DUAL CHALLENGE a Roadmap to At-Scale Deployment of CARBON CAPTURE, USE, and STORAGE CHAPTER TWO – CCUS SUPPLY CHAINS and ECONOMICS
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MEETING THE DUAL CHALLENGE A Roadmap to At-Scale Deployment of CARBON CAPTURE, USE, AND STORAGE CHAPTER TWO – CCUS SUPPLY CHAINS AND ECONOMICS A Report of the National Petroleum Council December 2019 This chapter was last updated on June 5, 2020 Chapter Two CCUS SUPPLY CHAINS AND ECONOMICS I. CHAPTER SUMMARY This chapter will provide a brief description of each U.S. project and what enabled its deployment, arbon capture, use, and storage (CCUS) is an as well as the level of incentive needed to achieve essential element in the portfolio of solu- at-scale deployment of CCUS in the United States. C tions needed to meet the dual challenge of The United States has a history of developing the providing affordable and reliable energy while legal and regulatory framework needed to enable addressing the risks of climate change. The CCUS projects. Although this chapter mentions CCUS supply chain involves the capture—sepa- that framework, a more detailed discussion about ration and purification—of carbon dioxide (CO2) what is required to support at-scale deployment from stationary sources so it can be transported in the United States appears in Chapter 3, “Policy, to a suitable location where it is used to cre- Regulatory, and Legal Enablers.” ate products or injected deep underground for safe, secure, and permanent storage. Stationary In 2019, the United States had more than 6,500 CO2 emissions are generated at fixed points and large stationary sources emitting approximately include sources such as power generation and 2.6 billion tonnes of CO2 per year across multiple industrial processes. industrial sectors. These sources represent nearly 50% of the total U.S. CO emissions. Although This chapter will describe the CCUS supply 2 these sources are distributed across the country, chain and relevant deployments in the United many are located near geologic formations suit- States. The focus on the United States will con- able for CO storage. tinue by describing CCUS supply chain enablers 2 as well as the costs associated with at-scale The United States has one of the largest known deployment. CO2 geological storage capacities in the world. In 2019, there were 19 large-scale CCUS proj- Most states in the continental United States ects operating around the world with a total possess some subsurface CO2 storage potential. capacity of about 32 million tonnes per annum Though estimates vary, experts generally agree 1 that the geologic resource would be able to store (Mtpa) of CO2. Ten of these projects are in the United States with a total capture capacity of hundreds of years of CO2 emissions from U.S. sta- about 25 Mtpa. tionary sources. Six of the U.S. projects were enabled by mar- In 2019, there were more than 5,000 miles of ket factors that included availability of a low-cost CO2 pipelines transporting more than 70 Mtpa of CO2 supply and a demand for CO2 by enhanced CO2 from both natural and anthropogenic sources. oil recovery (EOR) and food industries. The four With approximately 85% of the world’s CO2 pipe- remaining projects required significant policy lines and 80% of the world’s CO2 capture capacity, support to be economically viable. the United States has established itself as the world leader in CCUS deployment. However, the 1 Large-scale as defined by the Global CCS Institute. 25 million tonnes of CCUS capacity in the United CHAPTER TWO – CCUS SUPPLY CHAINS AND ECONOMICS 2-1 States represents an application to less than 1% the costs at each stage are dependent on supply of the CO2 stationary sources. Accordingly, the chain-specific circumstances that vary with each potential for further deployment is significant. CCUS project. Capture costs vary with CO2 con- centration, while transport costs vary based on As discussed in Chapter 1, “The Role of CCUS the volume, distance, and terrain over which CO2 in the Future Energy Mix,” U.S. stationary sources is transported. Storage costs also vary depending of CO2 emissions include power plants, refineries on location and nature of the storage formation. and petrochemical plants, pulp and paper produc- The variety of CO2 sources, capture processes, tion, natural gas processing, ammonia produc- transportation methods, and end uses makes tion, industrial hydrogen production, industrial many supply chain configurations possible. furnaces (including steel blast furnaces), cement plants, and the ethanol industry. For many of This National Petroleum Council (NPC) study these source types, CCUS is a viable solution to assessed the costs to capture, transport, and store CCUSenable emissions reduction.Artist Date ACCO 2 emissions BA from 80% of the largest U.S. sta- tionary sources. These results are presented in There must be an economic incentive for all a CO2 cost curve (Figure 2-1), where the cost to participants in a CCUS supply chain—from emis- capture, transport, and store one tonne of CO2 sion source and capture to transport and storage— from each of the largest 80% of stationary sources to establish a CCUS project. Creating a supply is plotted against the volume of CO2 abated from chain will require significant capital investment that source. This chapter provides a detailed and ongoing operating expenses. Furthermore, description of the assumptions used to develop 300 ACTIVATION PHASE (UP TO $50/teCO2) ASSUMPTIONS EXPANSION PHASE ($50-90/teCO2) ASSET LIFE 20 YEARS A AT-SCALE DEPLOYMENT ($90-110/teCO2) INTERNAL RATE 250 OF RETURN 12% EQUITY FINANCING 100% INFLATION RATE 2.5% ) 2 FEDERAL TAX RATE 21% 200 150 100 NOTIONAL TECHNOLOGY INCLUDES THE LARGEST 80% COST IMPROVEMENTS OF STATIONARY SOURCE ($ PER TONNE OF CO TONNE ($ PER FROM POTENTIAL EMISSIONS STATIONARY TECHNOLOGY ADVANCES POINT SUPPORTED BY CONTINUED R&D 50 SOURCESC U.S. CCUS COSTS BY POINT SOURCE POINT U.S. CCUS COSTS BY TOTAL 0 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2600 5300 B STATIONARY POINT SOURCE CO2 VOLUME EMITTED (MILLION TONNES PER YEAR) CURRENT CURRENT U.S. EMISSIONS Cost Curve Notes: A. Includes proect capture costs, transportation costs to defined use or storage location, and use/storage costs does not include direct air capture. B. This curve is built from bars each of which represents an individual point source with a width corresponding to the total CO2 emitted from that individual source. C. Total point sources include 600 Mtpa of point sources emissions without characterized CCUS costs. Figure 2-1. U.S. CCUSFigure Cost 2-1. Curve U.S. CCUS with COCost2 Capture Curve Volume by Phase 2-2 MEETING THE DUAL CHALLENGE Also Figure 2-10 the cost curve and the types of CCUS projects that The CCUS supply chain can take many forms could be enabled in the future by implementing depending on the emissions source, capture tech- the recommendations of this study. nology, transport option, and use or storage dis- position. Figure 2-3 uses a Sankey flow diagram There are three transition points on the cost to show the breadth of supply chain combina- curve that align with three phases of CCUS deploy- tions that can occur with CCUS. A Sankey dia- ment projected to occur over a 25-year period to gram is a directional flow chart where the width achieve at-scale deployment in the United States. of the streams is proportional to the quantity of The activation phase requires clarification of flow, and where the flows can be combined, split, existing policies and regulations with current and traced through a series of events or, in this financial incentives of about $50/tonne of CO2 case, elements of the supply chain. In this dia- to enable an additional 25 Mtpa to 40 Mtpa, dou- gram, the width of each link is an illustrative pro- bling existing U.S. CCUS capacity within the next portion of each component of the existing sup- 5 to 7 years. The expansion phase broadens exist- ply chain. This diagram is intended to show the ing policies and increases financial incentives to possible supply chain configurations and does $90/tonne of CO2. Combining greater financial not account for future, or low technology readi- incentives with a durable regulatory and legal ness level (TRL), capture technologies currently environment could enable an additional 75 Mtpa in development. to 85 Mtpa within the next 15 years. The at-scale phase requires increasing the level of incentives While Figure 2-3 shows the possibility of many different supply chain configurations that could up to about $110/tonne of CO2, which could drive total U.S. CCUS capacity to approximately 500 be developed to achieve at-scale deployment of Mtpa within the next 25 years. CCUS, it also highlights that many of the com- ponents have already been demonstrated in the Although the NPC does not expect CCUS will be United States. applied to all U.S. stationary sources, achieving 500 Mtpa of U.S. CCUS deployment means that A description of each step in the CCUS supply CCUS would be deployed on nearly 20% of U.S. chain follows. stationary emissions, which is a level the NPC has defined as widespread or “at-scale” deploy- A. Source ment. It is also worth noting that at an incentive CO is emitted from a wide range of sources of about $150/tonne, CCUS could be economically 2 across a broad range of industries. The original applied to about 1.2 billion tonnes of CO emis- 2 source of the carbon in the CO is the carbon pres- sions, which is just under half of all U.S. station- 2 ent in a wide variety of feedstocks used in natural ary emissions and nearly a quarter of total U.S. and industrial processes to create and supply the CO emissions.