What’s shaping CCUS project costs?
4 minute read
Director of CCUS Economics
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Carbon capture, utilisation and storage (CCUS) looks set to become a key element of our net zero future. A combination of factors is prompting new project announcements: carbon taxes, government subsidies, operator and/or investor desire to reduce emissions, consumer willingness to pay more for carbon-abated products and the ability to sell carbon removal as an offset.
Based on our risk analysis of current global projects in development and our view of future growth, we project global capture capacity to increase more than sevenfold over the next 10 years, from 50 Mtpa to more than 370 Mtpa. Over US$150 billion in capital expenditure is required. Dauntingly, our Accelerated Energy Transition (AET) 1.5 °C scenario calls for 2 Btpa of CCUS, almost six times those projections, with roughly commensurate capital costs.
So, while the world determines whether and how to incentivise carbon capture to meet climate objectives, CCUS project developers are beavering away, designing projects that maximise the abatement per dollar of cost. Without improved clarity on these costs, development stumbles and capital does not flow freely.
In our recent 2023 CCUS Cost Update for point source emissions, we explored the factors affecting the levelised cost of CCUS (LCOCCUS) to 2030 and beyond. Fill in the form for a complimentary extract and read on for a brief introduction.
CCUS project costs vary greatly – but rules of thumb can help identify projects optimised for cost
Though considered crucial to meeting climate targets, the CCUS industry is still immature. The complexity of CCUS revenue or incentives is itself enough to create sizeable uncertainty, before one starts to cost CCUS projects — a process that is still a bit murky.
Any generic LCOCCUS model is potentially misleading due to the unique cost drivers of each CCUS project. Our model, therefore, does not aim to give an accurate cost estimate of individual projects, but a perspective on cost ranges and how all the potential variations of emission sources, scale, locations, parasitic emissions, CCUS project designs and other factors can impact cost. The more functionality, detail and real-life project data incorporated into the model, the better the estimates.
Our Lens CCUS valuations tool includes bespoke cost estimates of announced and operating projects, based on our CCUS project economics modelling template for individual projects. Our LCOCCUS model might act as a starting point or sanity check for an individual project valuation, but cannot substitute for actually analysing the specific project and we warn clients against using generic assumptions.
As CCUS grows to become world scale, towards a meaningful reduction in global emissions, the industry must improve its understanding of project costs for the gamut of potential project types. This includes how LCOCCUS itself is defined. We are advocating for a consistent industry standard – fill in the form to read more about this in our complimentary report extract.
Cost structures across capture, transport and storage are evolving differently
Capture costs are governed by CO2 partial pressure, scale (CO2 volume), technology and energy costs, but mostly by CO2 partial pressure, which varies with the industrial source of emissions. Parasitic emissions, including fugitive methane associated with natural gas delivery to the CCUS plant, can add further cost, depending on whether they are considered part of LCOCCUS. (In the US for example, capturers are not taxed for parasitic emissions, whereas they typically are in jurisdictions with carbon taxes.)
Transformational technologies and incremental cost reductions through learning will push capture costs down in the coming decades, though some cost overruns are to be expected with unproven designs.
Pipeline transport costs will vary greatly by distance, scale, geography and specific location. Even onshore rights-of-way can vary so greatly that costs are difficult to predict. Shipping CO2 on a commercial scale is nascent, but we have drawn on past studies to develop a shipping cost model based on likely fleet configurations – for scales of up to 20 Mtpa and distances up to 10,000 km (intercontinental). Shipping is likely to cost less than offshore pipeline transport after 400-700km, depending on the volume transported.
Overall, transportation costs are not expected to benefit greatly from technological advancements, but rather scale and network hub impacts. Fill in the form at the top of the page for a look at costs by onshore pipe, offshore pipe and ship.
Projecting storage costs is challenging, with only three projects operating globally, each of which was designed rather conservatively as a trailblazer. Monitoring, measurement and verification (MMV) will drive most of the storage costs, while regulations requiring it will likely relax over time. Furthermore, MMV technology and the understanding of CO2 plume migration should advance such that costs decline substantially.
CCUS costs are highly location-dependent
Transport and storage and hub development are complex, in optimising routes, scale and emitters for long-term project economics, but also in commercial and pricing strategies given multiple options that emitters/capturers may have. Where enhanced oil recovery (EOR) is an option, such as on the US Gulf Coast, further economic considerations arise based on commodity price exposure.
Overall, CCUS costs are highly location-dependent due to regional differences in labour cost (primarily during construction), remoteness, pipeline rights-of-way, distance between capture and storage, concentration of emitters nearby, energy costs and local regulations with respect to parasitic emissions and MMV.
This could all have consequences for CCUS project builds, as we detail in the full report.