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Carbon capture and storage in the USA: the role of US innovation leadership in climate-technology commercialization

Carbon capture and storage in the USA: the role of US innovation leadership in climate-technology... Received: 9 October 2019; Accepted: 25 November 2019 © The Author(s) 2019. Published by Oxford University Press on behalf of National Institute of Clean-and-Low-Carbon Energy This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited. For commercial re-use, please contact journals.permissions@oup.com 1 Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 2 | Clean Energy, 2019, Vol. XX, No. XX Keywords: carbon capture; CCUS; energy and environment; energy system and policy; fossil energy; hydrogen and fuel cell From a global perspective, scenarios that lead to a full Introduction decarbonization of the world economy include CCS in The USA is one of the top emitters globally and remains both the industrial sector and the power sector. For ex- highly dependent on fossil fuels to satisfy its primary en- ample, the International Energy Agency’s (IEA) Sustainable ergy demand. In light of ambitious and necessary climate Development Scenario [5] sees 7% [6] of emissions reduc- goals enshrined in the Paris Agreement, bringing the decar - tions to be delivered by CCS, in almost equal parts in the bonization of the country’s economy on track is extremely power and the industrial sectors, by 2040. The IPCC Report important. The 2018 release of the UN Intergovernmental on 1.5°C includes CCS in three of four illustrative pathways Panel on Climate Change’s (IPCC) 1.5°C Report on Global and negative emissions in all pathways (Fig. 1). Warming [1] has bolstered the need for urgent climate The USA—the second largest CO emitter globally in action, calling to reduce emissions as soon as possible and absolute terms—can be regarded as a microcosm within to net-zero by mid-century. After a decline of emissions the global economy. While comprehensive, economy-wide of several years, greenhouse-gas emissions rose sharply models that forecast a net-zero economy by mid-century are in 2018 by 3.1% in the USA, outpacing global emissions lacking for the USA, most available decarbonization path- growth almost by a factor of two [2]. Emissions were driven ways that are compliant with either the Paris Agreement or by more frequent hotter and colder days prompting higher a net-zero-emissions scenario by mid-century include CCS demand. in the industrial and the power sectors, among a range of A suite of clean-energy technologies that has recently other clean-energy technologies. For example, the Union experienced renewed policy support through incentive of Concerned Scientists analysed models that will lead to structure innovation and legislative initiatives is carbon a 90% decarbonization of the US power sector by 2050. In capture and storage (CCS). The technologies, which cap- these scenarios, natural-gas power plants retrofitted with ) from industrial and power ture carbon dioxide (CO CCS comprise between 9% and 28% of the total mix [7 ]. plants, and transport and permanently and safely store it With the impacts of more extreme weather already underground, are commercially viable and deployment- being felt across the globe—July 2019 was the hottest ready. Direct air capture (DAC), which captures CO from month on record to date [9]—the pressure to decarbonize the ambient air to deliver negative emissions, has also emissions is intensifying. As part of and address rising CO gained increasing attention. The USA has also historically this global challenge, innovation in the energy, industrial been a leader in innovation, particularly with regard to and manufacturing sectors must therefore enable sus- policy driving private-sector action, designing novel busi- tainable growth. Continued economic prosperity will de- ness models and inventing new-energy and clean-energy pend on countries’ ability to reduce their energy intensity. technologies. For the past decade, the country has been a Carbon capture is expected to play a key role, particularly leader in energy-supply investment and the second largest due to three key characteristics of the US economy. destination for energy investment after China [3]. The first is the power sector, which is largely seen as Due to a renewed push to formulate supportive policy the easiest sector to decarbonize vis-à-vis transportation and enhance the existing policy framework across the and industry, yet still faces complex challenges. Despite country, the USA is in a prime position to commercialize renewable-energy generation more than doubling since these technologies that are expected to be needed widely 1990, the USA remains heavily dependent on fossil fuels to to fully decarbonize the global economy. As such, US lead- satisfy energy demand. In addition, the future of its nuclear ership on the deployment of CCS technologies would fleet, which provides more than 60% [10] of the country’s make significant contributions to the world’s reaching its carbon-free power, remains uncertain. Analysts expect re- climate and sustainable-development goals. It would also tiring nuclear to be replaced not only by renewable energy, contribute to reducing the cost of CCS—a technology that but also by unabated fossil-fuel additions. These asym- is essential to meeting climate goals and enabling tech- metries, coupled with a young natural-gas fleet of 22 years nology deployment abroad. The paper seeks to provide an average age [11] and further unabated, natural-gas cap- overview of CCS deployment in the USA while assessing acity underway, underpin the need to deploy carbon cap- the maturity of the US deployment framework, including ture in the US power sector. policies and infrastructure. The second is the industrial sector—an often- overlooked sector in terms of decarbonization and CCS deployment. It remains the largest consumer of energy 1 The US decarbonization opportunity and is responsible for 22% of emissions [12]. In 2017, the After 3  years of decline, US CO emissions rose by 3.1% sector was also responsible for ~18.2% [13] of US gross in 2018. Its largest emissions sector remains the trans- domestic product. So far, experts agree that the sector portation sector, followed by electricity and industry [4]. has felt little pressure to decarbonize due to the lack of Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 Beck | 3 AIM 2.0 MESSAGE-GLOBIOM 1.0 REMIND-MAgPIE 1.5 MESSAGEix-GLOBIOM 1.0 WEM SSP1–19 SSP2–19 SSP5–19 LowEnergyDemand Faster Transition Scenario (S1) (S2) (S5) (LED) (IEA WEM) Fossil without CCS Nuclear Fossil with CCS 1000 Wind Biomass without Solar CCS Other renewables Biomass with CCS 2030 2050 2100 2030 2050 2100 2030 2050 2100 2030 2050 2100 2030 2050 Fossil Fossil Biomass Biomass Nuclear Wind Solar Other renewables without CCS with CCS without CCS with CCS S1 S2 S5 LED IEA WEM 2030 2050 2100 20302050 21002030 20502100 20302050 210020302050210020302050 21002030 20502100 203020502100 Fig. 1: Primary energy supply for the four illustrative pathway archetypes plus the IEA’s Faster Transition Scenario (OECD/IEA and IRENA, 2017) (a) and their relative location in the ranges for pathways limiting warming to 1.5°C with no or limited overshoot (b) Reproduced by permission from the IPCC [8]. solutions and understanding of the challenge, as well as alone. A  total of more than 250 Mtpa of CO—almost 10 its significant political economic influence. In fact, the in- times the US capture capacity today—would be available dustrial sector offers early deployment opportunities for for capture from hydrogen, cement, steel, ethanol, am- CCS. As of November 2019, 17 of 19 operating, large-scale monia production and natural-gas processing combined facilities globally are in the industrial sector [14]. In the [18]. Hence, the industrial sector should be considered a USA, 9 of 10 operating, large-scale facilities are in industry. key target for CCS deployment. Furthermore, low-cost applications of CCS are concen- The third is the USA’s economic structure; the USA is trated in industry, amenable to a near-term roll-out of the strongly dependent on fossil fuels, providing ideal condi- technology that could result in significant cost reductions tions for CCS deployment. In fact, in 2018, about 80% of the and learning-by-doing. For example, processes that pro- primary energy demand was satisfied by natural gas, coal duce a pure stream of CO such as ethanol production and and petroleum [19]—a share that has been constant for the natural-gas processing can start at $15/tCO . last decade. Between 1983 and the great recession, the share Further, CCS can play a key role as a low-carbon heat hovered around 85%. These long-term trends signal strong solution and for process emissions from cement and steel rigidity of the US energy economy. The USA, due to the shale [15]. Industrial heat emissions alone account for 10% of revolution, has also become the largest natural-gas pro- global emissions and research has shown that many de- ducer in the world, holding this position since 2009, but also carbonization options are more costly than CCS applica- demonstrating its ability to improve techno-economic pro- tion [16]. Along these lines, a key to decarbonizing industry cesses through innovation. Due to its fossil-fuel-dependent could be hydrogen, whose production from fossil resources economic structure, the USA, along with China and Russia, can be decarbonized with CCS. In fact, the USA holds ideal ranks highest in the Global CCS Institute’s Inherent Interest conditions for large-scale hydrogen production with CCS in CCS [20], which is a relative index based on the share thanks to the vast availability of low-cost natural gas [17]. of fossil-fuel production and consumption, indicating an A  2014 NETL study showed that almost 70 Mtpa of CO economy’s suitability for large-scale CCS deployment to di- would be available for capture from hydrogen production versify and decarbonize its energy production. Primary energy by illustrative pathway (EJ/y) Primary energy by fuel type (EJ/y) Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 4 | Clean Energy, 2019, Vol. XX, No. XX However, the USA’s energy economy evidences further large-scale CCS deployment. Furthermore, the technology, supporting factors for CCS commercialization in the near- which is also seen as essential to alleviate the existing to-medium term, underpinning the country’s suitability. lock-in of emissions from existing infrastructure, could The structure of its energy supply has also contributed to potentially be exported to other countries, cementing the low energy prices in comparison to other advanced econ- USA’s leadership in innovation. Moving to a lower-carbon omies, boosting energy security, while also strengthening economy is inevitable to contain global warming and the desire by producers, policymakers and consumers to prevent potentially disastrous effects of climate change. maintain low levels of energy prices [21]. At the same time, Therefore, the USA’s ability to maintain its position as a for the past decade, the country has been a leader in energy- top natural-resource producer, exporter and its ability to supply investment and the second largest destination for provide energy security will largely depend on the possible energy investment, right after China [22], evidencing strong transformation of its energy and industrial sectors. government commitment as well as a capability to attract investment in the sector. On an absolute basis, the USA in- vests more than any other nation to support clean-energy 2 CCS in the USA innovation. It invests more in total clean-energy RD&D ($6.8 billion in 2018) than the next two countries, China and Currently, as of November 2019, there are 10 CCS facilities in Japan, combined and more in basic energy science than all the USA with a combined capacity to capture more than 25 other nations combined [23]. Therefore, the desire to main- million tonnes per annum. In total, there are 19 operating tain strong energy security as well as accelerate innovation facilities globally, with a further 28 in various stages of de- provides fertile ground for large-scale CCS deployment. velopment and 4 under construction (Fig. 2). In the USA, While this outlook, evidencing strong fossil-fuel and there are 10 operating, large-scale projects and a further manufacturing dependence of the economy, might pose 17 under development. One of the operating facilities in an obstacle to full decarbonization at first sight, it should the USA is in the power sector, with others in natural-gas also be regarded as an opportunity and incentive to trans- processing and fertilizer, hydrogen and ethanol produc- form the sector and develop next-generation clean-energy tion [24]. In addition, the USA hosts the National Carbon technologies. Coupled with a strong desire to bolster en- Capture Center—a large public and privately backed test ergy security, demonstrate technology leadership and an centre allowing new technology providers to test their innovative edge from a policy, finance and private-sector technologies. The USA also has a history of demonstra- perspective, the USA is well positioned to benefit from tion and small-scale projects. A  prime example is the APPLICATIONS IN OPERATION 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+ WASTE INCINERATION NORWAY FULL CHAIN CEMENT PRODUCTION CHEMICAL INTEGRATED LAKE PRODUCTION MID- SINOPEC QILU CHARLES CONTINENT ILLINOIS INDUSTRIAL METHANOL YANCHANG HUB IRON AND STEEL ABU DHABI PHASE 1 PRODUCTION HYDROGEN CARBONNET* GREAT AIR ACTL PRODUCTION QUEST PORTHOS PLAINS PRODUCTS STURGEON FERTILISER ENID PRODUCTION ACTL AGRIUM COFFEYVILLE WABASH FERTILIZER NATURAL GAS SNØHVIT CNPC JILIN PROCESSING SHUTE PETROBRAS PRE-SALT CREEK ABU DHABI CENTURY GORGON UTHMANIYAH PHASE 2 TERREL PLANT (FORMALLY VAL VERDE) LOST CABIN SLEIPNER POWER GENERATION CARBONSAFE ILLINOIS HUB* BOUNDARY DAM PETRA NOVA DRY FORK PROJECT TUNDRA = 1 Mtpa OF CO CIRCLE AREA PROPORTIONATE TO CAPACITY IN OPERATION IN CONSTRUCTION ADVANCED DEVELOPMENT Fig. 2: Large-scale CCS projects by industry and storage type [25]. Reproduced by permission from the Global CCS Institute Ltd. Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 Boundary Dam Yanchang Petrobras Santos Sinopec Qilu Lost Cabin ACTL with NW Sturgeon Refinery Coffeyville ACTL with Agrium Air Products SMR Gorgon Century Plant Beck | 5 demonstration of the Allam Cycle, a novel zero-emissions large-scale operating and under-construction CCS facil- power-plant technology, at a 50MWth facility in Texas. ities. In particular, the authors assessed their incentive The USA has traditionally been the leader in CCS de- and capital structures, alongside other enabling mechan- ployment. Initial deployment was driven by enhanced oil isms (Fig. 3). The framework lends itself well to analysing recovery (EOR), which has provided a value for carbon di- the maturity of the USA to accelerate the large-scale de- oxide. This is complemented by private-sector-technology ployment of CCS: expertise and a supportive policy framework. The typ- 1. A value on carbon ical price for anthropogenic CO that companies pay is estimated to start at around US$15/tCO [26], albeit it is A value on carbon provides policy signals that gov- indexed to the oil price. For example, at oil prices of US$70 ernments are committed to moving to a lower-carbon per barrel, the cost of CO is around US$30/tCO [27]. Hence, world, and reflects the externalities created by pol- 2 2 as a result, multiple CCS projects in the USA have come lution. Twenty-two of the 23 facilities analyzed were online during periods of high oil prices; in the early 1980s, built or are being built in an environment that pro- two projects started and, in 2013, three CCS projects com- vided some value on carbon such as through an emis- menced operation [28]. EOR has demonstrated secure geo- sions credit, a carbon tax or a tax credit, or enhanced logic storage, can result in reduced life-cycle emissions oil recovery. For example, two projects in Norway per barrel of oil and has provided an incentive to deploy were built as the result of a carbon tax on offshore CCS, demonstrating that a value on carbon can drive tech- natural gas production. Only one project, the Gorgon nology deployment. project in Australia, which is also the largest geologic storage project to date, was the result of a regulatory requirement. 2. A framework enabling investment 3 A framework for analysing CCS progress Most CCS projects have been enabled through high The Global CCS Institute, in 2019, has developed a policy- proportions of grant funding, with little to no debt priorities framework [29] through analysing the 23 financing. To deploy CCS at scale, private sector POLICIES & PROJECT CHARACTERISTICS Carbon Tax Tax Credit or Emission Credit Grant Support Provision by Government or SOE Regulatory Requirement Enhanced Oil Recovery Low Cost Capture Low Cost Transport and Storage Vertical Integration The facilities in light blue are under construction Fig. 3: Key incentives and project characteristics of realized-large-scale CCS projects globally [30]. Reproduced by permission from the Global CCS Institute Ltd. CNPC Jilin SnØhvit Petra Nova Great Plains Illinois Industrial Sleipner Abu Dhabi CCS Project Shute Creek Uthmaniyah er Enid F tiliser Quest Terrell Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 6 | Clean Energy, 2019, Vol. XX, No. XX investment must increase with banks providing debt As mentioned above, EOR has provided a value on CO , financing at feasible interest rates. Currently, pro- roughly estimated at ~$15 t/CO. Nonetheless, to date, ject risks are perceived by banks as too high, and the only about 30% of CO used for EOR is from anthropogenic cost of capital has a substantial implication for the sources, the rest is being mined from natural resources sanction of CCS projects. As the number of CCS fa- [32]. Hence, it would be an obvious step to aim for the sub- cilities increases, debt finance will become available stitution of mined for anthropogenic sources, opening up for CCS projects, thereby reducing the cost of capital. a larger market for capture, or to require maximum CO However, in the meantime, governments can provide stored per barrel of oil produced [33]. further grant funding, accelerated depreciation, con- Beyond regional carbon markets, which, for the most cessional loans, loan guarantees and other mech- part, trade either below $10 t/CO or do not allow CCS pro- anisms to attract private capital. Such instruments jects to gain credit, the USA has recently reformed and reward early investments for the knowledge they introduced two significant, CCS-specific values on carbon. create that is available to future project developers. Since 2008 [34], the USA has been incentivizing the capture Government investment in public goods such as of CO through a tax credit also known as 45Q, named after clean air is important, even if these investments do the relevant section of the US tax code. The tax credit was not make a private financial return, but a distributed first introduced in 2008, when it provided $10 t/CO for CO 2 2 societal financial return. stored via EOR and $20 t/CO for geologic storage, adjusted for inflation. This credit was significantly expanded and re- 3. Infrastructure access and storage formed in 2018 (Table 1). The work was led by a bipartisan group of lawmakers, supported by a diverse coalition of en- Most facilities that have successfully commenced vironmental groups, trade associations and industry. The operation so far had access to well-developed and credit now provides up to $18/tCO for CO used for EOR 2 2 characterized storage sites, and low-cost transporta- and $29/tCO for CO stored through dedicated geological 2 2 tion options, such as existing pipeline infrastructure storage, rising linearly to $35/tCO and $50/tCO by 2026, re- 2 2 to transport the CO . It is therefore an imperative for spectively, and adjusted to inflation thereafter. The credit is countries to map and understand their CO storage currently being implemented by the internal revenue ser - capacity, and aid the private-sector in the identifica- vice and also includes other features, including enhanced tion of suitable sites. In addition, governments can transferability that will make it more attractive to the tax- support the build-out of CO pipeline networks to equity market, similar to solar and wind. Projects have to reduce cross chain risks and enable the establish- commence construction before 2024 in order to qualify. ment of CCS hubs that significantly reduce unit CO Moreover, California’s Air Resources Board, antici- storage costs. pating the need for CCS and DAC, amended the state’s Low Carbon Fuel Standard (LCFS) [35]—a credit-based emissions-reductions system aimed at reducing the 4 The framework in the US context emission intensity of fuels sold in California by 20% by Using the above-mentioned framework to analyse CCS 2030. The regulation was amended with a CCS protocol in policy and deployment infrastructure provides a clear September of 2018, after a series of stakeholder consult- understanding that the USA is in a prime position to ations and listening sessions, and came into effect in early commercialize carbon-capture technologies. These find- 2019. Trading at an average of 186.5$/tCO during the first ings are also supported by the Global CCS Institute’s CCS 6  months of 2019 [36], the LCFS CCS Protocol credits are Readiness Index, which actively monitors the progress of stackable with 45Q for projects that reduce the life-cycle CCS deployment and identifies nations that are leaders in emissions of fuel consumed in California. Recognizing creating an enabling environment for the large-scale de- that the stock of CO contained in the atmosphere is a ployment of CCS. The USA ranks in second place, with 70 transnational problem, the protocol also incentivizes DAC of 100 points—close to Canada, the global leader [31]. projects globally to spur advancement and technological Table 1 : The 45Q tax credit for CCS [35] Plant size in ktCO/yr Relevant level of tax credit (USD/tCO ) 2 2 Power Industrial plants facilities DAC 2020 2021 2022 2023 2024 2025 2026 Onwards Geologic storage Min. 500 100 100 34 36 39 42 45 47 50 Indexed to CO -EOR-storage Min. 500 100 100 22 24 26 28 31 33 35 inflation Utilization dependent on actual 25–500 25 25 22 24 26 28 31 33 35 emissions reductions Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 Beck | 7 innovation in negative-emissions-technology options is essential to risk reduction enabling financing, which needed to reach global climate goals (Fig. 4). in turn will lead to more deployment, reducing risk and These combinable measures have the potential to sig- cost. For example, both the Air Products SMR CCS project nificantly change the economics of projects. Current (a hydrogen-production facility) and the Decatur Illinois break-even estimates range between $5 t/CO for natural- project (an ethanol plant) depended on grants to provide gas-processing CCS facilities to $30t/CO for hydrogen pro- more than 60% [41] of their funding. On the other hand, duction and coal-to-chemicals processing, as well as $60 projects like Petra Nova and Lake Charles Methanol were t/CO for power plants equipped with CCS [38]. The incen- able to secure financing, because their revenues are re- tives are expected to support spurring a wave of new pro- liant on the sale and use of CO for EOR. Contributing sig- jects at low-cost capture facilities, bringing down the cost nificantly to enhancing policy confidence, these policies of the technology, while also enabling and accelerating in- have already resulted in project announcements. This in- frastructure and industrial hub build-out. In fact, a 2019 cludes an ammonia-production facility set to become the analysis has shown that, in the power sector alone, 45Q largest geologic-storage project in the USA, as well as a could drive the deployment of CCS, enabling the capture of DAC facility in Texas. More announcements are antici- 49 Mtpa on coal- and gas-fired power plants [39]. A conser - pated, pending the implementation of the 45Q tax credit. vative learning-rate estimate of 10% means that the cost of Currently, there are nine projects at various stages of de- CCS could halve with large-scale deployment. velopment, which include ethanol, coal power, fertilizer Further positive policy signals include the passage production and DAC [42]. of clean-energy standards in seven states, bolstering Nonetheless, large-scale deployment of CCS at the scale technology–neutral decarbonization pathways in the necessary to reduce emissions to net-zero will need to power sector and providing an alternative value on be driven by policy measures, just as other clean-energy carbon through certificate trading. Ambitious emissions- technologies have been deployed thanks to innovative in- reductions pledges by multiple utilities complement this centive structures like feed-in tariffs and renewable port- policy development and could spur CCS deployment in the folio standards. These policy measures, at the beginning of short-to-medium term [40]. large-scale deployment, must be accompanied by further With CCS-specific incentives in place creating an initial risk-reducing mechanisms. business case for deployment, further project support is The Department of Energy (DOE) is largely seen as the still necessary. As outlined in the framework, the financing global leading agency concerning the support of CCS, of CCS projects remains challenging due to the perceived having supported the advancement of the technologies and actual risks of these projects. As such, banks are re- since 1997 [43]. The DOE is responsible for R&D and hosts luctant to lend unless they can be assured that the risk of multiple funding programmes for different parts of the a proven, yet not widely deployed, technology has been CCS-development, -deployment and -commercialization sufficiently mitigated. Therefore, government support value chain. For example, it provides funding for Front-End DIRECT AIR CCS AT OIL & GAS CCS AT REFINERIES ALL OTHER CCS CAPTURE PRODUCTION PROJECTS PROJECTS (E.G. CCS PROJECTS FACILITIES WITH ETHANOL) Anywhere, provided Anywhere, provided they Anywhere, provided they Location of they sell the Anywhere in the world sell the transportation sell the transportation fuel CCS project transportation fuel in fuel in California in California California Storage site Onshore saline or depleted oil and gas reservoirs, or oil and gas reservoirs used for CO -EOR Project-based, under Project-based, under the Project-based or fuel Credit method Project-based the Innovative Crude Refinery Investment Credit pathway Provision Program Earliest date which existing Any 2010 2016 Any projects eligible Requirements Project must meet requirements specified in the CCS protocol Additional Must achieve minimum None None None restrictions CI or emission reduction Fig. 4: Types of CCS projects qualifying for credits under the LCFS [37]. Reproduced by permissions from the Global CCS Institute Ltd. Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 8 | Clean Energy, 2019, Vol. XX, No. XX Engineering Design (FEED) Studies, research grants, tech- mid-west, an ethanol hub, to the Permian Basin could en- nology development and related activities, all of which can able an additional 30 Mtpa of CO to be stored, doubling the reduce risk and entry cost. It also provides a loan guar - US storage of anthropogenic sources. Should the govern- antee for advanced fossil-energy projects that include CCS ment finance only half of the pipeline, CO storage would to support projects in securing affordable financing. In drop to 19 Mtpa [47]. The study also found that the net- total, there are $8.5 billion in loan guarantees available. So work would not be feasible without government finance far, one project—the Lake Charles Methanol project, which and pointed to the important role of government sup- is the first petcoke-to-methanol facility in the USA—has port overcoming the chicken-and-egg problem. Therefore, been offered a conditional commitment to guarantee while the USA possesses an initial CO -transport infra- loans of up to $2 billion [44]. These support mechanisms structure, its overall pipeline system is insufficient to sup- and structures have helped initial projects to be realized port the scale of CCS expansion needed to transition to a through mitigating risk. net-zero economy. However, stakeholders in the USA representing the cli- With regard to CO storage, the USA has made significant mate and CCS community have moved to suggest add- advances in developing its own geologic-storage potential. itional incentives through legislative efforts. These focus In the Global CCS Institute’s database, the USA ranks as on the ability of projects to secure additional financial sup- second out of all countries assessed. The USA’s storage is port, including but not limited to the eligibility for private- thoroughly characterized and there is high confidence in activity bonds and master limited partnerships. Other published storage-resource estimates that include 2360– legislative proposals include funding for large-scale CCS- 21  200 GT (high likelihood) [48]. Currently, there are >100 demonstration projects. sites operating EOR, injecting an estimated 68 Mtpa [49] To conclude, the USA has a robust framework of policy of CO , albeit the majority being non-anthropogenic CO 2 2 support through the DOE, as well as multiple potentially [50]. An excellent example of the US government’s leader - fruitful legislative initiatives to reduce the financial risk of ship on supporting CCS deployment is the Carbon Storage large-scale CCS projects. However, more near-term, robust Assurance Facility Enterprise (CarbonSAFE) Initiative. policies to lower perceived and actual risk could accel- These projects focus on the development of geologic- erate and support the urgently necessary roll-out in light storage sites for the storage of an estimated 50 Mt of CO . of climate goals. The projects are aimed at improving the understanding A key part enabling the large-scale deployment of of project screening, site selection, characterization and CCS is a robust CO-transportation network. The US CO - baseline monitoring, verification, accounting and assess- 2 2 transport and -storage infrastructure is among the most ment procedures. Commencement of injection is antici- well developed globally, but not sufficient to support imme- pated for 2026 [51]. States are also seeking to simplify diate large-scale deployment. The USA already possesses CO -storage guidelines and provide regulatory clarity. In 5000 miles of CO pipelines, which were built primarily addition, multiple CO -transport and -storage hubs are in 2 2 for EOR and connect privately owned assets [45]. Several the early stages of development. states already provide financial assistance and tax incen- Overall, CCS has gained momentum in the USA. Beyond tives for the build-out of CO pipelines. However, the cur- the analysis of its policy framework, multiple initiatives rent amount of pipeline capacity and geographical reach are pending and being proposed, evidencing that the are not sufficient to sustain large-scale CCS deployment. policy gaps for CCS deployment have been well under - Experts estimate that pipeline capacity needs to grow 3- to stood and stakeholders are aiming for an optimization of 5-fold over the course of the next 30  years to facilitate a the government’s role. For example, several pieces of legis- CCS industry of the size needed for climate mitigation [45]. lation are aiming to increase the funding and scope of the In 2015, a working group consisting of different stake- DOE’s carbon capture, storage and utilization (CCUS) pro- holders suggested five trunk lines to be developed. These gramme, including directing funding to CCS on natural-gas trunk lines could connect different CO and industrial power generation. Further legislation seeks to fix the 48A hubs, strategically transporting more than 150 Mtpa of tax credit for efficient coal plants, which, equipped with CO , which is about six times as much as being stored CCS, are unable to meet the efficiency requirements, es- from anthropogenic sources today [46]. Pending legisla- tablish research programmes for DAC and commercialize tion such as the USE IT Act can enable the facilitation of CCS within the next decade. Building on the diverse and and clarify the siting, permitting and planning of the CO bipartisan support, lawmakers also introduced legislation infrastructure. However, it remains to be seen how these aimed at research and development to enable emissions pipelines can be financed, particularly in the absence of reductions in the industrial sector, including steel, iron, government financing. Analyses suggest a strong role for cement, aviation, shipping and petrochemicals. The indus- initial government financing and ownership to reduce trial sector has long been an overlooked climate challenge cross-chain risk and address the fact that pipelines are and reflects a significant policy gap to accelerate decarbon- natural monopolies. For example, an analysis from 2018 ization solutions. In fact, some CCS applications in the in- showed that a government-financed pipeline from the dustrial sector are low-cost and already competitive today. 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Carbon capture and storage in the USA: the role of US innovation leadership in climate-technology commercialization

Clean Energy , Volume Advance Article – Apr 4, 2020

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Abstract

Received: 9 October 2019; Accepted: 25 November 2019 © The Author(s) 2019. Published by Oxford University Press on behalf of National Institute of Clean-and-Low-Carbon Energy This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited. For commercial re-use, please contact journals.permissions@oup.com 1 Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 2 | Clean Energy, 2019, Vol. XX, No. XX Keywords: carbon capture; CCUS; energy and environment; energy system and policy; fossil energy; hydrogen and fuel cell From a global perspective, scenarios that lead to a full Introduction decarbonization of the world economy include CCS in The USA is one of the top emitters globally and remains both the industrial sector and the power sector. For ex- highly dependent on fossil fuels to satisfy its primary en- ample, the International Energy Agency’s (IEA) Sustainable ergy demand. In light of ambitious and necessary climate Development Scenario [5] sees 7% [6] of emissions reduc- goals enshrined in the Paris Agreement, bringing the decar - tions to be delivered by CCS, in almost equal parts in the bonization of the country’s economy on track is extremely power and the industrial sectors, by 2040. The IPCC Report important. The 2018 release of the UN Intergovernmental on 1.5°C includes CCS in three of four illustrative pathways Panel on Climate Change’s (IPCC) 1.5°C Report on Global and negative emissions in all pathways (Fig. 1). Warming [1] has bolstered the need for urgent climate The USA—the second largest CO emitter globally in action, calling to reduce emissions as soon as possible and absolute terms—can be regarded as a microcosm within to net-zero by mid-century. After a decline of emissions the global economy. While comprehensive, economy-wide of several years, greenhouse-gas emissions rose sharply models that forecast a net-zero economy by mid-century are in 2018 by 3.1% in the USA, outpacing global emissions lacking for the USA, most available decarbonization path- growth almost by a factor of two [2]. Emissions were driven ways that are compliant with either the Paris Agreement or by more frequent hotter and colder days prompting higher a net-zero-emissions scenario by mid-century include CCS demand. in the industrial and the power sectors, among a range of A suite of clean-energy technologies that has recently other clean-energy technologies. For example, the Union experienced renewed policy support through incentive of Concerned Scientists analysed models that will lead to structure innovation and legislative initiatives is carbon a 90% decarbonization of the US power sector by 2050. In capture and storage (CCS). The technologies, which cap- these scenarios, natural-gas power plants retrofitted with ) from industrial and power ture carbon dioxide (CO CCS comprise between 9% and 28% of the total mix [7 ]. plants, and transport and permanently and safely store it With the impacts of more extreme weather already underground, are commercially viable and deployment- being felt across the globe—July 2019 was the hottest ready. Direct air capture (DAC), which captures CO from month on record to date [9]—the pressure to decarbonize the ambient air to deliver negative emissions, has also emissions is intensifying. As part of and address rising CO gained increasing attention. The USA has also historically this global challenge, innovation in the energy, industrial been a leader in innovation, particularly with regard to and manufacturing sectors must therefore enable sus- policy driving private-sector action, designing novel busi- tainable growth. Continued economic prosperity will de- ness models and inventing new-energy and clean-energy pend on countries’ ability to reduce their energy intensity. technologies. For the past decade, the country has been a Carbon capture is expected to play a key role, particularly leader in energy-supply investment and the second largest due to three key characteristics of the US economy. destination for energy investment after China [3]. The first is the power sector, which is largely seen as Due to a renewed push to formulate supportive policy the easiest sector to decarbonize vis-à-vis transportation and enhance the existing policy framework across the and industry, yet still faces complex challenges. Despite country, the USA is in a prime position to commercialize renewable-energy generation more than doubling since these technologies that are expected to be needed widely 1990, the USA remains heavily dependent on fossil fuels to to fully decarbonize the global economy. As such, US lead- satisfy energy demand. In addition, the future of its nuclear ership on the deployment of CCS technologies would fleet, which provides more than 60% [10] of the country’s make significant contributions to the world’s reaching its carbon-free power, remains uncertain. Analysts expect re- climate and sustainable-development goals. It would also tiring nuclear to be replaced not only by renewable energy, contribute to reducing the cost of CCS—a technology that but also by unabated fossil-fuel additions. These asym- is essential to meeting climate goals and enabling tech- metries, coupled with a young natural-gas fleet of 22 years nology deployment abroad. The paper seeks to provide an average age [11] and further unabated, natural-gas cap- overview of CCS deployment in the USA while assessing acity underway, underpin the need to deploy carbon cap- the maturity of the US deployment framework, including ture in the US power sector. policies and infrastructure. The second is the industrial sector—an often- overlooked sector in terms of decarbonization and CCS deployment. It remains the largest consumer of energy 1 The US decarbonization opportunity and is responsible for 22% of emissions [12]. In 2017, the After 3  years of decline, US CO emissions rose by 3.1% sector was also responsible for ~18.2% [13] of US gross in 2018. Its largest emissions sector remains the trans- domestic product. So far, experts agree that the sector portation sector, followed by electricity and industry [4]. has felt little pressure to decarbonize due to the lack of Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 Beck | 3 AIM 2.0 MESSAGE-GLOBIOM 1.0 REMIND-MAgPIE 1.5 MESSAGEix-GLOBIOM 1.0 WEM SSP1–19 SSP2–19 SSP5–19 LowEnergyDemand Faster Transition Scenario (S1) (S2) (S5) (LED) (IEA WEM) Fossil without CCS Nuclear Fossil with CCS 1000 Wind Biomass without Solar CCS Other renewables Biomass with CCS 2030 2050 2100 2030 2050 2100 2030 2050 2100 2030 2050 2100 2030 2050 Fossil Fossil Biomass Biomass Nuclear Wind Solar Other renewables without CCS with CCS without CCS with CCS S1 S2 S5 LED IEA WEM 2030 2050 2100 20302050 21002030 20502100 20302050 210020302050210020302050 21002030 20502100 203020502100 Fig. 1: Primary energy supply for the four illustrative pathway archetypes plus the IEA’s Faster Transition Scenario (OECD/IEA and IRENA, 2017) (a) and their relative location in the ranges for pathways limiting warming to 1.5°C with no or limited overshoot (b) Reproduced by permission from the IPCC [8]. solutions and understanding of the challenge, as well as alone. A  total of more than 250 Mtpa of CO—almost 10 its significant political economic influence. In fact, the in- times the US capture capacity today—would be available dustrial sector offers early deployment opportunities for for capture from hydrogen, cement, steel, ethanol, am- CCS. As of November 2019, 17 of 19 operating, large-scale monia production and natural-gas processing combined facilities globally are in the industrial sector [14]. In the [18]. Hence, the industrial sector should be considered a USA, 9 of 10 operating, large-scale facilities are in industry. key target for CCS deployment. Furthermore, low-cost applications of CCS are concen- The third is the USA’s economic structure; the USA is trated in industry, amenable to a near-term roll-out of the strongly dependent on fossil fuels, providing ideal condi- technology that could result in significant cost reductions tions for CCS deployment. In fact, in 2018, about 80% of the and learning-by-doing. For example, processes that pro- primary energy demand was satisfied by natural gas, coal duce a pure stream of CO such as ethanol production and and petroleum [19]—a share that has been constant for the natural-gas processing can start at $15/tCO . last decade. Between 1983 and the great recession, the share Further, CCS can play a key role as a low-carbon heat hovered around 85%. These long-term trends signal strong solution and for process emissions from cement and steel rigidity of the US energy economy. The USA, due to the shale [15]. Industrial heat emissions alone account for 10% of revolution, has also become the largest natural-gas pro- global emissions and research has shown that many de- ducer in the world, holding this position since 2009, but also carbonization options are more costly than CCS applica- demonstrating its ability to improve techno-economic pro- tion [16]. Along these lines, a key to decarbonizing industry cesses through innovation. Due to its fossil-fuel-dependent could be hydrogen, whose production from fossil resources economic structure, the USA, along with China and Russia, can be decarbonized with CCS. In fact, the USA holds ideal ranks highest in the Global CCS Institute’s Inherent Interest conditions for large-scale hydrogen production with CCS in CCS [20], which is a relative index based on the share thanks to the vast availability of low-cost natural gas [17]. of fossil-fuel production and consumption, indicating an A  2014 NETL study showed that almost 70 Mtpa of CO economy’s suitability for large-scale CCS deployment to di- would be available for capture from hydrogen production versify and decarbonize its energy production. Primary energy by illustrative pathway (EJ/y) Primary energy by fuel type (EJ/y) Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 4 | Clean Energy, 2019, Vol. XX, No. XX However, the USA’s energy economy evidences further large-scale CCS deployment. Furthermore, the technology, supporting factors for CCS commercialization in the near- which is also seen as essential to alleviate the existing to-medium term, underpinning the country’s suitability. lock-in of emissions from existing infrastructure, could The structure of its energy supply has also contributed to potentially be exported to other countries, cementing the low energy prices in comparison to other advanced econ- USA’s leadership in innovation. Moving to a lower-carbon omies, boosting energy security, while also strengthening economy is inevitable to contain global warming and the desire by producers, policymakers and consumers to prevent potentially disastrous effects of climate change. maintain low levels of energy prices [21]. At the same time, Therefore, the USA’s ability to maintain its position as a for the past decade, the country has been a leader in energy- top natural-resource producer, exporter and its ability to supply investment and the second largest destination for provide energy security will largely depend on the possible energy investment, right after China [22], evidencing strong transformation of its energy and industrial sectors. government commitment as well as a capability to attract investment in the sector. On an absolute basis, the USA in- vests more than any other nation to support clean-energy 2 CCS in the USA innovation. It invests more in total clean-energy RD&D ($6.8 billion in 2018) than the next two countries, China and Currently, as of November 2019, there are 10 CCS facilities in Japan, combined and more in basic energy science than all the USA with a combined capacity to capture more than 25 other nations combined [23]. Therefore, the desire to main- million tonnes per annum. In total, there are 19 operating tain strong energy security as well as accelerate innovation facilities globally, with a further 28 in various stages of de- provides fertile ground for large-scale CCS deployment. velopment and 4 under construction (Fig. 2). In the USA, While this outlook, evidencing strong fossil-fuel and there are 10 operating, large-scale projects and a further manufacturing dependence of the economy, might pose 17 under development. One of the operating facilities in an obstacle to full decarbonization at first sight, it should the USA is in the power sector, with others in natural-gas also be regarded as an opportunity and incentive to trans- processing and fertilizer, hydrogen and ethanol produc- form the sector and develop next-generation clean-energy tion [24]. In addition, the USA hosts the National Carbon technologies. Coupled with a strong desire to bolster en- Capture Center—a large public and privately backed test ergy security, demonstrate technology leadership and an centre allowing new technology providers to test their innovative edge from a policy, finance and private-sector technologies. The USA also has a history of demonstra- perspective, the USA is well positioned to benefit from tion and small-scale projects. A  prime example is the APPLICATIONS IN OPERATION 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+ WASTE INCINERATION NORWAY FULL CHAIN CEMENT PRODUCTION CHEMICAL INTEGRATED LAKE PRODUCTION MID- SINOPEC QILU CHARLES CONTINENT ILLINOIS INDUSTRIAL METHANOL YANCHANG HUB IRON AND STEEL ABU DHABI PHASE 1 PRODUCTION HYDROGEN CARBONNET* GREAT AIR ACTL PRODUCTION QUEST PORTHOS PLAINS PRODUCTS STURGEON FERTILISER ENID PRODUCTION ACTL AGRIUM COFFEYVILLE WABASH FERTILIZER NATURAL GAS SNØHVIT CNPC JILIN PROCESSING SHUTE PETROBRAS PRE-SALT CREEK ABU DHABI CENTURY GORGON UTHMANIYAH PHASE 2 TERREL PLANT (FORMALLY VAL VERDE) LOST CABIN SLEIPNER POWER GENERATION CARBONSAFE ILLINOIS HUB* BOUNDARY DAM PETRA NOVA DRY FORK PROJECT TUNDRA = 1 Mtpa OF CO CIRCLE AREA PROPORTIONATE TO CAPACITY IN OPERATION IN CONSTRUCTION ADVANCED DEVELOPMENT Fig. 2: Large-scale CCS projects by industry and storage type [25]. Reproduced by permission from the Global CCS Institute Ltd. Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 Boundary Dam Yanchang Petrobras Santos Sinopec Qilu Lost Cabin ACTL with NW Sturgeon Refinery Coffeyville ACTL with Agrium Air Products SMR Gorgon Century Plant Beck | 5 demonstration of the Allam Cycle, a novel zero-emissions large-scale operating and under-construction CCS facil- power-plant technology, at a 50MWth facility in Texas. ities. In particular, the authors assessed their incentive The USA has traditionally been the leader in CCS de- and capital structures, alongside other enabling mechan- ployment. Initial deployment was driven by enhanced oil isms (Fig. 3). The framework lends itself well to analysing recovery (EOR), which has provided a value for carbon di- the maturity of the USA to accelerate the large-scale de- oxide. This is complemented by private-sector-technology ployment of CCS: expertise and a supportive policy framework. The typ- 1. A value on carbon ical price for anthropogenic CO that companies pay is estimated to start at around US$15/tCO [26], albeit it is A value on carbon provides policy signals that gov- indexed to the oil price. For example, at oil prices of US$70 ernments are committed to moving to a lower-carbon per barrel, the cost of CO is around US$30/tCO [27]. Hence, world, and reflects the externalities created by pol- 2 2 as a result, multiple CCS projects in the USA have come lution. Twenty-two of the 23 facilities analyzed were online during periods of high oil prices; in the early 1980s, built or are being built in an environment that pro- two projects started and, in 2013, three CCS projects com- vided some value on carbon such as through an emis- menced operation [28]. EOR has demonstrated secure geo- sions credit, a carbon tax or a tax credit, or enhanced logic storage, can result in reduced life-cycle emissions oil recovery. For example, two projects in Norway per barrel of oil and has provided an incentive to deploy were built as the result of a carbon tax on offshore CCS, demonstrating that a value on carbon can drive tech- natural gas production. Only one project, the Gorgon nology deployment. project in Australia, which is also the largest geologic storage project to date, was the result of a regulatory requirement. 2. A framework enabling investment 3 A framework for analysing CCS progress Most CCS projects have been enabled through high The Global CCS Institute, in 2019, has developed a policy- proportions of grant funding, with little to no debt priorities framework [29] through analysing the 23 financing. To deploy CCS at scale, private sector POLICIES & PROJECT CHARACTERISTICS Carbon Tax Tax Credit or Emission Credit Grant Support Provision by Government or SOE Regulatory Requirement Enhanced Oil Recovery Low Cost Capture Low Cost Transport and Storage Vertical Integration The facilities in light blue are under construction Fig. 3: Key incentives and project characteristics of realized-large-scale CCS projects globally [30]. Reproduced by permission from the Global CCS Institute Ltd. CNPC Jilin SnØhvit Petra Nova Great Plains Illinois Industrial Sleipner Abu Dhabi CCS Project Shute Creek Uthmaniyah er Enid F tiliser Quest Terrell Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 6 | Clean Energy, 2019, Vol. XX, No. XX investment must increase with banks providing debt As mentioned above, EOR has provided a value on CO , financing at feasible interest rates. Currently, pro- roughly estimated at ~$15 t/CO. Nonetheless, to date, ject risks are perceived by banks as too high, and the only about 30% of CO used for EOR is from anthropogenic cost of capital has a substantial implication for the sources, the rest is being mined from natural resources sanction of CCS projects. As the number of CCS fa- [32]. Hence, it would be an obvious step to aim for the sub- cilities increases, debt finance will become available stitution of mined for anthropogenic sources, opening up for CCS projects, thereby reducing the cost of capital. a larger market for capture, or to require maximum CO However, in the meantime, governments can provide stored per barrel of oil produced [33]. further grant funding, accelerated depreciation, con- Beyond regional carbon markets, which, for the most cessional loans, loan guarantees and other mech- part, trade either below $10 t/CO or do not allow CCS pro- anisms to attract private capital. Such instruments jects to gain credit, the USA has recently reformed and reward early investments for the knowledge they introduced two significant, CCS-specific values on carbon. create that is available to future project developers. Since 2008 [34], the USA has been incentivizing the capture Government investment in public goods such as of CO through a tax credit also known as 45Q, named after clean air is important, even if these investments do the relevant section of the US tax code. The tax credit was not make a private financial return, but a distributed first introduced in 2008, when it provided $10 t/CO for CO 2 2 societal financial return. stored via EOR and $20 t/CO for geologic storage, adjusted for inflation. This credit was significantly expanded and re- 3. Infrastructure access and storage formed in 2018 (Table 1). The work was led by a bipartisan group of lawmakers, supported by a diverse coalition of en- Most facilities that have successfully commenced vironmental groups, trade associations and industry. The operation so far had access to well-developed and credit now provides up to $18/tCO for CO used for EOR 2 2 characterized storage sites, and low-cost transporta- and $29/tCO for CO stored through dedicated geological 2 2 tion options, such as existing pipeline infrastructure storage, rising linearly to $35/tCO and $50/tCO by 2026, re- 2 2 to transport the CO . It is therefore an imperative for spectively, and adjusted to inflation thereafter. The credit is countries to map and understand their CO storage currently being implemented by the internal revenue ser - capacity, and aid the private-sector in the identifica- vice and also includes other features, including enhanced tion of suitable sites. In addition, governments can transferability that will make it more attractive to the tax- support the build-out of CO pipeline networks to equity market, similar to solar and wind. Projects have to reduce cross chain risks and enable the establish- commence construction before 2024 in order to qualify. ment of CCS hubs that significantly reduce unit CO Moreover, California’s Air Resources Board, antici- storage costs. pating the need for CCS and DAC, amended the state’s Low Carbon Fuel Standard (LCFS) [35]—a credit-based emissions-reductions system aimed at reducing the 4 The framework in the US context emission intensity of fuels sold in California by 20% by Using the above-mentioned framework to analyse CCS 2030. The regulation was amended with a CCS protocol in policy and deployment infrastructure provides a clear September of 2018, after a series of stakeholder consult- understanding that the USA is in a prime position to ations and listening sessions, and came into effect in early commercialize carbon-capture technologies. These find- 2019. Trading at an average of 186.5$/tCO during the first ings are also supported by the Global CCS Institute’s CCS 6  months of 2019 [36], the LCFS CCS Protocol credits are Readiness Index, which actively monitors the progress of stackable with 45Q for projects that reduce the life-cycle CCS deployment and identifies nations that are leaders in emissions of fuel consumed in California. Recognizing creating an enabling environment for the large-scale de- that the stock of CO contained in the atmosphere is a ployment of CCS. The USA ranks in second place, with 70 transnational problem, the protocol also incentivizes DAC of 100 points—close to Canada, the global leader [31]. projects globally to spur advancement and technological Table 1 : The 45Q tax credit for CCS [35] Plant size in ktCO/yr Relevant level of tax credit (USD/tCO ) 2 2 Power Industrial plants facilities DAC 2020 2021 2022 2023 2024 2025 2026 Onwards Geologic storage Min. 500 100 100 34 36 39 42 45 47 50 Indexed to CO -EOR-storage Min. 500 100 100 22 24 26 28 31 33 35 inflation Utilization dependent on actual 25–500 25 25 22 24 26 28 31 33 35 emissions reductions Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 Beck | 7 innovation in negative-emissions-technology options is essential to risk reduction enabling financing, which needed to reach global climate goals (Fig. 4). in turn will lead to more deployment, reducing risk and These combinable measures have the potential to sig- cost. For example, both the Air Products SMR CCS project nificantly change the economics of projects. Current (a hydrogen-production facility) and the Decatur Illinois break-even estimates range between $5 t/CO for natural- project (an ethanol plant) depended on grants to provide gas-processing CCS facilities to $30t/CO for hydrogen pro- more than 60% [41] of their funding. On the other hand, duction and coal-to-chemicals processing, as well as $60 projects like Petra Nova and Lake Charles Methanol were t/CO for power plants equipped with CCS [38]. The incen- able to secure financing, because their revenues are re- tives are expected to support spurring a wave of new pro- liant on the sale and use of CO for EOR. Contributing sig- jects at low-cost capture facilities, bringing down the cost nificantly to enhancing policy confidence, these policies of the technology, while also enabling and accelerating in- have already resulted in project announcements. This in- frastructure and industrial hub build-out. In fact, a 2019 cludes an ammonia-production facility set to become the analysis has shown that, in the power sector alone, 45Q largest geologic-storage project in the USA, as well as a could drive the deployment of CCS, enabling the capture of DAC facility in Texas. More announcements are antici- 49 Mtpa on coal- and gas-fired power plants [39]. A conser - pated, pending the implementation of the 45Q tax credit. vative learning-rate estimate of 10% means that the cost of Currently, there are nine projects at various stages of de- CCS could halve with large-scale deployment. velopment, which include ethanol, coal power, fertilizer Further positive policy signals include the passage production and DAC [42]. of clean-energy standards in seven states, bolstering Nonetheless, large-scale deployment of CCS at the scale technology–neutral decarbonization pathways in the necessary to reduce emissions to net-zero will need to power sector and providing an alternative value on be driven by policy measures, just as other clean-energy carbon through certificate trading. Ambitious emissions- technologies have been deployed thanks to innovative in- reductions pledges by multiple utilities complement this centive structures like feed-in tariffs and renewable port- policy development and could spur CCS deployment in the folio standards. These policy measures, at the beginning of short-to-medium term [40]. large-scale deployment, must be accompanied by further With CCS-specific incentives in place creating an initial risk-reducing mechanisms. business case for deployment, further project support is The Department of Energy (DOE) is largely seen as the still necessary. As outlined in the framework, the financing global leading agency concerning the support of CCS, of CCS projects remains challenging due to the perceived having supported the advancement of the technologies and actual risks of these projects. As such, banks are re- since 1997 [43]. The DOE is responsible for R&D and hosts luctant to lend unless they can be assured that the risk of multiple funding programmes for different parts of the a proven, yet not widely deployed, technology has been CCS-development, -deployment and -commercialization sufficiently mitigated. Therefore, government support value chain. For example, it provides funding for Front-End DIRECT AIR CCS AT OIL & GAS CCS AT REFINERIES ALL OTHER CCS CAPTURE PRODUCTION PROJECTS PROJECTS (E.G. CCS PROJECTS FACILITIES WITH ETHANOL) Anywhere, provided Anywhere, provided they Anywhere, provided they Location of they sell the Anywhere in the world sell the transportation sell the transportation fuel CCS project transportation fuel in fuel in California in California California Storage site Onshore saline or depleted oil and gas reservoirs, or oil and gas reservoirs used for CO -EOR Project-based, under Project-based, under the Project-based or fuel Credit method Project-based the Innovative Crude Refinery Investment Credit pathway Provision Program Earliest date which existing Any 2010 2016 Any projects eligible Requirements Project must meet requirements specified in the CCS protocol Additional Must achieve minimum None None None restrictions CI or emission reduction Fig. 4: Types of CCS projects qualifying for credits under the LCFS [37]. Reproduced by permissions from the Global CCS Institute Ltd. Downloaded from https://academic.oup.com/ce/advance-article-abstract/doi/10.1093/ce/zkz031/5686277 by guest on 18 February 2020 8 | Clean Energy, 2019, Vol. XX, No. XX Engineering Design (FEED) Studies, research grants, tech- mid-west, an ethanol hub, to the Permian Basin could en- nology development and related activities, all of which can able an additional 30 Mtpa of CO to be stored, doubling the reduce risk and entry cost. It also provides a loan guar - US storage of anthropogenic sources. Should the govern- antee for advanced fossil-energy projects that include CCS ment finance only half of the pipeline, CO storage would to support projects in securing affordable financing. In drop to 19 Mtpa [47]. The study also found that the net- total, there are $8.5 billion in loan guarantees available. So work would not be feasible without government finance far, one project—the Lake Charles Methanol project, which and pointed to the important role of government sup- is the first petcoke-to-methanol facility in the USA—has port overcoming the chicken-and-egg problem. Therefore, been offered a conditional commitment to guarantee while the USA possesses an initial CO -transport infra- loans of up to $2 billion [44]. These support mechanisms structure, its overall pipeline system is insufficient to sup- and structures have helped initial projects to be realized port the scale of CCS expansion needed to transition to a through mitigating risk. net-zero economy. However, stakeholders in the USA representing the cli- With regard to CO storage, the USA has made significant mate and CCS community have moved to suggest add- advances in developing its own geologic-storage potential. itional incentives through legislative efforts. These focus In the Global CCS Institute’s database, the USA ranks as on the ability of projects to secure additional financial sup- second out of all countries assessed. The USA’s storage is port, including but not limited to the eligibility for private- thoroughly characterized and there is high confidence in activity bonds and master limited partnerships. Other published storage-resource estimates that include 2360– legislative proposals include funding for large-scale CCS- 21  200 GT (high likelihood) [48]. Currently, there are >100 demonstration projects. sites operating EOR, injecting an estimated 68 Mtpa [49] To conclude, the USA has a robust framework of policy of CO , albeit the majority being non-anthropogenic CO 2 2 support through the DOE, as well as multiple potentially [50]. An excellent example of the US government’s leader - fruitful legislative initiatives to reduce the financial risk of ship on supporting CCS deployment is the Carbon Storage large-scale CCS projects. However, more near-term, robust Assurance Facility Enterprise (CarbonSAFE) Initiative. policies to lower perceived and actual risk could accel- These projects focus on the development of geologic- erate and support the urgently necessary roll-out in light storage sites for the storage of an estimated 50 Mt of CO . of climate goals. The projects are aimed at improving the understanding A key part enabling the large-scale deployment of of project screening, site selection, characterization and CCS is a robust CO-transportation network. The US CO - baseline monitoring, verification, accounting and assess- 2 2 transport and -storage infrastructure is among the most ment procedures. Commencement of injection is antici- well developed globally, but not sufficient to support imme- pated for 2026 [51]. States are also seeking to simplify diate large-scale deployment. The USA already possesses CO -storage guidelines and provide regulatory clarity. In 5000 miles of CO pipelines, which were built primarily addition, multiple CO -transport and -storage hubs are in 2 2 for EOR and connect privately owned assets [45]. Several the early stages of development. states already provide financial assistance and tax incen- Overall, CCS has gained momentum in the USA. Beyond tives for the build-out of CO pipelines. However, the cur- the analysis of its policy framework, multiple initiatives rent amount of pipeline capacity and geographical reach are pending and being proposed, evidencing that the are not sufficient to sustain large-scale CCS deployment. policy gaps for CCS deployment have been well under - Experts estimate that pipeline capacity needs to grow 3- to stood and stakeholders are aiming for an optimization of 5-fold over the course of the next 30  years to facilitate a the government’s role. For example, several pieces of legis- CCS industry of the size needed for climate mitigation [45]. lation are aiming to increase the funding and scope of the In 2015, a working group consisting of different stake- DOE’s carbon capture, storage and utilization (CCUS) pro- holders suggested five trunk lines to be developed. These gramme, including directing funding to CCS on natural-gas trunk lines could connect different CO and industrial power generation. Further legislation seeks to fix the 48A hubs, strategically transporting more than 150 Mtpa of tax credit for efficient coal plants, which, equipped with CO , which is about six times as much as being stored CCS, are unable to meet the efficiency requirements, es- from anthropogenic sources today [46]. Pending legisla- tablish research programmes for DAC and commercialize tion such as the USE IT Act can enable the facilitation of CCS within the next decade. Building on the diverse and and clarify the siting, permitting and planning of the CO bipartisan support, lawmakers also introduced legislation infrastructure. However, it remains to be seen how these aimed at research and development to enable emissions pipelines can be financed, particularly in the absence of reductions in the industrial sector, including steel, iron, government financing. Analyses suggest a strong role for cement, aviation, shipping and petrochemicals. The indus- initial government financing and ownership to reduce trial sector has long been an overlooked climate challenge cross-chain risk and address the fact that pipelines are and reflects a significant policy gap to accelerate decarbon- natural monopolies. For example, an analysis from 2018 ization solutions. In fact, some CCS applications in the in- showed that a government-financed pipeline from the dustrial sector are low-cost and already competitive today. 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Journal

Clean EnergyOxford University Press

Published: Apr 4, 2020

References