Climate targets are not being met. Is it time to mass deploy CCS?
Liv Hovem, CEO DNV GL, Oil & Gas
For gas to realize its true potential in helping to reach international and national emissions targets, its production and consumption must be decarbonized. The challenge is that all major routes to removing carbon from oil and gas use rely on the large-scale uptake of carbon capture and storage (CCS).
After the Paris Agreement, CCS gained momentum as a viable option to address climate targets. It is currently the only technology that can achieve significant reductions in carbon dioxide (CO2) and it can play a vital part in decarbonizing our planet.
Our Energy Transition Outlook forecasts that CCS will not be implemented at scale until at least the 2040s, unless governments change policy and set a higher carbon price than the cost of the technology.
So, what’s the barrier to its deployment? Quite simply, it’s cost.
To date, the fitting or retrofitting of CCS to power plants and industrial sources has only happened with government intervention. The use of CCS for enhanced oil recovery (EOR) stands alone as the only viable business case for its implementation.
While other climate change mitigating technologies (such as technologies to increase energy efficiency and generate renewable power) have become commercially viable without government incentives, CCS struggles to gain traction because there is a cheaper option for industry: continuing business as usual. Emitting carbon into the atmosphere costs virtually nothing.
Most economists see governments setting carbon prices as the most cost-effective way to incentivize emissions reductions. Yet, 85% of global emissions are currently untaxed. The remaining 15% of emissions costs less than USD10 per tonne of CO2, according to the World Bank’s State of Trends of Carbon Pricing from last year. If the cost of emitting carbon into the atmosphere increases, the speed at which industry will deploy CCS technology will also increase.
The future of CCS may largely lie in the hands of policymakers. But industry can also play a role in stimulating quicker adoption of the technology by finding ways to reduce the cost of implementing it. The quicker CCS is introduced to the oil and gas industry at scale, the quicker we go through the energy transition.
When deployed, we expect CCS to enter a cost learning curve similar to what we saw in the solar and wind industries, with costs reducing 15-20% per doubling of capacity.
So, how do we get going? Well, it’s a bit of a chicken-and-egg situation. We won't move down the cost learning curve, unless we start rolling out the technology. And we don’t foresee a roll-out of technology, before the costs have come down.
This requires some bold decisions to be made: the types of bold decisions that stimulated other technologies for decarbonization to be taken up at scale.
We now see a high acceleration of solar power and wind globally. I believe that this would not have happened without the high incentives that were put forward by certain countries, such as Germany in the Energiewende.
Large-scale uptake of carbon capture and storage technology will unlock significant opportunities for hydrocarbon and renewable energy technologies to work together to decarbonize the energy mix.
Opportunities, such as power-to-gas, where existing gas pipelines could be used to transport hydrogen produced from electrolysis of seawater, or offshore-based methane reformers. Opportunities to heat homes and businesses with carbon-free forms of gas through existing gas networks.
Cost may be a barrier to deploying CCS technology at scale today, but with some bold decisions, it need not be in the future.