Blog 2: Why are we working on carbon capture and storage?
Steinar Eikaas, Vice President of Low Energy Solutions, Equinor
In the energy transition debate, you often meet a distinct level of negativity towards certain technologies. In some circles, there is an almost knee jerk reaction to and resistance against fossil fuels.
At the same time, we are witnessing a sizeable and growing population also less enamoured to renewables like wind and solar, even if they can’t see them in their backyard. This binary debate between renewables vs. fossil fuels is not only frustrating and polarising but will only hold us back from reaching any meaningful progress on tackling climate change and achieving the Paris targets.
One of the key issues in energy transition is a somewhat narrow focus around a narrative that ‘you can electrify everything’ - so green it as fast as possible. The problem here is that electrons are just 20% of global primary energy demand. The rest is molecules, used for heating, power, transport, petrochemicals, steel production, fertilizer and so much more.
You can stick a plug on a lot of things, but the global energy system is essentially hard-wired towards molecules from fossil fuels. At 80%, the share of fossil fuels in the primary energy mix today is about the same as 30 years ago, despite a 14% annual growth in global renewables over the past 20 years.
At the national level, we see genuine energy transition in many key markets. The UK is a shining example with 30% of power alone coming from renewables, backed up by natural gas. Coal is almost completely off the grid and Britain’s CO2 emissions are down 28% over the past 10 years. The country is also in the process of quadrupling its offshore wind capacity.
At the global level, it’s a different story. Increasing wealth and population growth are driving stronger fossil fuel demand and even higher greenhouse gas emissions. China now consumes 26% of all energy, India’s population is forecast to hit 1.5bn people by 2025 and the US shale revolution is contributing to a new geopolitical reality. This is the conundrum between a genuine energy transition and the continuous forces of energy addition.
Equinor is a pioneer within CCS, with Europe’s first commercial scale CCS plant at the Sleipner field in 1996 and with Snøhvit in 2007. Since then, we have safely stored more than 25 million tonnes of CO2. Globally, there are 22 major CCS projects which have captured over 200 million tonnes of CO2 since 1972.
Whilst the technology is proven, it remains expensive and – as of today - carbon prices are too low to ensure a sustainable business model. The technology is also viewed as controversial in several countries. Many politicians view CCS as throwing out a lifebuoy to the fossil fuel industry, especially for coal, the largest polluter.
Others fear that major CO2 capture projects will simply be used to pump up even more oil. In fact, 70% of CCS sites are in the US and are used for Enhanced Oil Recovery for onshore production. Some politicians, especially in Europe, fear earthquakes or leakage and Germany has shown strong resistance against onshore CO2 storage. In terms of greening the energy mix and reaching climate targets, politicians have generally favoured subsidising renewables over funding major CCS projects.
Admittedly, we have an image problem with CCS. Yet, the technology is an essential part of the climate mitigation toolbox according to the UN´s International Panel on Climate Change. In a world where more countries follow the likes of France, Norway, Sweden and the UK in adopting net zero emission targets, serious alternatives to unabated fossil fuels must be pursued.
For Equinor, the path to a net zero emissions world by 2050 is both a threat and an opportunity. For many of us, this may seem a long way away, but in policy terms these targets are already informing the political and societal debate and setting tighter policy frameworks. Without a clear carbon abatement strategy for our natural gas sales into Europe, a major part of our business will inevitably be disrupted. In that respect, we want to be part of the solution and CCS is clearly a part of this.
In a net zero Europe, it is not only the energy sector that will feel the change. Industrial activities, including hydrogen, steel, cement, fertilizers, petrochemicals and waste disposal represent around 15% of the EU’s greenhouse gas emissions. Here we see CO2 transport and storage solutions as a business opportunity for Equinor.
The CCS business model can feel somewhat counterintuitive. You must start at the end and then work your way forward. The bedrock of a major scale CCS value chain is the CO2 storage solution itself. Most CCS projects around the world utilise saline aquifers, depleted wells or natural CO2 sources which have stored molecules for thousands of years. Ensuring that we can replicate mother nature´s ability to safely store CO2 underground is essential to making the CCS business model bankable.
In terms of costs, CO2 transportation and storage are logistics and scale games. It’s the CO2 capture part of the value chain that poses the real cost challenge. Through higher levels of deployment, we can ensure continuous innovation and learning, which in turn will bring down cost. This has been the recipe behind the huge cost reduction in wind and solar and we need to replicate it for CO2 capture.
This value chain of capture – transportation – storage is the basis of the business model behind the Northern Lights project. Northern Lights is a European CO2 transport and storage network, a venture between Equinor, Shell and Total, and it is a cornerstone in a broader low carbon solutions strategy for Equinor.
Sector coupling with hydrogen
If Northern Lights is successful, it will open opportunities for scaling CCS across new markets. It also offers Equinor an opportunity to produce clean hydrogen. The technical concept is proven. Hydrogen is widely produced from fossil fuels, around 70 million tonnes per year. With CCS for natural gas, we can store the carbon from hydrogen production and drive a clean molecules market. This is sometimes referred to as ‘blue hydrogen’ as opposed to ‘green hydrogen’ which is produced by electrolysis from renewables. Both technologies are needed, but we see natural gas-based hydrogen as creating a more scalable and cost-effective path than electrolysis.
Some of the key market development opportunities that Equinor is working on for clean hydrogen, include 100% conversion to hydrogen for the heat market in the UK (H21), zero-emission and flexible power production (targeting “when the wind does not blow”) in the Netherlands (Magnum), zero-emission marine fuel initiatives in Norway and negative CO2 emission concepts based on organic fuelled power production combined with CCS (BECCS) in the UK (Zero Carbon Humber).
In many respects we are breaking new ground with these business model ideas. The problem is that clean hydrogen is more expensive than natural gas – ranging from a 25% premium for industrial sectors already using hydrogen up to around twice the cost if used in a power plant. Developing commercial solutions with key national governments and industrial partners to build a market for clean hydrogen and drive down the costs as we scale it up is a key focus area we are pursuing today.
At times we feel ahead of the pack in our CCS and hydrogen strategy, and that can feel a little lonely. Are we too early to build presence now? Thinking long-term here in an energy world which may look very different from today is not just a luxury for us in Equinor, it’s a necessity. The renewables wave is already upon us, the next one will be low carbon, and here Equinor is in pole position.