CCUS: A game changing technology or greenwashing?

Carbon Capture, Usage and Storage (CCUS) is a controversial technology in the sustainable infrastructure space. Proponents of the technology see it as an integral part of the energy transition and one of the few ways to truly decarbonise hard-to-abate industrial sectors. Detractors have asserted that its capital-intensive nature and lack of real-world success point to unproven scalability, arguing instead that it is merely an attempt to greenwash legacy oil and gas activities.

Therefore, it is important to consider how CCUS can be deployed, and what sectors are best suited to its integration in the long term, in addition to what challenges it has in proving its scalability and efficiency. inspiratia considers what role CCUS will play in the drive to decarbonisation and what limitations the technology has as a long-term solution to mitigate CO₂ emissions.

inspiratia insights:

• Carbon Capture, Usage, and Storage (CCUS) will emerge as a key technology to decarbonize hard-to-abate industrial sectors, such as cement, iron, and steel, but faces scepticism over its scalability and efficiency, with concerns raised about potential greenwashing of legacy oil and gas activities.
• The CCUS sector experiences significant growth and investment, with over 500 pipeline projects driven by commitments from the UK and US governments. Proponents believe that the technology can overcome challenges with time and investment and contribute to long-term emissions reductions.
• CCUS plays a crucial role in the hydrogen economy, particularly in facilitating blue hydrogen projects by capturing and sequestering emissions from natural gas. However, its effectiveness depends on competing with other carbon abatement strategies like green hydrogen and recycling scrap steel.

Growth in the value chain

The CCUS sector has grown momentum substantially over recent years, with over 500 projects currently under development across the value chain.

2022 represented a watershed year for the sector, with more than 140 new projects announced, which, according to the IEA figures, will lead to a planned storage capacity increase of 80% and capture capacity of 30%.

As the value chain continues to develop, proponents have argued that increased efficacy of the technology will follow. Speaking to inspiratia, Stacey Collins, partner at Pinsent and Masons, posited that, "Some of the same challenges that are currently levelled against the carbon capture & storage market are the same levelled against the offshore wind market some 10 years ago. Of course, the success and growth of the offshore wind market shows that those challenges can be overcome."

It is the view of many that, given time, CCUS can be effectively upscaled to ensure the teething problems do not remain significant issues. This, Collins argues, is all down to investment. He states that, "Investing in the technology will mean that we will better understand it, leading to long-term improvements that reduce risk and overall costs".

Both the UK and the US have committed heavily to the technology. In March 2023, the UK committed to invest £20 billion to scale up CCUS projects across the UK. Before this, the US Department of Energy (announced $131 million for 33 research and development projects to advance the wide-scale deployment of CCUS).

The investment is based on the rationale that CCUS can offer varied value across a range of sectors. Including being retrofitted onto existing power and industrial plants, the decarbonisation of hard-to-abate sectors such as cement and iron and the enablement of cost-effective low-carbon hydrogen production.

As overall costs reduce across the CCUS value chain, the opportunity for new specialised players has grown exponentially. This, in turn, could have a considerable impact on the sector driving growth, supported by the heavy investment committed by the US and UK.

Hard-to-abate

The most publicised utility of CCUS projects is in its potential to decarbonise hard-to-abate sectors. CCUS is one of the few available technologies that can yield significant emissions reductions in industries with direct scope-1 emissions, such as cement, iron and steel, and chemicals.

Speaking with inspiratia, a partner from Squire Patton Boggs stated that, "in the short term, CCUS has a crucial role in the transition to lower carbon fuels by enabling high CO₂ producers to continue operating while reducing their carbon footprint via CCUS."

This is especially evident within the cement industry, which involves less processing than steel and other hard-to-abate sectors. The IEA has noted that CCUS is virtually the only technology solution for deep emissions reductions from cement production. It is also the most cost-effective approach in many regions to curb iron, steel, and chemicals manufacturing emissions. In the iron and steel sector, production routes based on CCUS are currently the most advanced and least-cost low-carbon options for producing virgin steel, accounting for around 70% of global steel production. In chemicals, CCUS is often the cheapest option for reducing emissions from the production of ammonia-rich fertilisers and methanol.

However, it is essential to note that CCUS alone cannot solve the decarbonisation conundrum, and many questions are still to be answered about the process's overall efficacy. Currently, around 65% of operating CO₂ capture capacity is at natural gas processing plants, one of the lowest-cost CO₂ capture applications.

In the longer term, the role of CCUS will depend on how it competes as other carbon abatement strategies are developed, such as green hydrogen or recycling scrap steel in the steel to capture carbon from gasification, reformation, or burning fossil fuels.

Hydrogen and CCUS

The hydrogen economy will primarily derive its fuel from both renewable energy sources, known as green hydrogen, and natural gas, known as blue. However, for blue hydrogen projects there needs to be a mechanism to capture and sequester the emissions used to ensure the hydrogen is low carbon.

In June, inspiratia learned from Leonidas Papanikolaou, senior head of bespoke and new schemes at the LCCC, that CCUS projects would act as a vital tool for blue hydrogen projects in the first Hydrogen Business Model / Net Zero Hydrogen Fund allocation round to ensure they meet a low carbon standard.

Papanikolaou stated that, "the blue hydrogen projects have more provisions in their contracts because of their interactions with the transport and storage CO₂ network. To comply with the low carbon hydrogen standard, the associated emissions have to be below a certain threshold, which means that, amongst other things, a percentage of the CO₂ generated must be captured. This makes CCUS a vital tool for blue hydrogen projects to ensure they meet a low carbon standard."

Consequently, CCUS will play a key role in facilitating blue hydrogen projects in the UK's hydrogen economy. CCUS can do so by capturing the emissions from natural gas or coal, which are the sources of practically all hydrogen production today, and provide an opportunity to bring low-carbon hydrogen into new markets in the long term at potentially low costs.

In this scenario, CCUS would play a critical role in the short term within the hydrogen sector, permitting green hydrogen projects time to upscale and reduce costs whilst supporting the burgeoning hydrogen economy.

Greenwashing

Historically, CCUS has been firmly in the domain of the oil and gas giants who operate five of the dedicated CO₂ storage projects in operation and most of the existing CO₂ pipelines. Project developers, including Chevron, BP and Shell, to name a few, have announced ambitions for over 200 new capture facilities to be operating by 2030, capturing over 220 Mt CO₂ per year. However, according to the IEA, even at such a level, CCUS deployment would remain substantially below the around 1.2 Gt CO2 per year that is required in the Net Zero Emissions by 2050 (NZE) Scenario.

Talking with inspiratia, Bruce Robertson from the Institute for Energy Economics and Financial Analysis (IEEFA) stated that CCUS has several significant barriers to success. Firstly, for it to succeed, it requires a high price of carbon, which means its commercial value changes significantly depending on the project's jurisdiction.

In addition, it has been accused of being an enabler of new gas projects, with successful CCUS exceptions mainly existing in the natural gas processing sector serving the fossil fuel industry, leading to further emissions. Lastly, of the 13 flagship cases (10 in operation, two that have failed and one that has been suspended), failed/underperforming projects considerably outnumbered successful experiences.

As a result, the funding announcements made by the US and UK have received a mixed reaction from investors and experts in the sector. Many have argued that investment in CCUS is unwarranted due to the failure of pilot projects to meet expectations despite high capital costs. This, they argue, is emblematic of the industry, which despite massive investment, has yet to come close to the targets set. Subsequently, unless CCUS efficacy improves significantly in the short term, its role in the drive to net zero will be curtailed significantly.

Others argue that most global decarbonisation scenarios see an important role for CCUS (particularly in relation to industry), and there has never been a greater focus, and will, to deliver CCUS. They highlight that despite the challenges around early projects, it is clear that (if done correctly) the technology does work, and the increased potential market size means there's a huge incentive on supply-chain parties to deliver high-performing CCUS projects.