Rapid expansion in carbon capture industry for net zero targets

An essential pathway to Net Zero is carbon capture: Carbon Capture, Utilisation, and Storage (CCUS). Envisaged in most current Net Zero scenarios, capture capacity will have to at least double every five years for the next 30 years, according to new research from the Clean Energy Technology team at research firm IHS Markit.

The recent wave of decarbonisation targets have activated the pipeline of large-scale CCUS in different sectors. According to the recently launched IHS Markit CCUS Global Project Tracker, there are 23 projects under construction, financing and design that if completed could double the operational capacity by 2026.

CCUS covers a group of technologies that capture and compress CO₂ from large point sources, including power generation or industrial facilities, and store it securely underground or transport it for use in other applications.

Most energy transition scenarios estimate that a diversified portfolio of low-carbon solutions will be needed to meet climate goals. CCUS is a key element of these solutions and is projected to reduce between 4% to 20% of global CO2 emissions by 2050: requiring a record rate of growth for an industry still in its infancy.

Over the past decade, only 16 large-scale CCUS projects have started operations globally, accounting for 75% of the current operating projects. Over the same timeframe, 20 large-scale projects have been canceled, largely due to high capital costs and the lack of carbon storage regulation in some regions.

Further clarification around storage liability—the issue of who will monitor and be liable for the CO₂ stored underground—is needed to help improve public perception and acceptance of technological carbon sequestration solutions.

“CCUS projects are capital intensive compared to other decarbonization solutions. The complexity of these projects and the small scale of the industry have kept costs high, particularly for sectors with low CO₂ concentration,” said Edurne Zoco, executive director, clean energy technology, IHS Markit.

“Lessons learned from the past decade, coupled with new emerging business models and ambitious decarbonization goals, could create a very positive environment for the CCUS industry to grow at a faster pace,” said Paola Perez Pena, principal research analyst, clean energy technology, IHS Markit.

These lessons learned and new emerging business models include:

• Policy support. The growing awareness that government support is essential is leading to an improvement in national policies and more projects with public-private partnerships.
• Growth of low-carbon hydrogen. Low-carbon ‘blue’ hydrogen is the end product of a process that uses CCUS to capture the CO₂ emissions released by fossil fuel resources. Blue hydrogen is expected to scale up to meet demand and at a lower cost than ‘green’ hydrogen (zero-carbon hydrogen produced via electrolysis using renewable energy sources). Blue hydrogen projects currently account for more than 30% of the CO₂ capture capacity in the active pipeline and rapidly growing demand is set to be a key driver in the expansion of CCUS globally.
• Emerging business models. Industrial clusters could be a promising business model to drive down the high costs within the CCUS sector. Localized networks of a few industrial emitters with shared transportation and storage infrastructure could significantly reduce project costs owing to economies of scale.

Based on announced projects, the industry is on track to double carbon capture capacity in the next five years. However, it remains to be seen if the nascent CCUS industry will be able to maintain the substantial rate of growth in line with current Net Zero scenarios. More than 75% of the announced projects are in early stages of development and have yet to overcome multiple challenges, most critically to secure financing.

“As the number of CCUS projects increase, we expect to see cost reduction, mainly in the capture segment, driven by next generation technologies and learning rate from process optimization. In the long term we could see overall cost reductions between 15%-30% which would improve the project economics and the growth rate of the industry,” said Paola Perez Pena, principal research analyst, clean energy technology, IHS Markit.