Issue No 1
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
(One or two relevant graphics from DE files to break up this section).
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.
- 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.
- 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).
- 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 globe such 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.