There are two basic routes to carbon neutrality: reducing carbon emissions and sequestering the carbon that has already been emitted. CCUS (carbon dioxide capture, utilization, and storage), as a technical means of carbon sequestration, once followed the concept of carbon neutrality and became a rising star in the investment community, but many projects were stranded due to multiple obstacles.
The first financial reporter noticed that the 2023 ESG (social, environmental and governance) or sustainable development reports released by many oil and gas energy companies have emphasized the need to increase the research and development of CCUS. In early April, CNOOC Limited released an ESG report mentioning that in order to respond to climate change, it will carry out a pilot demonstration of CCS (carbon capture and storage) in China's offshore oil and gas fields, tackle key problems in offshore CCUS technology systems and core equipment, and reserve carbon neutral technologies. A number of energy and chemical companies have also frequently mentioned the technological progress of CCUS in the report, and stated that they will continue to increase investment.
"In 2023, the company will continue to carry out the recovery of high-concentration carbon dioxide emitted by hydrogen production, synthetic ammonia and other devices, capturing 1.749 million tons of carbon dioxide, an increase of 14% year-on-year. Sinopec revealed in its 2023 sustainability report.
Zhang Xian, director of the Global Environment Division of China's Agenda 21 Management Center, told the first financial reporter that CCUS technology is developing rapidly and showing a large-scale development trend. The number of projects worldwide has been growing for six consecutive years, and by the end of 2023, more than 100 CCUS demonstration projects have been put into operation or planned under construction in China. At the same time, there is still a lack of large-scale full-chain demonstration experience in China as a whole, especially in the optimization of pipeline networks and cluster construction.
A number of industry insiders who have been engaged in the development of CCUS projects for a long time told reporters that compared with the more complete policies and market support in Europe and the United States and other countries and regions, China still has a lot of room to play in CCUS project approval, incentive policies, and improving the construction of the carbon market.
High cost restricts capacity expansion
Under the Paris Agreement, the world needs to capture 1.2 billion tonnes of CO2 per year by 2030, a far cry from the 50 million tonnes currently in operation combined. However, this has attracted the attention and action of companies, among which the energy giants, which have seen a sharp increase in the pressure to transition, have been the most active. This is not only the helplessness of the traditional oil and gas business under pressure due to the increasingly stringent carbon emission management in the European Union and other places, but also the ambition of energy giants to take the lead in the layout of emerging industries in the future.
Among them, the most frequently mentioned landmark project is the "Northern Lights" project in Norway. It is a US$680 million joint venture between Statoil, Shell and TotalEnergies, and is the EU's first CCS project with open, flexible infrastructure to sequester industrial CO2. The first phase of the project is expected to be completed in mid-2024 and will be able to sequester up to 1.5 million tonnes of CO2 per year. Globally, projects of similar size are still "scarce".
Si Mingyang, chief technology officer of TotalEnergies, said in an interview with CBN that carbon dioxide capture is the first step in the CCUS technology chain, and it is also the most complex and costly step, and the high cost of capture is the biggest pain point hindering the continuous expansion of CCUS applications.
"The current cost of capturing carbon is about $100 per tonne, and our goal is to cut that number in half, to $50. Once effective carbon capture has been carried out, it can effectively promote subsequent utilization and storage. In terms of utilization, carbon can be used for high-value applications in areas such as sustainable aviation fuel. In terms of sequestration, the implementation of the Northern Lights project in Norway has proven the feasibility of carbon sequestration, and the next step is to continuously reduce costs. Si Mingyang said.
In China, the pace of this business has accelerated significantly in the past year. Two intuitive manifestations are the completion of a number of domestic million-ton demonstration projects and the implementation of large-scale pilot tests of carbon capture technology.
In September last year, the world's largest 3 MW chemical chain combustion (CLC) pilot plant was inaugurated in Deyang, Sichuan. The project is based on the EU-China Pollutant Emission Reduction Technology Research Project (CHEERS), with the joint funding of TotalEnergies, Orient Boiler, Tsinghua University, and the French National Institute of Petroleum and New Energies, to verify and demonstrate the semi-industrial scale pilot test of chemical chain combustion technology that is expected to be applied on a large scale in the oil refining industry and the power industry in the future.
Si Mingyang told reporters that the device can capture high-purity carbon dioxide while producing steam, and vigorously reduce the energy consumption and cost of carbon capture, and can be widely used in chemical, power generation, heating and other fields after maturity. "On the basis of this plant, our next plan is to conduct trials of a 50 MW chemical chain combustion unit. The final commercial operation needs to reach a scale of 200 megawatts, and the entire commercialization should be completed by 2030. ”
Xu Zhonghua, vice president of TotalEnergies Asia, told CBN that the feasibility of scientific research, the scalability of the project, and the profitability of business all determine the promotion process of CCUS. This means that, in addition to addressing technical challenges, companies also need to work with the corresponding policy environment and commercialization scenarios.
"From a business model perspective, the policy architecture is crucial. There are a range of policy incentives to support CCS projects in Europe and the US, but few in China. So we hope for a better policy environment and more transparent information. For example, the geological data required for underground carbon storage projects is not readily available in China. Xu Zhonghua said.
Zhang Xian told reporters that there are many factors affecting the development of CCUS in China. First of all, CCUS technology lacks a mature system of regulations and standards to regulate and guide, including technical standards for carbon dioxide storage, transportation, injection and storage, and the allocation of long-term safety monitoring responsibilities at storage sites. Second, CCUS projects are complex system engineering, involving the use of aboveground and underground space, environmental impact assessment, safety review and other aspects, and the current mainland CCUS project authorities and approval processes are not clear, resulting in enterprises carrying out CCUS project construction "crossing the river by feeling the stones", increasing the time and cost of the project, and reducing the investment enthusiasm of enterprises. Thirdly, the current methodological research on the accounting methods and verification mechanisms of emission reductions of various CCUS technologies is still immature, resulting in the fact that CCUS has not yet been included in the carbon market. Under the influence of multiple factors, most of the CCUS projects in the current stage of the mainland are in the industrial demonstration stage, and there is still a long way to go before large-scale commercial application.
The carbon market is the key to breaking the situation
In order to solve the biggest problem hindering the development of CCUS, "economy", in addition to the cost reduction brought by CCUS's own technology iteration and scale, the opening of the carbon trading market is considered to be a key factor. The logic behind this is that even if the cost of CCUS seems slightly higher, if you don't adopt such technologies and have to pay a higher price to buy carbon allowances in the carbon market, then more people will be willing to "take a step back" and accept CCUS.
Zhang Xian said that carbon dioxide concentration is one of the important factors that determine the cost of carbon capture technology. At present, the capture cost of most CCUS demonstration projects in China is between 100 yuan and 500 yuan per ton, the capture cost is relatively low in the chemical industry, and the capture cost is relatively high in the electric power, cement and other industries due to the relatively low carbon dioxide concentration of flue gas. Overall, domestic capture costs are at a moderately low level worldwide.
However, the current global carbon price and China's carbon price are far from the ideal level to trigger CCUS investment. According to the results of Zhang's team, when the carbon price rises to about 350 yuan to 380 yuan/ton of carbon dioxide, the pre-invested power plant will meet the conditions for carrying out the CCUS retrofit, so that the balance of payments can be achieved.
The EU is the "pacesetter" of the global carbon market. In 2022, the EU's carbon trading volume was 9.277 billion tons, accounting for 75% of the total global carbon market transactions, the trading volume was 5.5 trillion yuan, accounting for 87% of the total global carbon market transactions, and the average carbon price was 81 euros/ton. Compared to the European Union, although China has the largest carbon footprint in the global carbon market, it is still not actively traded and the prices are relatively low. In 2022, the total carbon trading volume of the domestic carbon market will be 50.8895 million tons, with a total turnover of 2.814 billion yuan and an average transaction price of 58.08 yuan/ton. In other words, the trading size of the national carbon market is less than 1/100th of that of the EU, and the average carbon price is less than 1/10.
"After the Chinese government put forward the dual carbon goals, many Chinese companies are looking for and benchmarking in the market, hoping to find the most participatory and commercially viable CCUS solutions and high-quality projects. However, due to economic, technological and other factors, there are relatively few projects that have actually landed. If China's carbon market can be included in CCUS projects in the future, and the income from the purchase and sale of allowances through the carbon emission market will be accompanied by a higher carbon price, then the internal rate of return of CCUS will be significantly improved, eliminating concerns for more projects. Xu Zhonghua said.
It is worth noting that while some people are discussing how CCUS can develop better and faster, there are also those who believe that it is not appropriate to invest too much human and financial resources in this kind of research and development at this stage. "CCUS is the last resort to achieve the dual carbon goals, and the cost is high and it consumes additional energy, so we should now focus our limited resources on energy conservation, emission reduction, and clean electricity, rather than prioritizing the development or application of CCUS. A senior researcher of renewable energy once told reporters.
In this regard, Zhang Xian believes that in the short term, prioritizing investment in energy conservation, emission reduction and clean electricity is undoubtedly an efficient and direct means of carbon reduction, which can effectively reduce greenhouse gas emissions by improving energy efficiency and promoting the use of renewable energy. However, from a long-term perspective, the importance of CCUS technology is beginning to come to the fore, especially in industries where it is difficult to reduce emissions through traditional technologies. While current CCUS technology is challenged by high costs and additional energy consumption, it offers a viable solution for offsetting CO2 emissions from industrial processes. With technological progress, cost reduction, and enhanced policy support, the application of CCUS technology will become more extensive. Therefore, even with limited resources, investments in R&D and early deployment of CCUS technology are important preparations for the future, ensuring that all available technologies can be used to address the challenges of climate change.
(This article is from Yicai)