Insights on Clean Energy Transition & Carbon Management

Inflexion

Issue No 1

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Welcome to INFLEXION – a quarterly newsletter from Dastur Energy designed to provide you with a useful overview of current developments, strategies, and solutions in clean energy transition and decarbonization.

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Introduction

We are indeed at an inflection point today, as we face a global imperative with profound consequences never seen before; as the climate crisis has turned into a climate emergency before our very eyes, in a span of just a few years. Concerned and invested stakeholders in the energy ecosystem — consumers, communities, businesses, governments, and enablers – education, research and technology providers, and financial institutions, must rise together to meet this global challenge.

It is also increasingly clear, that to make net zero possible by 2050, from a broad, and often confusing, array of clean energy technologies, we must identify, design and implement a set of effective and scalable solutions based on existing technologies, that can be operationalized within existing energy systems, while simultaneously developing a range of sustainable alternatives to transform the world’s energy system.

Dastur Energy, a young clean energy systems pioneer is on a mission to leverage its deep legacy in engineering and project management, globally, to deliver clean energy and carbon management solutions. We focus primarily on what we believe is a critical bridge in energy transition — Carbon Management through Carbon Capture Utilization and Storage (CCUS) and supporting technologies in new energy and hydrogen. Our work is focused on industrial emitters in ‘hard-to-abate sectors’ – which are responsible for close to a quarter of total carbon emissions globally, to assist them in making a smooth and timely transition into high efficiency systems using clean energy.

In this inaugural issue of our newsletter, we take you on a quick run through of some important trends and developments in the industry over the last quarter and provide a brief on critical aspects of the carbon capture, utilization, and storage (CCUS) landscape, and its applicability within hard-to-abate industries. In addition, you will find updates on decarbonization policies from across the globe particularly in geographies where Dastur Energy operates.

In subsequent quarterly issues, we will explore the levers that can facilitate broader scaling of CCUS and see how an optimal combination of technologies can help accelerate clean energy transition for our industry partners. We aim to bring insights and analyses that you as an enterprise leader, policymaker, or an invested stakeholder, can use to inform energy transition decisions. Finally, it is also our hope to receive feedback and input from you on the most pressing issues in the field.

We hope you find this to be a productive read.

FROM THE CEO’s DESK

“Inflection point” is commonly used to refer to a specific moment or stage when a significant change occurs, often indicating a shift in direction, behavior, or outcome. That point has certainly arrived around the transformation of our current energy system. Each year, this month, when we celebrate Global Energy Independence Day, we are reminded of our collective imperative to make the transition to clean energy, to arrest, if not reverse, the catastrophic damage from GHG emissions that now endangers our very existence.

As we are all aware, renewable energy sources such as solar, wind, hydro and geothermal, have gained substantial traction in recent years as viable and sustainable alternatives to traditional fossil fuels. However, the industrial sector, one of the largest emitters of GHGs, and rightly termed as ‘hard-to-abate’ because it is difficult to decarbonize, poses a significant challenge in our journey towards a clean energy future.

To address this challenge comprehensively, we require the adoption of a multifaceted approach that combines various levers that include industrial scale technologies for CCUS, low-carbon energy carriers like hydrogen, waste gas transformation into value added products, access to a growing pool of clean energy solutions, and a robust infrastructure capable of integrating these technologies into existing energy systems. Additionally, the role of supportive policies developed specifically to help hard-to-abate industries in their energy transition journey cannot be overstated.

The techno-economics involved in providing these innovative solutions for hard-to-abate sectors is crucial. Viable options must factor in the developmental stages of various technologies, the impact of financial incentives, subsidies, carbon pricing mechanisms and costs associated with deploying CCUS and hydrogen production at industrial scale.

At Dastur Energy, we are enabling industry partners in testing and putting techno-economically sound strategies to work, with approaches that innovatively combine CCUS processes, while producing value-added chemicals and blue hydrogen, and exploring carbon storage opportunities. Our growing success in implementing these strategies for our clients in the US and India, in projects funded by US Department of Energy (USDOE), the US Trade and Development Agency (USTDA), and the Government of India, among others, makes me confident that we can cross the transition barriers in our journey towards a new global energy system.

Time is of the essence. Speed and scale of transformation are the keys to success. This can only happen through a community of dedicated technologists, industry captains, investors, and sensitized policymakers, who are able and willing to grasp the criticality of agile and exigent decision making. We need forward thinkers who can balance ROI concerns against the larger consequences of delayed action, and understand that in this scenario, the turtle will not win the race. We must leap into the future, now.

ABOUT DASTUR ENERGY

Dastur Energy Inc. (Dastur Energy | Clean Energy Technology Company) based in Austin, TX, is fastemerging as an industry leader incommercial scale clean energy transition and carbon management solutions for ‘hard to abate’ industries. Led by our CEO, Atanu Mukherjee ((8) Atanu Mukherjee | LinkedIn) one of the most sought after thought leaders and industry experts in the decarbonization space today, the company has been pioneering innovative projects in North America, India and the Middle East. We provide techno-economically sound strategies that effectively combine decarbonization of existing processes while producing value-added chemicals and blue hydrogen.While leading Dastur Energy, Atanu has been engaged by the Govt of India (NITI Aayog) to define India’s path forward towards its net zero goals; heis also advising individual ministries. He has been providing the US Department of Energy with technical expertise anddriving a lot of collaborative activity in this domain across India and the US through his role as the Regional President of the American Chamber of Commerce. To helpsteer the company towards its goal of becoming a global leader, the company hasassembled a robustboard of internationally renownedacademics and practitionersdrawn from multiple related disciplines (About – Dastur (dasturenergy.com)), while also growing a senior leadership team deeply invested in our clients’ energy transition journey.

In a span of just three years, since its inception, Dastur Energy has quickly mapped out a presence in decarbonization projects across the globe. Our techno economic analyses and advisory projects are highly valued by both private and state-owned enterprises in the US, India and the Middle East, where our services include feasibility studies, Pre-FEED and FEED analyses,initial design engineering and systems integrationservices at various points in our clients’ transition journey. In addition, we have been providing policy guidance to national governments and ministries.

Region	Client, Country	Project Services
America	Cleveland-CLIFFS (USDOE supported), Ohio, USA.	Initial design engineering, integration with BoP and costing to enable production of green steel through CO₂ capture from BF gases at the 5 MPTA Burns Harbor Steel Plant.
Mid-East	ADNOC, UAE	Pre-Feed feasibility study for a coal and petcoke gasification project, for CO₂ capture and Enhanced Oil Recovery (EOR) integrated with methanol, IGCC, ammonia and H2 production.
South Asia	IOCL, Gujarat, India	Feasibility study to evaluate the technical economic viability of CO₂ capture and utilization for IOCL’s Koyali refinery.
South Aisa	Government of India, New Delhi, India	Policy advisory services for the development of a CCUS framework and deployment mechanism.

TRENDS & HAPPENINGS

Alliances and acquisitions key to decarbonization efforts!

Power deals in the clean energy sector. Renewable energy accounted for 303 power deals announced in the 2nd Quarter of 2023, for a total value of $25.3bn, with the $6bn acquisition of Iberdrola Mexico by Mexico Infrastructure Partners leading the charge. The surge in acquisitions, particularly by key oil and gas companies,reflects both the growing value of renewables and other clean energy options in the energy mix, and the fact that these companies are poised to benefit most from such investments.

Learn more at: https://www.power-technology.com/dashboards/deals-dashboards/ma-activity-renewable-energy-power-industry/

M&A Alert! Exxon entered an agreement to acquire Denbury Inc, a well-known developer of CCS solutions and enhanced oil recovery. The acquisition is an all-stock transaction valued at $4.9 billion. The acquisition of Denbury accelerates Exxon’s Low Carbon Solutions business and provides it with the largest owned and operated CO₂ pipeline network in the USA, spread across multiple states, located within one of the largest U.S. markets for CO₂ emissions and onshore sequestration sites.

Green Alliance in EU With Norway already established as a leader in decarbonization efforts including in CCUS, it is not surprising to see the EU and Norway establish a Green Alliance to strengthen their cooperation on the clean energy and industrial transition. The EU-Norway Green Alliance is a comprehensive bilateral engagement established under the European Green Deal, and targets include hard to abate industries as well as all modes of transport.

WTO meeting on decarbonization standards in steel:In March 2023, the WTO held its first ever forum to speed up steel sector energy transition by facilitating coherence and transparency in decarbonization standards. This was the first time that steel industry representatives and officials came together at the WTO on climate issues, with participants noting that policy fragmentation and incompatible carbon standards — with at least 20 different standards in existence, have the potential to undermine the global scaling of steel sector decarbonization. Producers’ struggle to cope with disparate and competing policy requirements, add to costs and uncertainty in efforts, and hamper decarbonization investments.

Read more at: https://www.wto.org/english/news_e/news23_e/clim_09mar23_e.htm

Ministerial Meet in Goa The 14th Clean Energy Ministerial (CEM14) and 8th Mission Innovation meeting was held in Goa earlier this month, on the margins of the G20’s Energy Transitions Ministerial Meeting. India’s green hydrogen drive is being heralded as being indicative of India’s lead role in driving global renewable energy production. Aligning Industrial policy with policy for hydrogen production will be key according to the Chief of the Climate and Technology Partnership Division of the United Nations Industrial Development Organization (UNIDO) participating at the event.

SPOTLIGHT

Clean Energy Transition and CCUS – The Need of The Hour

Every day brings new evidence – in the form of forest fires, parched riverbeds, unprecedented heat waves, and devastating floods – that urgent steps are needed on every aspect of climate change action. The International Panel on Climate Change (IPPC) has been repeatedly sounding the warning on the need to cut global CO₂ emissions by 45% by 2030 to keep global temperature rise to 1.5 degrees, failing which, we risk catastrophic consequences. Yet, as the International Energy Agency (IEA) notes, global CO₂ emissions from energy combustion and industrial processes reached their highest ever annual level of approximately 36.3 gigatons (Gt) in 2021, registering the largest single year growth since 2010.

Against this dire scenario, decarbonizing the industrial sector, particularly subsectors like steel, cement, and chemicals, that are responsible for nearly a quarter of annual CO₂ emissions globally, has become the need of the hour.

Today, clean energy efforts cover a range of technologies with renewables like solar, wind and geothermal, which are increasingly competitive against legacy fuels. However, the decarbonization of existing energy systems and industrial processes in hard-to-abate sectors poses a huge challenge. The question becomes one of building a new energy infrastructure while operating and maintaining existing ones, and meeting current and constantly evolving energy demandswithout disrupting industrial production or negatively impacting economies. No small challenge!

In this context, Carbon Capture Utilization and Storage technologies (CCUS) stands out as a strategically viable and valuable energy transition option, with the potential to contribute – directly or indirectly – to CO₂ emission reductions across the global energy system.

CCUS – In Brief

Carbon Capture Utilization and Storage (CCUS) refers to a technology set that providesinterconnected but flexible options in decarbonizing industrial processes. Although CCUS facilities have been in use in certain industrial sectors like natural gas and fertilizers for over a few decades now, they are still at a nascent stage of development in heavy industries like steel and cement.

CCUS, as the acronym suggests, involves three points of action: 1) Carbon capture from industrial production processes or from the atmosphere, 2) the utilization and transformation of captured carbon into products, and 3) the storage of the captured or unutilized carbon.

The capture of CO₂ typically takes place from large sources — power generation or industrial facilities that use fossil fuels like coal or biomass for their production processes. It can also be removed directly from the atmosphere. Technologies for the direct capture of atmospheric CO₂ are still in their infancy. Regardless of source, there are structured pathways for the captured CO₂ — it can be compressed and transformed and used on site or transported for use in a range of applications such as feedstock to produce synthetic fuels like methanolother value-addedchemicals;sequestered to produce building materials; or stored permanently in deep geological formations such as depleted reservoirs or aquifers.

Coal Gasification and Blue Hydrogen

Coal gasification is animportant component of CCUS technology.The captured CO₂ from coal, especially pre-combustion CO₂, is relatively inexpensive, and can be utilized to generate value added products profitably. Essentially, coal is converted to Syn Gas– a combination of carbon monoxide, CO₂and Hydrogen, which is subjected to a water-based reaction to yield a stream of denseCO₂.Capturing CO₂ from this stream provides one of the cheapest forms of carbon capture. The residual stream yields H2 rich gas. H2 produced through this route called Blue Hydrogen, a low carbon carrier that is increasingly used in steel and cement making. Blue Hydrogen features increasingly in clean energy transition discussions, alongside green hydrogen.

We will take a deeper look at the Blue-Green Hydrogen debate and the techno-economics involved in one of our forthcoming issues

Why CCUStechnologies forma an important strategy and tool in clean energy transition

A number of factors make CCUS salient among the strategies and tools in carbon mitigation.

CCUS is the only viable alternative to enable the continued operation of existing power and industrial plants, and associated supply chains with significantly reduced emissions, without interrupting or disrupting existing energy supply, thereby minimizing negative impacts on production and economic growth.
Most hard to abate industries have complex production processes established over a lengthy production life cycle; and the high cost of production infrastructure in these sectors makes it challenging to make changes to the energy systems in use. CCUS technologies are particularly important to the steady but gradual greening of these sectors.
CCUS is most valuable in addressing the challenge of emissions from hard-to-abateindustries, where transforming existing processes completely to renewables or new carbon efficient processes in a short duration,is either prohibitively expensive or unviable. Further, within these sectors, CCUS is deployed differently.
1. In cement, emissions are not associated just with fossil fuel use, CO₂ isa byproduct of the extreme heating of limestone in the production process. Without any demonstrated industrial scale alternative, CCUS becomes the only effective option in decarbonization of cement production.
2. In the steel sector, CCUS is among the few available technologies that result in significant emission reductions. Production processes based on CCUS are currently the most advanced and least-cost low-carbon option to produce virgin steel –around 70% of global steel production (IEA).
3. Using natural gas as a fuel as a first step change from coal-based electricity production has already become a reality in several places.However, even in this mechanism, CO₂ continues to be emitted. CCUSbecomes vital for capturing the CO₂ generated in this process.
Addressing the economics of energy transition technologies against investments (ROIs) by enterprises is also a key issue. The deployment of clean energy solutions is only possible when the prices of cleaner alternatives become competitive with current energy systems. Not only is this seen in renewables – e.g., solar and wind, where prices have come down substantially to generate exciting momentum, but also in the cost of CCUS and gasification-enabled Blue Hydrogen– as a low carbon carrier in steel, cement and chemical industries.Evenas the costs of green hydrogen continue to decline, CCUS and gasificationbased blue hydrogen remains a strong option in the interim, particularly in regions with low-cost fossil fuels and CO₂ storage resources.
CCUS also offers an opportunity to address emissions from hydrogen production itself – one of the biggest conundrums in clean energy. Currently hydrogen production is almost exclusively reliant on natural gas and coal and is associated with significant emissions. The role of CCUS is therefore vital in reducing carbon intensity of hydrogen production.
While CCUS technology can enable the transformation of industrial energy systems, it can also support the integration of renewables to provide flexibility and expansion in energy supply. In an all-hands-on-deck scenario, this flexibility is vital.

CCUS gaining traction?

After years of slow progress, there is fresh interest and momentum in CCUS since 2018, mainly because CCUS costs have been declining; in large scale projects in the power sector, the cost of CO₂ capture has declined by 35%. Globally, there are 21 CCUS facilities around the world with capacity to capture up to 40 MtCO₂ each year. Since January 2022 plans have been announced for over 50 new facilities to be operational by 2030, capturing around 125 Mt CO₂ per year, more than tripling the amount of CO₂ being captured by 2030. The approximate potential investment of these projects is around USD 27 billion.Geographically, thus far, the deployment of CCUS has been concentrated in the US, home to half of all operating facilities. Though the USA and EU lead the charge, with Norway as a leader in the EU, CCUS facilities have been commissioned in Australia, Brazil, Canada, China, Saudi Arabia and the United Arab Emirates.

What is driving this momentum?

Strengthened climate commitments from governments, industries and investor groups, stemming from international climate pacts for net zero by 2050; as well as research, particularly, the 2018 IPCC Special Report on the 1.5°C global temperature increase containment goal.

Individual enterprisesare committing to net zero goals, even though the levels of commitment may vary. For example, more than 20% of global oil and gas production is under 2050 net-zero commitments, with a significant role for CCUS (IEA). Global industry leaders across sectors, such as Dalmia & Heidelberg in Cement and ArcelorMittal in steel, are actively pursuing CCUS apart from exploring greener production processes to meet their CO₂ reduction goals.

New policy incentives across the globesuch as the expansion of the 45Q tax credit in the US, state level policies such as California Low Carbon Fuel Standard (LCFS) have spurred new investments. Recently India too has announced decarbonization goals that focus on both green and blue hydrogen production. India has also released its policy for carbon credits and markets.

Business models in CCUS are themselves evolving to improve the financial viability of CCUS – essentially clearing the air, to make the net zero horizon just a little more visible.

Does this mean we are on track?

The answer, unfortunately, is no. While all three major industries in the hard to abate sector – steel, cement and chemicals – have been able to reduce the carbon intensity of their emissions somewhat, reductions are still falling short of what needs to happen to meet the 2030 targets for the1.5-degree scenario, and considerably short of the net zero scenario.In fact, the need to expand CCUS capacity cannot be overstated. Although much work lies ahead, this unmet need also indicates tremendous opportunity for project developers and solutions providers.

Note: the IEA report on the role of CCUS in energy transition was a key resource for this brief.

You can find it here. https://www.iea.org/reports/ccus-in-clean-energy-transitions

REGIONAL SNAPSHOTS

India: Progress Towards a Carbon Market

Carbon markets are a key factor in successful decarbonization efforts, since they provide a platform where entities that are unable to reduce emissions, can engage and trade with those thatare actively reducing or eliminating CO₂,by using carbon credits to offset their emissions. Carbon markets can be either voluntary or regulatory, many working on a trade and cap basis, so that national or regional decarbonization goals can be met through the offsets.

In June this year, the Indian government announced the establishment of a national steering committee to issue guidelines and oversee the country’s nascent carbon market, as one among several national climate action initiatives. Earlier in May, the government had announced its plans to develop the framework for the Indian Carbon Market (ICM) with a carbon trading scheme, pricing greenhouse gas emissions, and issuing tradeable Carbon Credit Certificates. This committee is charged with ensuring that carbon credits are issued and traded in compliance with the requirements of the Ministry of Power, and the Ministry of Forests and Climate Change, the two entities with joint charge of this mission, along with the Bureau of Energy Efficiency (BEE). The BEEis responsible for constituting technical committees to create compliance mechanisms to meet ICM objectives; while the Central Electricity Regulatory Commission (CERC) has been made responsible for regulating the operations of the market – registering power exchanges and updating and approving the certificates periodically. All the above are indications of India’s evolution as a regulated carbon market.

EU: Carbon Tariffs & Carbon Storage

As the world’s leading region in decarbonization targets and actions, the EU has embarked on a series of legislative actions in itsFit for 55 package to address their climate goal of reducing emissions by at least 55% by 2030. Among the many legislative proposals that the EU has considered and passed is a stringent new import tariff. In Dec 2022, the EU became the first major economy to legislate for a “green tariff” on imports — to be levied on goods produced with high carbon dioxide emissions. The levy comes under a “carbon border adjustment mechanism’ (CBAM) that essentially places a carbon tax on the EU’s trading partners which fail to green their industries in keeping with the EUs climate commitments, particularly those who derive their profits from high-carbon activities. Adopted by the EU Council in April 2023, it is expected to be operationalized in October 2023. CBAM will target imports of iron and steel, cement, fertilizers, aluminum, electricity, hydrogen and some chemicals. Countries most likely to be affected are those with high-carbon exporter industries such as China, Turkey, India, and Australia. While the intent is to reduce carbon emissions on a global scale and force emitters to comply, this tariff is not without risks. There is a fear in some quarters that the legislation is too punitive, and that some member countries may move production to less regulated regions to avoid penalties, effectively rendering the policy useless.

Additionally, in March 2023 the European Commission introduced the Net Zero Industry Act, to create a framework for further strengthening Europe’s net-zero technology products manufacturing ecosystem. CCUS is among the Act’s eight strategic net-zero technologies. The Act aims at increasing CO₂ storage capacity, by setting an EU-wide goal to achieve an annual CO₂ injection capacity of 50 Mt CO₂/ yr for 2030 and improved permitting procedures for CCUS. Oil and gas producers will be asked to contribute to this, based on each entity’s share in the EU’s crude oil and natural gas production.

USA: 45Q — Funding and Tax Incentives For CCUS

In Feb 2023, the Biden-Harris Administration, through the US Dept. of Energy (DOE) announced $2.52 billion in funding for two carbon management programs to drive investments in CCUS technologies to significantly reduce emissions for petrochemicals, steel and cement and the core power sector

The Carbon Capture Large-Scale Pilots Program is a funding opportunity for up to $820 million across 10 projects focused on testing novel new carbon capture technologies in the power and industrial sectors, to demonstrate their viability for investments for commercial-scale deployment. The Carbon Capture Demonstration Projects Program includes up to $1.7 billionfor approximately six projects, to demonstrate commercial-scale carbon capture technologies integrated with CO₂ transportation and geologic storage infrastructure.

Earlier, in 2022, the US introduced a significant stimulus for CCUS investments and operations with the passage of the Inflation Reduction Act, which contained provisions to expand and extend the 45Q tax credit from the Internal Revenue Code, to provide a tax credit for CO₂ storage and incentivize CCUS. The changes through the 2022 legislation to 45Q provide up to US$85 / per ton of CO₂ permanently stored; and US$60/ per ton of CO₂ used for industrial uses of CO₂ including Enhanced Oil Recovery, contingent upon clear demonstration of emissions reduction. The amount of credit accorded was significantly more for direct air capture projects — US$180/ per ton of CO₂ permanently stored, and USD$30/ per ton for CO₂ used for value added products.

It is famously said there’s nothing like a common enemy to bring disparate forces together. The world is indeed in an existential crisis. We must combat the threat of climate change with every possible means, and from every direction, for the short and long term alike. Decarbonizing hard to abate industrial processes for maximum impact is one of the most impactful steps we can take today.

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