IEA (2023), How new business models are boosting momentum on CCUS, IEA, Paris https://www.iea.org/commentaries/how-new-business-models-are-boosting-momentum-on-ccus, Licence: CC BY 4.0
2022 was a strong year for carbon capture, utilisation, and storage (CCUS). More than 140 new projects were announced, increasing planned storage capacity by 80%, and capture capacity by 30%. CCUS projects were announced in seven additional countries, in central and southern Europe, the Middle East, and Southeast Asia, bringing the total number of countries with plans to develop CCUS to 45.
Around 15 final investment decisions were taken across applications in industry, power, fuel transformation and direct air capture since the beginning of 2022, up from eight in 2021. This signals an increasing confidence in the industry, driven in part by CCUS-specific policy incentives in the United States, Canada, and the United Kingdom; by strengthened climate pledges; and by rising carbon prices in compliance and voluntary carbon markets.
These details and more on operating and planned large-scale CCUS projects around the world can be found in the CCUS projects database, which the IEA has released today for the first time. Alongside the CCUS handbooks released in 2022, the database is intended to be a tool that governments and companies can use to continue to drive growth on CCUS.
The storage gap is closing as plans for CCUS hubs multiply
Along the CCUS value chain, the most significant growth is observed in the development of CO2 transport and storage infrastructure, particularly in North America, Europe, China, the Middle East, and Australia. In 2022 over 210 Mt of new CO2 dedicated storage capacity was announced, up from 100 Mt CO2 in 2021, and 70 Mt CO2 in 2020. Similar capacities for connecting infrastructure, including collection terminals, pipelines and shipping, also entered into planning. This means that planned storage capacity currently outweighs planned capture capacity by 2030, but a continued and sustained push is nonetheless needed to ensure enough storage sites are developed and capacity is available to meet mid-century climate targets.
Governments and companies are increasingly recognising that deploying CCUS to meet decarbonisation goals hinges on the timely roll-out of CO2 management infrastructure and governments around the world have committed over USD 6 billion in the development of CO2 transport and storage infrastructure since 2021, including in the United States, the European Union, and Australia. Funding is supporting important milestones in infrastructure development: this month, CO2 captured in Belgium was transported to Denmark for injection in a depleted oil field in the North Sea.
This growth signals an important shift in the CO2 management sector. With a few exceptions, most CCUS projects to date have operated on the same business model: they are "full-chain" projects where CO2 is transported from one capture facility to one injection site, typically involving a single operator. While this was a natural model for first-of-a-kind projects, full-chain projects suffer from high investment, cross-chain risks and liabilities born by a single developer. Breaking up the CCUS value chain can help mitigate these hurdles as CCUS scales up. We are now seeing this happen, with part-chain projects focused on capture, transport or dedicated storage developing in connection to emerging shared infrastructure within CCUS hubs. In total, over 140 CCUS hubs are in development, more than three times as many as in 2021.
Breaking up the CCUS value chain is allowing new players to emerge
Historically, oil and gas companies have been leaders in CCUS development. They operate five of the eight dedicated CO2 storage projects in operation and most of the existing CO2 pipelines. Together, Exxon Mobil, Occidental, Petrobras, and Chevron are involved in over half of current operational capture capacity. Oil and gas companies remain heavily involved in CCUS projects, and CCUS is likely to be an important component to support the transition of producing economies. This and other considerations will be explored this year in the upcoming IEA publication on the Oil and Gas Industry and COP28, which will help to frame the discussions at COP28 by providing guidance about the role of oil and gas producers in a net zero pathway.
Alongside oil and gas companies, new specialised players are emerging as the CCUS value chain is being broken into its constituent components. These include existing companies expanding their portfolio to CO2 management, such as gas infrastructure developers who are increasingly involved in building and operating CO2 pipelines as part of their portfolio, sometimes retrofitting existing gas assets. Liquefied natural gas carriers and shipping companies are expanding into CO2 shipping. Chemical companies have leveraged their technical know-how to develop proprietary capture technologies, both to reduce emissions from their own facilities and to provide capture solutions to third parties. Engineering companies have also developed proprietary capture solutions, with modular capture skids for third-party emitters.
New companies specialising in one part of the chain are also emerging. Carbon Clean, Svante, ION clean energy, and Entropy Inc. are all examples, with proprietary capture solutions offering capture-as-a-service to emitters, either as developers, owners and operators of the unit or through technology licensing. Companies such as Storegga, Summit Carbon Solutions and Horisont Energi are also developing CO2 transport and storage infrastructure solutions. This increasingly specialised corporate landscape can bolster innovation and boost cost reductions in parts of the chain, as well as enable easier access to decarbonisation solutions for emitters.
CCUS hubs provide stronger incentives to capture emissions
The CCUS hub model spreads infrastructure costs between emitters, and generates economies of scale to reach emitters that are smaller-scale or further away from identified CO2 storage sites. In Europe, the 5th list of energy Projects of Common Interest includes CO2 networks and terminals connecting Poland and France to storage in the North and Baltic seas. In the United States, Summit Carbon Solutions proposes to build a 3 200 km CO2 pipeline spanning five states to connect more than 30 small-scale bioethanol plants with a capture capacity averaging 0.3 Mt CO2 per year.
The development of CCUS hubs can also send a positive signal to operators of emitting facilities seeking to reduce their emissions: should they invest in CO2 capture, the required CO2 management infrastructure will be available. In the United Kingdom, the number of capture projects in development has more than tripled since the announcement of the GBP 1 billion Carbon Capture and Storage Infrastructure Fund in 2020. The Northern Lights transport and storage project in Norway is considering a third expansion phase to meet the demand from emitters who have expressed interest in connecting, which is currently over six times greater than planned capacity of the first two phases.
Governments need to keep up with CCUS business model changes
To ensure that policy makers can keep up with an evolving CO2 management sector and support the growth required to meet decarbonisation goals, policies should proactively leverage opportunities and tackle challenges that may arise from new CCUS business models:
- Governments have a key role in network planning, co-ordinating hub development, and accelerating lead times for storage permitting. CCUS hubs can involve higher counterparty risks related to the cancellation, unavailability or failure of part of the chain. Efforts to mitigate these risks are already underway in Canada, the United States, and the United Kingdom.
- There is a need to develop comprehensive legal and regulatory frameworks with considerations specific to CCUS hubs, including third-party access to storage, multi-modal transboundary transport and regulatory obligations under the London Protocol. This is true for emerging frameworks around the world, as well as existing regulation, which must be fit for purpose. For example, the European TEN-E regulation on energy networks was revised in 2022, but still does not fully support all modes of CO2 transport.
- International collaboration is instrumental in exporting these models to other regions exploring CCUS, such as Southeast Asia and the Middle East, as first-of-a-kind hubs are firing up in Europe and North America.