The Economics of Carbon Capture, Utilisation and Storage Technology

AUTHOR: Chilombo (Olga) Priscila EconomicResearcher/Statistician@ RDJ Consulting

The process of carbon capture has garnered significant attention lately as a potential solution to mitigate greenhouse gas emissions and combat climate change This is achieved by using Carbon capture and storage (CCS) technologies - a set of technologies designed to capture CO2 from large emitting sources The approach involves capturing carbon dioxide (CO2) emissions from various industrial processes and power generation activities, transporting them to a suitable storage location, and securely storing them underground or permanently in products to prevent them from being released into the atmosphere

Despite the importance of CCS in achieving clean energy transitions, deployment of this technology has been slow to take off, especially in Africa, attributing this to mainly cost of deployment. Other equally important barriers that involve finance include technological readiness, policy frameworks, and infrastructure development

The International Energy Association (IEA) reported that by 2021, there were only around 20 commercial Carbon Capture, Utilisation and Storage (CCUS) operations worldwide, with plans for 30 additional commercial CCUS facilities to come CCUS in this case refers to an industrial process that makes economically valuable products using CO2 at concentrations above atmospheric levels. Despite the Covid 19 crisis, in 2020 governments and industry committed more than USD 4 5 billion to CCUS This momentum led to the increase of these numbers, and as of July 2023, the Global CCS Institute reported a total of 392 facilities in the pipeline, representing a 102% year-on-year increase. “41 facilities are in operation, with a capacity to capture and store 49 Mtpa and 351 facilities are in development.”

Examining the fundamental cost structures and determinants of CCS technologies is crucial for facilitating investment decisions and informing policymaking regarding CCS technology adoption Before delving into these aspects, it is important to provide a concise overview of the three primary capture technologies: post-combustion, pre-combustion, and oxyfuel.

1 Pre-Combustion Carbon Capture: this entails capturing CO2 from fossil fuels before combustion, often via gasification, and then separating it from the resulting syngas

Post-Combustion Carbon Capture: this technology involves capturing CO2 emissions after combustion, typically from industrial processes or power plants, using chemical solvents or sorbents.

2. Oxy-Fuel Combustion: in this process, fossil fuels are burnt in an oxygen-rich environment to produce a flue gas consisting mainly of CO2 and water vapor, which can be easily captured.

3 Cost Determinants for CCS

Africa has vast potential for CCS deployment due to its growing industrial activity and energy demand The cost of CCS technology is multifaceted and depend on various factors including the cost of capture, transportation, and storage, as well as policy incentives and market conditions Costs also vary depending on the CO2 concentration in the emissions stream - meaning; the lower the CO2 concentration in the gas, the higher the energy demand required for separating out the CO2, resulting in higher costs

The IEA also attributes the persistent high costs of CCS to high design complexity and the need for customization that limits the deployment of CCS. Despite being in use commercially for more than 50 years, CCS cost reductions have been slow compared to the experience rates (or the decrease in cost with increased development and deployment) of CCS with other energy technologies, such as solar and wind

The cost of carbon capture

CCUS applications do not all have the same cost Looking specifically at carbon capture, the cost can vary greatly by CO2 source The IEA estimates that industrial processes producing “pure” or highly concentrated CO2 streams (such as ethanol production or natural gas processing) cost USD 15-25/t CO2, while processes with “dilute” gas streams, such as cement production and power generation cost USD 40-120/t CO2 Capturing CO2 directly from the air is currently the most expensive approach but could nonetheless play a unique role in carbon removal

In fact, it is reported that postcombustion carbon capture technologies tend to have higher capital costs than pre-combustion technologies.

The cost of transport and storage

Moving on to the cost of transportation and storage, this can also vary greatly on a case-by-case basis, depending mainly on CO2 volumes, transport distances and storage

Courtesy:wwwglobalccsinstitutecom conditions. In the United States, for example, the cost of onshore pipeline transport is in the range of USD 2-14/t CO2, while the cost of onshore storage shows an even wider spread according to the IEA However, more than half of onshore storage capacity is estimated to be available below USD 10/t CO2 In some cases, storage costs can even be negative if the CO2 is injected into (and permanently stored in) oilfields to enhance production and thus generate more revenue from oil sales - this stand as a great economic opportunity for Africa to pursue, given significant new oil discoveries!

CCUS - A Cost Reduction Opportunity for Industry

Achieving deep emissions reductions in heavy industry (cement, steel and chemicals production) can be challenging, however, CCUS is a relatively advanced and cost-competitive option to significantly cut the CO2 emitted during the production of these essential materials. It can also be more cost-effective to retrofit CCUS to existing facilities than building new capacity with alternative technologies. CCUS is currently the cheapest option for reducing emissions in the production of some important chemicals such as ammonia, which is widely used in fertilisers The estimated costs of CCUS-equipped ammonia and methanol production based on natural gas are estimated to be around 20-40% higher than their unabated counterparts, while the cost of electrolytic hydrogenroutesisestimatedtobe50-115%higher

Conclusion

The global carbon capture market is expected to grow significantly between 2023 and 2027, reaching a value of USD 7 5 billion by 2027 according to the Carbon Capture in Global Market Overview 2023-2027 report Africa cannot afford to miss out on this It comes as a great economic opportunity for the continent through innovative financing mechanisms, supportive policies, and international cooperation to stimulate initial investment costs, technological readiness, and sound policy frameworks. The conversation as always continues at esa@rdjpublishing.africa

Readings: https://www iea org/commentaries/is-carbon-capture-tooexpensive https://www globalccsinstitute com/resources/ccs-image-library/ https://www reportlinker com/market-report/EnvironmentalServices/7665/Carbon-Capture www.rdjpublishing.africa