Carbon capture plants are underperforming — why are we so optimistic about them?

Carbon capture and storage (CCS) technology has been touted as a potential solution for mitigating climate change. Even countries are beginning to build CCS dependency into their climate targets. The European Union’s recently announced 2040 goal, for instance, included CCS as a dependency to meet the targets.

Recent analyses, however, have revealed a stark reality: Many CCS projects are failing or underperforming. This reality stands in contrast to the persistent optimism surrounding CCS. Despite being advocated as a key solution by countries, industries and multilateral organisations, the actual efficacy of CCS may not match the grandeur often attributed to it.

CCS involves capturing carbon dioxide from industrial and power plant emissions and storing it in geological formations underground. This helps prevent CO2 from building up in the atmosphere, thereby preventing further global warming.

If the captured CO2 isn’t stored underground but used in other industries, it is called CCUS (carbon capture, utilisation and storage). While CCS can be carbon neutral, CCUS may not, depending on how the CO2 is used industrially.

Unmet expectations

The Institute for Energy Economics and Financial Analysis (IEEFA) conducted an analysis of CCS projects: many are either failing or underperforming. Out of the 13 projects scrutinised, three had completely failed, including projects in Algeria and the United States’ Kemper and Petra Nova ventures.

Additionally, five projects were deemed underperforming, three were barely meeting capture capacity, and two lacked publicly available data during their lifetimes.

CCS technology’s efficacy is still not proven, as past efforts have shown disappointing CO2 capture rates. 

Source: Zero Carbon Analytics

Further, the energy needed to run the CCS setup housed in a power plant would decrease the overall electricity output of the power plant — past experiences have shown parasitic loads between 30-40 per cent. This, in turn, would necessitate the extraction of additional fuel to make up for the loss in power output of the plant. 

Essentially, this means that in a bid to achieve carbon neutrality, more fuel has to be extracted unless the CCS facility itself is powered by a renewable source. This also implies more cost per unit output of electricity, thus making the levelised cost of electricity 1.5-2 times higher for a plant with CCS. 

From a financial standpoint, the implementation of CCS demands a significant capital investment. Using the projections by the International Energy Agency (IEA) for the required CCS, the Global CCS Institute estimated that the total capital needed could range between $655-1,280 billion annually.

Highest cost, lowest mitigation potential

In the Working Group III Contribution to the Sixth Assessment Report by the Intergovernmental Panel on Climate Change, CCS was acknowledged as a solution for climate mitigation. However, IPCC also noted that CCS has the highest cost and lowest possible contribution to net emission reduction in both energy and industry sectors. In order to meet the 1.5°C goal, IPCC projects the need to have technical geological storage of about 1,000 GtCO2. However, the availability of geological storage is highly location dependent and there are several technological, economic, institutional, ecological-environmental and socio-cultural barriers to implementing CCS, according to IPCC.   

CCS in oil and gas industries

The loudest voice in support of CCS seems to come from the oil and gas industry. However, historically, there has been no business case for oil and gas corporations to capture and store CO2. 

State support, especially in the form of subsidies, has been instrumental in running most, if not all, of the existing projects. The recent Inflation Reduction Act of 2022 by the US provides tax incentives of $17 per tonne of CO2 captured and sequestered. 

Moreover, the actual emissions of the fossil fuel industry captured through CCS has been negligible, standing at only 0.1 per cent. Around 73 per cent of the captured CO2 is in fact used for enhanced oil recovery (EOR). EOR is a tertiary form of production, where high pressure CO2 is pumped into geological formations to extract more oil. Essentially, the fossil fuel company makes a profit and produces more fossil fuels under the guise of CCS.

Take the example of Exxon’s Schute Creek CCS plant in the US, the largest CCS plant in the world operating for over 30 years. In this lifetime, only 3 per cent of its captured CO2 has actually been stored in geological formations. The rest has either been sold at a profit for EOR or vented into the atmosphere. 

Notably, the incentives provided by the governments were aligned with support for EOR strategies and continue to be so, albeit increasingly labeled under the header of ‘climate mitigation’. For example, the IRA also provides a tax incentive of $12 per metric tonne of CO2 that is injected for EOR.

But tax incentives not focused on EOR have had other kinds of fallouts. Zero Carbon Analytics documents Equinor’s (formerly Statoil) Sleipner CCS project in the North Sea, initiated to mitigate tax expenses by offsetting the carbon dioxide emission fee imposed by Norwegian authorities in 1993. This fee incentivised CCS over paying emission fees.  

Equinor’s adoption of CCS has resulted in substantial tax savings for the company, also rendering extraction from the Sleipner West field financially viable. Since its launch in 1996, the project has nearly exhausted all recoverable gas and reserves, leaving only eight million cubic metres of gas equivalent, a significant decline from the original 154.1 million cubic metres.

Nevertheless, the financial benefits of CCS plants seem limited to tax breaks and profit-generating EOR. Beyond this, the fossil fuel industry’s appetite to invest in CCS purely for climate mitigation is lacking.

A Bloomberg report stated that a CCS plant set up by Exxon in Wyoming was paused indefinitely in 2020 citing the pandemic as a reason — meanwhile Exxon’s oil and gas production has been expanded exponentially. Exxon’s project in Guyana, which continued at the same time, is valued at $9 billion — 35 times more than the cost of the Wyoming CCS plant.

CCS in hard-to-abate sectors

The only sectors where CCS may be justified are hard-to-abate sectors where the full transition to renewable energy isn’t quite within reach, particularly in industries like steel and cement. These sectors pose significant challenges for decarbonisation, as they are contributors to about 14 per cent of global emissions.

“A majority of current technologies utilised in hard-to-abate sectors such as steel and cement heavily rely on fossil fuels and carbon-intensive raw materials,” said Parth Kumar, programme manager of the industrial pollution research unit at the Centre for Science and Environment. 

He further noted that “the Global Cement and Concrete Association’s 2050 Net Zero Roadmap indicates that 36 per cent of emission reduction in the cement and concrete sector is projected to stem from CCS by 2050. Similarly, in steel production, where the blast furnace-basic oxygen furnace (BF-BOF) technology dominates with 70 per cent of global steel production, CCS could stand out as a solution for decarbonisation.”  

Yet, we see that the current uptake is minimal in these sectors. In the present landscape, according to the Global CCS Institute’s facility database, there are 41 operational CCS plants worldwide. Of these, there is only one operating CCS plant in the steel sector and no operating plant in the cement industry. The one plant in operation in Abu Dhabi has no publicly available performance or finance data to assess its performance.

Such industries are in fact looking at other solutions that are more accessible. “CCS as a decarbonisation solution for the hard to abate sector currently faces a viability challenge, as alternate / cleaner energy sources and technologies are evolving and becoming affordable,” Kumar emphasised. 

In response to this challenge, he pointed out, “The steel sector in countries like Sweden have chosen the path to produce their future steel through green hydrogen using the direct reduced iron and electric arc furnace technology, rather than BF-BOF technology, and cheap wind power has played a significant role in this shift.”

Existing CCS plants are underperforming, they are costlier than other mitigation strategies for the energy and industry sectors and they do not present a business case for investments by fossil fuel entities. Yet, CCS as a strategy continues to feature in climate mitigation plans of both countries and companies. 

These bullish projections could lead to crowding out investments in more affordable, reliable and effective technologies to promote decarbonisation. This warrants a serious re-evaluation of its role in climate action.