GCCSI EMPHASIZES ROLE OF EOR IN DRIVING CCS PROJECTS IN SOME REGIONS

Institute Also Underscores Need to Continue Geologic Storage Work 

Tamar Hallerman
GHG Monitor
10/12/12

The Global CCS Institute this week underscored the role that enhanced oil recovery has played in spearheading much of the recent development of carbon capture and storage projects in North America, China and the Middle East in its annual status report of the industry released this week. However, the trade group also argued that not all development in the CO2 storage sector should be concentrated on EOR because many regions—including Australia and much of Europe—do not have the geology to widely benefit from that form of CO2 utilization. The report, which tracks global developments in the industry over the last 12 months, points out that of the nine new large-scale CCS projects that have emerged over the last year, the majority have some sort of EOR component. It says that about two-thirds of the projects currently in operation or under construction are also pursuing the technology, while three-quarters of the eight projects that have been killed or put on hold since last fall did not include some sort of CO2 utilization component. “Overall, CO2-EOR is likely to have a substantial role in the next decade supporting CO2 storage and development of capture technology,” the report says. 

EOR as a method of carbon capture, utilization and storage has been a major focus of the U.S. Department of Energy’s Office of Fossil Energy over the last 18 months under the leadership of Assistant Secretary Chuck McConnell. But despite the technology’s potential, the 218-page report says that EOR “will not lead to a CCS industry by itself” and that its role will likely “diminish” in future decades as the demand for much larger volumes of CO2 storage grows. “Yes, EOR is a gamechanger and a great opportunity to reduce cost of capture fairly quickly,” Institute CEO Brad Page told reporters this week. “The Institute is very supportive of EOR, but it is very much a North American story at the moment.”

In the report, the Institute argues that EOR should not be the sole focus on government development programs. “While EOR continues to be an important step in demonstrating CCS technology at a commercial scale, providing a partial cost offset to develop CO2 capture facilities, there is a need for consistent and comprehensive policy settings that provide an incentive to invest in CCS at the macro level, including the use of dedicated geologic storage,” the report says.

Institute Counts 75 Large-Scale Projects in Development

Released Oct. 10 at the Institute’s members meeting in Calgary, Alberta, this year’s assessment reports “moderate” progress in the CCS industry over the last year. It counts 75 large-scale CCS projects in various stages of development globally, for a net gain of one project compared to last year. It echoes a study released earlier this summer by Bloomberg New Energy Finance that found that North America is outpacing the rest of the world in terms of advancing demonstration projects—GCCSI says that nearly one-third of projects in development are located in the United States, with eight more in Canada. The survey adds that 21 projects are under development in Europe despite a series of high-profile project failures over the last year, and 11 are currently being pursued in China. It reports that eight CCS projects are in operation worldwide and are cumulatively storing 23 million tons of CO2 annually, with eight additional projects under construction.

The Institute lists Shell Canada’s recent final investment decision on Quest, continued construction at Boundary Dam and Kemper County, as well as the start-up of fully-integrated operations at Southern Company’s Plant Barry pilot project as notable industry accomplishments over the last year. However, the survey also emphasizes the need to move forward on more power generation CCS projects, as well as industrial capture ventures in more expensive industries such as iron, steel and cement manufacturing. Most projects to date have concentrated on industries with the lowest cost of capture, particularly natural gas extraction and synfuels and ethanol production.

Broad Rollout of CCS Needed to Meet UN Targets, Report Says

While the report says that the Institute remains optimistic about the ability of CCS projects currently in development to meet short-term targets set by the International Energy Agency, a “substantial increase” in projects will need to occur in the near future to meet goals to limit global temperature increases to 2°C, the target previously set by the United Nations. Page said that the number of operational projects would have to increase to about 130 by 2020, a reality he said currently “seems unlikely.” 

In order to get near those goals, though, the report says that “substantial, timely and stable policy support,” including some sort of carbon price signal, is needed in order to spur investment in the technology. “The lack of progress [on climate legislation] continues to undermine private sector investment in CCS activities, which then impedes technology development,” according to the report. “Since CCS is the only technology available for the decarbonization of industrial sectors such as iron, steel and cement manufacture, the risk of not being able to limit temperature rises to just 2°C becomes even greater.”

In addition to passing some sort of carbon legislation, the report recommends that governments invest more in demonstration projects while also enacting other policies that can help reduce barriers to implementation and capital and operating costs. Page said that while there is a substantial amount of capital availability for CCS projects—GCCSI estimates that governments have allocated roughly $21 billion in capital subsidies for CCS to date—the lack of support for project operating costs is an issue in the long term. “We are encouraging governments to have another look at the way that they’re trying to encourage CCS and ask if they really have the right mix there,” Page said.

Page cited the United Kingdom’s suite of CCS-enabling policies as a particularly “sensible approach” to developing the technology. After the country’s only remaining project in its CCS competition, ScottishPower’s Longannet, dropped out last fall due to funding concerns, the country redesigned its CCS development program to create what has been seen by many as one of the world’s most robust plans for deployment. In April, the U.K.’s Department of Energy and Climate Change relaunched its £1 billion ($1.6 billion) competition for demonstration projects. The government also announced £125 million ($196 million) for smaller applied R&D projects and introduced an electricity market reform package in Parliament that would establish a feed-in tariff with contracts for difference for CCS that could provide longer-term operational support for projects. “CCS faces some headwinds, and we need to do everything we can to make sure that it sails as best it can into them,” Page said.  

Institute Optimistic Moving Forward

Page said that the policy gaps the CCS industry faces are not unique to the field, but are shared by the developers of many other low-carbon technologies. “When I talk to colleagues involved in other early-stage, low-emission technologies like wave energy and solar, they’re in exactly the same place at the moment,” he told reporters. “This isn’t about CCS being slower. It’s important to put it in perspective that CCS is not on its own here—there’s a whole sect of technologies in exactly the same boat.”

Even without an international carbon price, Page stressed to reporters that the industry is still seeing progress, even though it has been slower than initially anticipated. “My take on this is while there are certainly some challenges in front of us, there are also some really bright things starting to happen around government policy settings that cause me to have quite a bit of optimism as we start looking into the next few years,” he said.