Carbon capture and storage developers say they still require state support to get projects up and running, despite record-high carbon prices that now cover much of the cost of the process, because of risks posed by relatively immature technology, a lack of an established economic model and the early stage of industry development, reports Platts.
EU Emissions Trading System carbon price breach
The EU Emissions Trading System carbon price breached Eur100/mt for the first time in Feb. 21, and has remained at elevated levels, assessed at Eur95.68/mt ($102.49/mt) on March 13, according to Platts assessments from S&P Global Commodity Insights. The UK carbon price under its Emissions Trading Scheme was assessed at GBP83.01/mt CO2e (Eur93.98/mt, $100.95/mt) March 13.
Transport and storage costs for CO2 are in the region of $10-$20/mt (Eur9-19/mt), while capture costs vary widely depending on the sector, Storegga CFO Michael Alsford told S&P Global on the sidelines of International Energy Week March 1.
Other project developers gave indications of capture costs in the region of $30-$40/mt CO2, while the International Energy Agency shows higher costs in industries with lower concentrations of CO2 emissions. However, while CO2 prices in Europe appear on paper to cover capture and storage costs, other barriers remain.
“There are quite a few challenges and things that need to come together in order for this whole sector to move forward and establish itself, and one of those is getting the economic model right, but it’s not the only thing,” Ro Lazarovitch, projects lawyer at Bracewell, told S&P Global in an interview March 13.
“When I look at the whole CCS sector, I’m thinking to myself, here we are trying to create a new industry from scratch,” he said. “If you look at established industries like the global LNG trade, which has its roots in the 1980s and earlier, and that took a really long time to get to the mature market we have today.”
Business model support
Building an industry on such a scale would take much longer without state support, Lazarovitch said, noting that business models were needed to develop both sides of the market — capturing industrial emissions, and the storage side — simultaneously.
Storage hubs need to know they will have the CO2 supplied to them from when the facilities start operating, and industrial emitters likewise need guarantees there will be somewhere to put the captured CO2, he said.
Linda Cook, CEO of Harbour Energy, which is leading the Viking CCS project in the UK, said the system itself didn’t need government funding, but the associated emitters did.
“What we need is the regulatory framework… because at least part of our project will be regulated in terms of what we can charge, so we need to understand how that model is going to work,” Cook said on an investor call earlier in March.
“We need the government to assign… the emitters who have indicated support for our project to our project. Then we need the long-term government commitment around the long-term liability related to the storage.”
A review of the UK government’s net-zero strategy carried out in 2022 pointed to an urgent need to bring forward legislation for CCS projects.
“The likes of Shell and SSE have said that delivering the business models through primary legislation is ‘a matter of urgency’,” the review said in its Mission Zero report.
“On power CCUS there is a particular ‘lack of clarity on market design’ according to BP, with uncertainty as to how the Dispatchable Power Agreement (DPA) will fit into future electricity markets being developed under government’s Review of Electricity Market arrangements (REMA).”
“Delays will create uncertainty for developers and investors, increasing the cost of investment,” Storegga told the review.
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Source: Platts
