We Can Capture Carbon, But What Then? Turning A Profit Will Be Key

We Can Capture Carbon, But What Then? Turning A Profit Will Be Key

Emily Pickrell, UH Energy Scholar

The new Biden administration has been in office a little more than a week, and carbon capture is already being identified as one of the leaders in the war against climate change.

It’s not new: the technology has been commercially available since the 1970s and is currently used to help industrial plants reduce the amount of carbon and other greenhouse gases they spew into the air, mostly through powerful scrubbers at the site. A more futuristic plan, direct air capture, proposes to filter already-emitted carbon out of the atmosphere.

Growing concern about the damage from warmer temperatures – 80% of Americans now say they believe in climate change – has made carbon capture relevant as never before. It is considered so important that it passed bipartisan scrutiny, featuring prominently in the Energy Act of 2020, included in the latest round of pandemic spending at the end of December and signed into law by former president Donald Trump, despite his long-time vocal skepticism.

And the Biden administration is already talking even bigger, with plans to invest $2.3 trillion in fighting climate change, with carbon capture one of the main tools listed in his campaign strategy.

A more practical challenge is that carbon emissions are still predominantly seen as an expense for companies. One of the hurdles for the blossoming of carbon capture technology will be coming up with creative ways to convert it into a valuable product. 

“How do I incentivize the growth of a carbon utilization scheme so that market forces can take over?” said Ramanan Krishnamoorti, a chemical engineer and chief energy officer at the University of Houston. “That is what will push the innovation and really drive costs down.”

It’s an issue that the 2020 legislation tries to tackle, calling for immediately increasing funding for carbon capture, utilization and storage to more than $1 billion, up from the current $200 million budget. Plans include six new carbon capture technology projects by the end of 2025.

The legislation is designed to push innovation in carbon capture. That’s a goal big players like ExxonMobil

are also looking into. In 2019, the oil-and-gas titan signed a joint development agreement with Global Thermostat to “advance breakthrough technology that can capture and concentrate carbon dioxide emissions from industrial sources, including power plants, and the atmosphere.”

Yet turning carbon dioxide into money-making products is still limited. The biggest demand for captured carbon dioxide is in enhanced oil recovery, a complex and expensive process that injects carbon dioxide to shake loose oil that otherwise couldn’t be produced.

The independent oil producer Occidental is betting big, with a proposed direct air capture plant that illustrates how technology can be commercialized when the financial benefits are clear. Occidental has said it will begin construction by 2022 and is currently working to secure funding. The plant will use new technology to essentially grab existing carbon dioxide out of the air, later using it for enhanced oil recovery in the Permian Basin in West Texas.

“We’re very committed to (direct air capture) and excited about it because this for us is a win-win-win,” said CEO Vicki Hollub at Anadarko’s third quarter 2010 earnings call. Hollub then listed these benefits: lowering its cost of enhanced oil recovery, selling its technology to others and at the same time, “helping the world by reducing CO2 out of the atmosphere”.

While Occidental is promoting the advantages, a look at the math indicates steep economic challenges ahead. Direct capture of carbon dioxide costs a startling $600 per ton of CO2, according to the Center for Carbon Management and Energy Sustainability at the University of Houston. Occidental’s plans rely heavily on a federal tax credit designed to stimulate investment in carbon capture.

The benefits for Occidental also rely on already-existing geographical conditions. Occidental has a lot of oil reserves in West Texas that require the use of enhanced oil recovery techniques using carbon dioxide.

The current high production costs are expected to fall with continued advancements in the technology, as happened with solar and wind generation, said Steve Capanna, the director of U.S. Climate Policy and Analysis at the Environmental Defense Fund. The EDF views investment in direct air capture as a starting point for developing the kinds of technology the U.S. will need by the 2040s to meet climate targets.

But if engineers can make cutting-edge technologies like direct air capture generate a return for shareholders on their own – without government incentives and without niche demands like those of Occidental – the financial benefits will push the technologies forward on their own.

Researchers at the University of Toronto are exploring ways to use carbon dioxide to create plastics. Stanford University, working  with the Department of Energy’s SLAC National Accelerator Laboratory, is searching for ways to create zero-emissions fuels from CO2.

If they are successful in finding high value uses, it will be a first step in bringing that $600 per ton price tag down for companies. Add to that improvements in capture technology, and a reduction in the need for storage, and the costs fall further. Suddenly, even futuristic proposals like direct air capture – that currently rely on government subsidies – could start to have market allure.

“If we can start to find the utilization of carbon dioxide and the marketplace for it and make that a true driver, then we give it enough of a runway for it to make economic sense,” Krishnamoorti said. “As we start to find ways to integrate it with renewables, perhaps capture costs can be further reduced.”

It sounds ambitious, but look at what happened with investment in solar power.

The result has been a tumble from $370 per megawatt-hour in 2009 to less than $50 per megawatt-hour in 2020. Billionaire investor Warren Buffett is building a plant that promises to cut that in half: his $1 billion, 690-megawatt solar plant in Los Angeles, now under construction, promises power at $20 per megawatt — plus $13 for storage. 

It’s a good reminder that when the market runs with ideas that government has encouraged, the results can be transformative indeed.

Emily Pickrell is a veteran energy reporter, with more than 12 years of experience covering everything from oil fields to industrial water policy to the latest on Mexican climate change laws. Emily has reported on energy issues from around the U.S., Mexico and the United Kingdom. Prior to journalism, Emily worked as a policy analyst for the U.S. Government Accountability Office and as an auditor for the international aid organization, CARE. 

UH Energy is the University of Houston’s hub for energy education, research and technology incubation, working to shape the energy future and forge new business approaches in the energy industry.

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