada earlier that shall operate, you know, we estimate that if we were to build a second quest project, it would be viable at a 30% reduction on the cap X reduction per tech, in a potential development, pilot skill.
Speaker 2 (40:21):
You just get better and the costs come down as we do more and more of these, which is why we need to do more and more of these. I think the second thing in terms of CapEx requirements and what we think could that, that could make a substantial reduction is really trying, at least from our end development and deployment of new capture technologies. So for example, one of the things that Charlotte has been, ,investing in is LVN green CO2, , solid Saba technology, which is so innovative, separation technology around CO2 capture, um, which really we think has the potential to significantly reduce the CapEx and OPEX sort of the capture side of the, , of the, of the equation. And we're scaling up at the moment from a one ton CO2 pilot to about 150 day per time demonstration project. I mean, these things take time and you can see that all of us from Jason, Steve, and myself, all the way coming from slightly different angles of the CCU S kind of a debate. Um, we acknowledged that, that the cost will come down, but I think right now what we need to see is more of these projects deployments, so that that can happen. And for more of those projects to be deployed, I think that really multi-stakeholder collaboration that you've heard all three of us talk about, particularly the role of governments, but also I think importantly, the, all of the finance sector is quite critical.
Speaker 1 (41:39):
Thank you for that. One, one question I've got here is that, we, we all talk about CC us, but so far today, we've not really, , focused on the U at all. So can you maybe outline some of the, opportunities and examples of carbon use and potentially if there's innovation there that can help bring down the overall cost?
Speaker 3 (42:06):
Yeah. I'm happy to take first stab at that. So, our technology fundamentally has two applications. We capture CO2 from the air, either barriers underground, which is the negative dimension that Jason was talking about, or you create a product which is utilization. So for us in our facility, in British Columbia, we make a synthetic fuel. So we take our CO2, we take hydrogen from electrolysis, um, using, renewable electricity, combine them together, using efficient tropes process. And you're going to send that in crude that synthetic crude can be refined into gasoline diesel or heresy any of the above. So when you have that, um, you now have a fuel whose CO2 footprint was taken out of the air in advance, so that when you put it into your existing car without modification or your existing plan without modification, that is now carbon neutral. If the fuel is carbon neutral vehicle is carbon neutral.
Speaker 3 (43:06):
So we see great potential in Europe, they call them electric fuels. We call our process air to fuels. We see great potential in utilization of atmospheric CO2 to produce a synthetic fuel, which has no feeds, not limitations. We're not going to run out of air almost carbon neutral, and it's totally compatible up to 100% use where that vehicle already on the planet. So I think there is a big industry to take, that's going to come around using CO2 as a product for liquid fuels, for fertilizers chemicals, , for a whole variety of different things that will also emerge over time. This circular economy and recycling use of CO2, I think has a big future.
Speaker 3 (43:55):
I would support that entirely. Um, you know, in our work with, um, various oil majors across the project to number side, we've looked at, reusing our biogenic CO2. Um, and as Steve said, you need CO2. That's coming from the biosphere already without digging fresh. It, if you combine that with hydrogen, you can make some fuels. So we've had multiple discussions about that, understanding the market size of that. Um, um, you know, vehicle fuels our aviation fuels is a great market. It's a big one. So it's a, it's a good place to put large quantities of CO2. Um, at drafts, we also have an incubation area. We encourage new startups, new companies, um, people who've got great ideas, but perhaps need some help to get these projects going at pilot level and develop some momentum. And in there at the moment, we've got a couple of sale to use technologies.
Speaker 3 (44:45):
Um, so we'll news, , is making a synthetic protein from CO2. So that's, that's an animal feed effectively. Um, and the other one is looking at, an innovative way to use CO2 as an ingredient for bio-plastics. Um, so there is significant amounts of work going on around the industry for using CO2. The reason CO2 is such a troublesome thing. It's a very stable molecule, um, and it's not easy to share and farm into other things. So, um, it is difficult to use there too, but there are some great pioneering technologies out there. Steve described one of them. Um, I know those are being developed all the time to do this. So, um, the usage thing is out there and very active. Um, I guess it's a little harder than the, than the large scale storage solutions that we're looking at, which is maybe why it gets talked about a little less.
Speaker 2 (45:36):
Yeah. I mean, a couple of examples on the shell side, you know, we have been capturing our CO2 from our Pernice refinery, which is in the Netherlands and we actually supply that CO2 to the greenhouses because it actually helps, the vegetables and the fruit grow quicker. So, that's, that's a partnership that we've had with our local, greenhouses in the Netherlands for quite some time now. Um, so a couple of other interesting, innovative ones and I'm with Jason, I think there are some quite interesting technologies being trialed. Two of which the OGCI climate investments fund has, um, has, helped fund, one's Lydia. So it's, uses producers kind of lower emissions, cement and concrete also benefit given the role of the cement sector in the future by curing, curing it with CO2 rather than water. So we also have a water savings. So I think that's quite an interesting technology that the, that us as a, in the oil and gas industry have funded because we see the value of that. , and also there's another company called the Connie, which is using CO2 for the plastics industry. So I think some quite interesting ideas being tested at quite early stages. I think Jason's right on that. Um, but, but I think of an interest from all of us to try and fund and support these, um, going forward.
Speaker 1 (46:53):
That's really interesting. Um, then the next question is a, is a more specific one and I think it's aimed at, , in the U S specifically California. So it's a question on carbon credits. So the carbon credit normally goes to the emitter. Um, I guess, how does it work in terms of emitter versus the operator of the storage site? Um, they get the, the share of the credit. Um, and, and how is that used typically, or how does that, how does that share, um, typically,
Speaker 3 (47:22):
I mean, different, um, I think there's a generic answer to this question, different regimes, different geographies, different carbon pricing policies and different rules. Um, so, you know, generally speaking, technology developer operator emitter work together, the, the, , common credit can only be claimed in one place. So a business deal is done between the three that reflects what makes the most sense for the three parties. But it's very important for people to understand if you claim the common credit at one place, you can't claim it somewhere else. So there's only one common credit for every one molecule of CO2 brought down. , that's a rule that we follow very strictly. So I won't go into the details of how we work that out on the plan behind me, but fundamentally there is a value that value is, is worked out and calculated in the business arrangement between which other parties are making the plant.
Speaker 1 (48:23):
, we've probably got time for maybe, maybe two more. So I'll do one, and then there are going to have the, the last question. So you can scan for the, for the best remaining one, um, on storage. And maybe this is perhaps to see one, can you just discuss what happens to the carbon once it's captured? Are there any, long-term environmental impacts of storing carbon underground and how long can we store the carbon under that?
Speaker 2 (48:55):
Um, I'll have first by, you know, Jason and see, please jump in as well. We've actually been storing CO2 for decades, you know, the insula field in Algeria, in north sea. So the storage component of it, particularly off shore storage has been something that goes on for a long time on shore. We've also, you know, UCO to restore it, , w particularly through enhanced oil recovery, for example, which has been a practice, it particularly in the U S we've used a lot of, um, so I think the storage component is something that, um, while I think there are better communication can be made to the public in terms of building their trust and their confidence in it, um, is something that given just the amount of and how long we've been doing it for, , without any leakage, , with strict monitoring requirements in place. Um, I think, , is not something that's of significant risk.
Speaker 3 (49:52):
I could probably add a couple of sentences to that. I think, so unsaid that there are multimillion tons of sale to start on the ground every year. It's not the new technology. Um, I often get asked the question, how does it stay there? Um, and it stays there for exactly the same geological reason that natural gas and oil stay on the ground and their natural farm, it's all to do with pressures, densities, um, that kind of thing. So it's, it's a very, that stuff's been there for millions of years. So, you know, there's no reason why liquid, um, den space CO2 is not going to do the same thing over time. The CO2 diffuses into, um, rocks under the geological formations and actually becomes almost a solid, um, so it becomes part of the strategy and in that piece of geology. So it's, , it's a very well tried, very long established and almost a natural process it's been happening for years, just 20 seconds from me on that. Um, this makes the point that I was making earlier on the UK has a sizable asset, the holes in the ground underneath the north sea. And, you know, you don't just store CO2 everywhere. I live on the west coast of Canada. We're in an, that's quite sad. You don't put CO2 storage that you can, it has the ability to start. And a lot of CO2, that's an asset that we should use.
Speaker 1 (51:12):
I think, one, one last one to, to round it off. And you've, you've all touched on this a little bit, um, through the conversation, but, um, from here going forward, um, or the, the projects have been executed, recently, what are the learnings from that generation of projects that you're going to take through to the next generation of projects? What's the, what's the next wave of, of improvement, maybe one, one or two key things.
Speaker 3 (51:40):
And if you can volunteer, I'm not quite sure barrage what it is we're comparing against. You said the previous generation of projects,
Speaker 1 (51:54):
Sorry, it may be. And maybe it's the question is the director placebo, because, um, Shell's been out a long time. So, um, when you compare quest or, you know, a Gorgon, you know, large sequestration projects, um, you know, where are the improvements to the next size?
Speaker 2 (52:12):
Um, so quest is a very different project to Gorgon. Um, so I think it comes back to that point. And in fact, all you've heard from all three of us in terms of the differences of these projects. But I think if I was to be more general about the lessons learned, you know, I think one, um, that need for that multi-stakeholder collaboration that you've heard all three of us talk about. And I think that's not just between, um, say the industry. So a lot of the projects that, , Charlotte is involved in at the moment, um, in CCS are ones we do with the exception of quest and purchase, which are both shell, , operated run projects. Are we do them in partnership with others? So, you know, we, we run the net zero T side project in partnership with five other on the guest companies and all the lights project, um, et cetera.
Speaker 2 (52:57):
So I think that partnership, um, because again, you're leveraging off each other's, , engineering, you know, intellectual resources, um, and frankly also managing the costs and the risks at this point in time of where we are in the deployment curve, I think has been, been a really important part of the, of the, um, of that collaboration piece. But I think also that, that collaboration around just sharing what we're learning with more people. So, for example, for quests, which has been a long running project five years or now, or continued storing of CO2, you know, since 2014, we've had, you know, over 80 delegations from all around the world and governments, you know, academics to come and look at how we've done it, and we've invited them on site. We've been really open about the lessons that we've learned, because that's the only real way that we can get this really deployed at the skill that we're required to work.
Speaker 2 (53:44):
We're quite keen on making sure that those lessons are shared more. And it's something also for example that the oil and gas climate initiative is quite focused on doing in partnership with people like the IAA, and others really sharing those lessons learned. So that's one, I think the other lesson is one that was in a previous question around what can we do to really try reduce this cost of the CCS projects? And I won't repeat it cause you heard the examples that we've talked about. And I think the third one, which is maybe not a lessons learned, but I think it's a lesson acknowledged about where we are right now in the world. The climate that we're in, um, which is really this need for us to keep really building and getting that momentum behind the need for CCS, because while I think it is changing, and I think you can see some of the key governments, are you hearing it more about the role of CTS in their nationally determined contributions and how there is countries are going to do it?
Speaker 2 (54:41):
I think we should try and see more of the role of CCS and in countries, policy roadmaps for how they will get to a net zero or whatever goal they have, internationally determined contributions. And I think that's something that we can all play better. Sorry, one quick, last one in terms of lessons, um, I encourage particularly given this audience to have a look at the clean energy minister or website on Tuesday. I was part of a panel. We launched as a pre event for the ministry meeting, , the key financing principles, , which was done in collaboration between some of the finance community and the clean energy ministry or governments to really think about the role of the finance sector in, in, um, in, in CCU. So it's available on their website. I do encourage the audience to have a look at that too, because I think the finance sector has a key role to play next
Speaker 3 (55:37):
22nd soundbite for me, I turned the question the other way, what can the world learn from these projects. And that's a very simple learning that climate change can be fixed or projects like the one behind me, like backs at CCOs do provide answers. It will cost more money on day one. It will become cheaper over time and we can fix the climate change problem. It's a question of choice. So we need, the support from people who, you know, once you see a change, um, and want to see governments address climate change, we need that support. We need people telling that politicians. Yeah, there are solutions out loud. Let's go fix it last 10 seconds from me, I guess one key lesson learned 20 years ago, CO2 was nobody's problem. Now CO2 is everybody's problem. Um, you know, and we have to deal with this. I think we're much better at as a private sector now working alongside government and the finance community to deliver solutions to this. And I think with the right stable investible regulatory support, you know, we can do this, we can make it investible and we can make it successful and deliver a solid pipeline of projects starting this decade.
Speaker 1 (56:53):
Great. I guess it just remains for me to, to thank you all. Certainly feels as if we're near the, cuspid not on the cusp of significant change in this industry. Thank you very much for all your insights today. just want to remind the audience that this is obviously the first of a series of events that we're trying to, to host here at RBC on the, , energy transition and, , in a month's time on October the 16th, we'll be tackling the, the very simple subject of, of hydrogen and how that has got a role to play. Um, so hope to hope to get more of you on the line then, but, thanks very much to the panel today. Very much appreciated