Navigating the Energy Transition Series

By Martin Copeland, RBC Europe Limited
Published September 22, 2020 | 3 min read

Session 1: Carbon Capture, Use and Storage (CCUS) – The opportunities, limitations and economics

On Thursday 17th September, 2020, we held the first session of a series of webinars on Energy Transition focusing in on the role of Carbon Capture, Use and Storage (CCUS) . Moderated by Biraj Borkhataria, Co-Head of European Energy Research, RBC Capital Markets, and John Musk, Head of European Utilities and Infrastructure Research, RBC Capital Markets, the panel included Jason Shipstone, Director of Innovation at Drax Group; Sue-Ern Tan, Group Carbon Relations Manager at Royal Dutch Shell; and Steve Oldham, CEO at Carbon Engineering. They discussed the opportunities, limitations and economics of CCUS, expected to play an increasingly important role in reaching climate goals and reducing emissions in the coming decades.

Following the discussion, we have highlighted some key themes:


Achieving ‘Net Zero’ by 2050 requires a colossal effort

“To achieve ‘Net Zero’ you need to stop every single emitter of CO2 on the planet, and collect CO2 from that emitter, permanently store it and put it back underground again - every car, truck, every plane, every boat, every plant, agricultural facility etc. It’s a huge undertaking,” explained Steve Oldham, CEO, Carbon Engineering. “On a global scale, there is an array of costs and feasibilities. There will be a series of low hanging fruit, things that are relatively easy to decarbonise,” he added, “but what about cars, trucks, planes, etc.?” The Direct Air Capture technology developed by Carbon Engineering captures CO2 directly from the atmosphere, offering two main advantages, it can eliminate any emission, from any place, whether CO2, methane or other GHGs, at any moment in time. Secondly, it can help address legacy emissions. “It’s an infinitely scalable solution,” he said.


The criticality of CCUS is well-known and agreed on by experts

“Under every scenario, from the IPCC to IEA, scientists believe CCUS has a critical role to play to achieve the Paris Agreement goals of a -2C world,” stressed Sue-Ern Tan of Shell. CCUS is seen as very helpful in particular for the meaningful decarbonisation of critical industries like steel, cement, refiners, and chemical complexes. “We need to start storing CO2 at scale by 2030,” she remarked. Currently, globally, there are 51 large scale CCS facilities in operation, or in development, representing some 30 million tonnes per annum of CO2, but to meet obligations we need to multiply this capacity rapidly.


CCUS has the potential to be the powerhouse of a Green Economic Recovery in the UK

Jason Shipstone, Director of Innovation at Drax Group, explained the Drax Power Station in North Yorkshire, is trialling Europe’s first bioenergy carbon capture and storage (BECCS) project. Combining sustainable biomass with carbon capture technology creates a negative carbon position, Drax believes it could remove and capture more than 16 million tonnes of CO2 a year as part of the wider decarbonisation efforts across the region (“Zero Carbon Humber”). “As part of helping the UK achieve a Net Zero carbon economy by 2050, CCUS projects offer lots of scope for post-COVID green recovery and capital project growth,” he said. There is momentum currently in the UK for CCUS schemes and investments to grow. “The UK will allocate at least £800 million to facilitate the delivery of two CCUS clusters,” noted Sue-Ern Tan. The Net Zero Teesside project, for instance, aims to decarbonise the cluster of carbon generating businesses in the area, which could potentially support the creation of many new jobs. “This will create a powerhouse here in the UK,” she argued. Steve Oldham added “The UK is in a favourable position to become a key player in carbon capture: it has access to the North Sea to store CO2 (sequestration), lots of opportunity for renewable power such as wind and solar power, and the skillset required in the industrial regions of the UK are similar to those necessary for carbon capture programmes.”


CCUS is a pre-commercial technology; pricing is key

“CCUS is reliable, it’s proven, it’s ready for deployment at scale - but the reality is that, where we are on the technology development curve right now, is the stage where financial support is required to make economic sense,” stated Sue-Ern Tan. The rough estimate for total cost of CCUS could range between 40 to 200 dollars per ton, she noted. Governments need to step in with specific policies, such as the tax credits seen in the US, or the critical role of the Norwegian government played in supporting the Northern Lights project, with the European Commission acknowledgement etc. “We need innovative policy instruments around carbon pricing,” She added that the role of banks and funds in developing novel ways to support the capital investment required will also be a critical ingredient.


A multi-stakeholder approach is required

All the panellists agreed that working closely in collaborative commercial structures between the private sector and government will be key, and that the priority today is to ensure the right level of regulatory support is in place to catalyse the CCUS industry. Keeping up extensive collaboration between all the stakeholders – including governments, industries, investors, NGOs, communities etc. is a prerequisite to achieve the CO2 emission targets and to enable successful delivery of more CCUS projects. The role of the finance sector to act as the lubricant in driving CCUS will  therefore be critical in meeting the ambitious goals of corporates and countries in this area.

Martin Copeland, RBC Europe Limited

Martin Copeland, RBC Europe Limited
Head, Energy, Europe

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