NEWS

Is carbon capture too expensive?

Carbon capture, utilisation and storage (CCUS) technologies are critical for putting energy systems around the world on a sustainable path. Despite the importance of CCUS for achieving clean energy transitions, deployment has been slow to take off – there are only around 20 commercial CCUS operations worldwide. But momentum is building. Plans for more than 30 commercial CCUS facilities have been announced in recent years, and despite the Covid‑19 crisis, in 2020 governments and industry committed more than USD 4.5 billion to CCUS.

A number of factors can explain the slow uptake of CCUS, but high cost is one of the most frequently heard. Commentators often cite CCUS as being too expensive and unable to compete with wind and solar electricity given their spectacular fall in costs over the last decade, while climate policies – including carbon pricing – are not yet strong enough to make CCUS economically attractive. As we explain in this commentary, to dismiss the technology on cost grounds would be to ignore its unique strengths, its competitiveness in key sectors and its potential to enter the mainstream of low-carbon solutions.

The idea that CCUS is “high cost” ignores the bigger picture

IEA analysis consistently shows that a broad portfolio of technologies is needed to achieve deep emissions reductions, both practically and cost-effectively. Energy efficiency and renewables are central pillars, but other technologies and strategies have a major role to play as well.

In its recently published report, the IEA identified four crucial ways in which CCUS can contribute to a successful clean energy transition:

• CCUS can be retrofitted to power and industrial plants that may otherwise still be emitting 8 billion tonnes of CO2 in 2050 – around one-quarter of today’s annual energy-sector emissions.
• CCUS can tackle emissions in sectors with limited other options, such as cement, steel and chemicals manufacturing, and in the production of synthetic fuels for long-distance transport.
• CCUS enables the production of low-carbon hydrogen from fossil fuels, a least-cost option in several regions around the world.
• CCUS can remove CO2 from the atmosphere by combining it with bioenergy or direct air capture to balance emissions that are unavoidable or technically difficult to avoid.

Limiting the availability of CCUS would considerably increase the cost and complexity of the energy transition by increasing reliance on technologies that are currently more expensive and at earlier stages of development. One such example is the electrification of very high-temperature heat furnaces used for cement production and virgin steelmaking.

Achieving net-zero goals will be virtually impossible without CCUS

CCUS applications do not all have the same cost. Looking specifically at carbon capture, the cost can vary greatly by CO2 source, from a range of USD 15-25/t CO2 for industrial processes producing “pure” or highly concentrated CO2 streams (such as ethanol production or natural gas processing) to USD 40-120/t CO2 for processes with “dilute” gas streams, such as cement production and power generation. Capturing CO2 directly from the air is currently the most expensive approach, but could nonetheless play a unique role in carbon removal. Some CO2 capture technologies are commercially available now, while others are still in development, and this further contributes to the large range in costs.

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

Achieving deep emissions reductions in heavy industry (cement, steel and chemicals production) can be challenging for several reasons. But CCUS is a relatively advanced and cost-competitive option for dramatically cutting 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.

In the case of cement production, where two-thirds of emissions are from chemical reactions related to heating limestone (rather than burning fossil fuels), CCUS is currently the only scalable solution for reducing emissions. And in the iron and steel sector, production routes based on CCUS are currently the most advanced and least-cost low-carbon options. Incorporating CO2 capture raises estimated costs by less than 10%, while approaches based on electrolytic hydrogen can raise costs by 35-70% compared with today’s conventional production methods.

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 around 20-40% higher than their unabated counterparts, while the cost of electrolytic hydrogen routes is estimated to be 50-115% higher.

For industry, CCUS technologies are among the cheapest abatement options – or the only option

Non CCUS-based (low CO2)
Solar and wind are set to become the largest and cheapest sources of electricity globally, but other technologies will still be needed for low-cost power systems. The growing proportion of power from variable renewables drives a greater need for capacity that is available “on-demand” to ensure the stable operation of power systems. CCUS-equipped coal- or gas-fired power plants can provide this capacity and supply electricity at any time, whether at night or on a still day.

Power plants with CCUS are particularly valuable in regions with strong seasonal variations in renewable generation. The few alternatives able to manage these variations, such as large-scale hydrogen storage, are currently more expensive than CCUS. CCUS can also be a cost-efficient strategy to tackle emissions from existing coal- and gas-fired power plants. Around one-third of today’s coal and gas plants were built only in the last decade; retrofitting with CCUS can allow them to continue operation and avoid the costs of early retirement.

CCUS can support the integration of renewables in power systems
There is considerable potential to reduce costs along the CCUS value chain, particularly as many applications are still in the early stages of commercialisation. Experience indicates that CCUS should become cheaper as the market grows, the technology develops, finance costs fall, economies of scale are reached, and experience of building and operating CCUS facilities accumulates. This pattern has already been seen for renewable energy technologies over recent decades.

Cost reductions have already been achieved at large-scale CCUS projects. For example, the cost of CO2 capture in the power sector has come down by 35% through its evolution from the first to the second large-scale CCUS facility, and this trend is set to continue as the market expands.

In the pursuit of net zero, we cannot afford to dismiss CCUS as “too expensive”. It is the only group of technologies that can contribute both to reducing emissions in critical economic sectors and to removing CO2 to balance emissions that cannot be avoided – a balance that is at the heart of net-zero ambitions. In some sectors, including in heavy industry, CCUS is currently the least-cost or only practical option for deep emissions reductions.

The relative lack of progress in deploying CCUS to date means that many technologies and applications are still at an early stage of commercialisation – and therefore at a high point in the cost curve. There is ample potential for cost reductions – the experience of wind and solar highlights what is possible – but, as with renewable energy, realising this potential will require strengthened policy support to drive CCUS innovation and deployment.

The development of economic stimulus packages in response to the Covid‑19‑related economic downturn presents a unique opportunity to boost investment in CCUS and support a least-cost pathway to net zero. In our recent ETP Special Report on CCUS, we outline four high-level priorities for governments and industry to accelerate progress of CCUS over the next decade.

Policy support is needed to drive CCUS innovation and deployment.

https://www.iea.org/commentaries/is-carbon-capture-too-expensive

Menu