Why Have So Few Carbon Capture Projects Been Fully Funded?

The short answer ... it hasn't been done commercially "at scale" before now.

Carbon capture and storage (CCS) technologies have been touted as crucial for mitigating climate change by reducing carbon emissions. Governments and investors worldwide have committed to investing in CCS projects to reduce carbon emissions, with dozens of publicly announced CCS projects in 2022. However, despite the press, few have reached Final Investment Decisions (FID) or even Front-End Engineering Design (FEED). Why? With so much money available and tremendous political will, why aren’t we seeing sequestration hubs popping up everywhere?

Technical

Enhance Oil Recovery (EOR) utilizing CO₂ has been around for 50+yrs, however EOR utilizes primarily geologic sourced CO₂ for injection into wells to encourage additional oil production.  Unlike anthropogenic (man-made) CO₂, geologic sourced CO₂ tends to have very high purity (97-99%) and homogenous flow characteristics.  Anthropogenic CO₂ purity varies by source (LNG, refinery, ethanol, power production, etc..) and require scrubbing and filtration to achieve pipeline quality.   Geologic sourced CO₂ also tends to come from a single location (Jackson Dome, Southwest Colorado, Arizona, etc..) providing a single on ramp to the transportation system.  Multiple on-ramps are required due to man-made CO₂ offtake locations. Not least of the challenges is maintaining dense (critical phase).   In order to carry enough CO₂, transportation systems require the CO₂ to be pressurized (1060 psi for 100%purity) and undergo a phase change.  This phase is called dense phase (it’s somewhere between a liquid and a gas, but behaves more like a liquid).  Maintaining balance between multiple on ramps and off ramps is challenging. 

Commercial

One of the major challenges facing CCS and CCUS projects is the mid-stream transportation model. While the cost of capture and injection is high, the transportation model has not been executed to date. One of the reasons for this is that the product itself is entirely different, than oil, gas and water. Non-food grade CO₂ does not have any product value…the only value is the tax value provide under 45Q.  This poses an extremely challenging business risk as project economics hinge solely on government subsidies. Additionally, there is a lack of precedence in contracting anthropogenic CO₂ sources which naturally concerns investors due to unknown risk exposure.  Issues like meter accuracy, custody transfer, abandonment liability weight heavily on the investment community. 

Why are Investors even considering CCS?

1. Financial Interests

The IRA allocated over $22 Billion for CO₂ and Hydrogen Project development with another $8-10 Billion in additional supplemental subsidy packages.

2. Unrivaled Impact

It is the only long-term, proactive solution to reducing CO₂ in the atmosphere.  Agricultural projects, such as reforestation, typically store carbon for under 100 yrs and then release the majority back into the atmosphere.  CCS has the potential to put trillions of tons of CO₂ into “forever” storage.  Regardless of energy source (traditional or renewable) there is a carbon impact, CCS is to date the most efficient way to offset that impact.  

Ringfencing Risk

CCS projects are technically achievable and financially viable; it’s all about risk mitigation. Successful execution of the CCS business is more reliant on detailed technical understanding. Being able to understand the linkage between technical and commercial, and how to use both tools to mitigate risk is absolutely critical. 

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PCS has been in the CO₂ Sequestration and Infrastructure space for over 15 years, with services that span from upfront advisory and design to contract negotiation assistance and project execution oversight.