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THINK SMALL TO UNLOCK CARBON CAPTURE’S BIG POTENTIALBy Alex
Dewar, Bas Sudmeijer, Oluseye Owolabi, and Pol-Hervé Floch
Carbon capture is potentially on the cusp of acquiring a major
role in meeting the world’s climate change mitigation goals. The
challenge: how to transform this expensive, 40-year-old niche
technology into one that is mainstream and cost competitive.
Carbon capture, utilization, and storage (CCUS) is one of just a
few technologies that can decarbonize large, stationary emit-ters
of CO2. CCUS advocates agree that one important means of minimizing
the costs of CCUS will be the development of large-scale
geographical hubs, in which multiple emitters are connected to a
shared CO2 transportation and storage network. These hubs can help
open up CCUS to a wide range of emitters. They also offer cost
ad-vantages thanks to their proximity to geo-logical storage and
existing pipeline infra-structure as well as the scale effects from
including a large number of emitters.
Our analysis of CO2-emitting industries and storage capacity
worldwide indicates that small, localized networks, comprising just
a
handful of emitters, could provide a key route to the
commercialization of CCUS and the eventual development of
large-scale hubs. By cutting average carbon abatement costs in
promising clusters to less than $100 per metric ton—in some
instances, up to an 80% reduction over standalone CCUS
projects—small networks would go a long way to delivering the
ca-pacity needed to reduce global warming. And by unlocking scale
and learning curve benefits, they would make low-concentra-tion
carbon capture, which is the holy grail of CCUS, a viable
option.
Low-Concentration Capture Needs a Capacity BoostIndustries that
are candidates for CCUS technology can be divided into two groups:
those with high concentrations and those with low concentrations of
CO2 emissions. For industries with highly concentrated CO2
emissions, such as natural gas process-ing, ammonia production, and
ethanol pro-duction, the costs of carbon capture are relatively
low. Recent tax incentives and
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policy initiatives in the US and Europe are now making CCUS
commercially viable in these sectors.
But by far the largest number of stationary CO2 emitters are in
industries with low con-centrations whose capture costs are
conse-quently high, particularly coal- and gas-fired power plants.
We estimate that between 80% and 90% of captured emis-sions would
have to come from such low-concentration sources in order to limit
the rise in the global temperature to well below 2°C—the goal of
the 2015 Paris Agreement.
As a result of technological breakthroughs, carbon capture costs
in low-concentration applications are declining. Recent
develop-ments by Svante, Ion Engineering, and the Petra Nova
project in the US have reduced capture costs significantly using
amine scrubbing and solid-sorbent technologies. Our research
indicates that low-concentra-tion capture costs could fall below
$30 per metric ton, from more than $70 per metric ton today.
However, this depends on low-concentra-tion CCUS capacity
increasing from less than 5 million metric tons currently to at
least 1 gigaton, thereby allowing low- concentration carbon capture
to benefit from economies of scale and learning curve effects
similar to those seen in other industries. We believe the
development of CCUS capacity via localized networks, which share
CO2 transportation pipelines and storage, is vital for reaching
this capac-ity goal.
Small Networks Deliver Large Benefits In addition to capture
costs, the costs of transporting and storing CO2 are important
components of the overall cost of CCUS and can vary widely. The
length, size, and capacity utilization of the pipelines used to
transport emissions all have cost implica-tions.
Transportation expenses range from under $5 per metric ton (when
an emitter is locat-
ed close to storage) to well over $100 per metric ton. Storage
costs are generally be-tween $2 and $11 per metric ton, depend-ing
on the depth of the well and whether it is a preexisting or a new
facility. Using cap-tured CO2 in enhanced oil recovery (which
relies on the gas to increase the amount of oil extracted from a
reservoir) can also im-prove CCUS economics.
BCG Gamma, our data science and ad-vanced analytics unit, has
created a propri-etary tool to gain an in-depth understand-ing of
the costs of CCUS technology when used in different locations. The
tool has three parts: a clustering component that uses two
algorithms to combine emitters into networks that maximize
transporta-tion efficiencies (based on their proximity to one
another) and minimize total system costs; a storage matching
algorithm that links emitters to the lowest-cost storage and
enhanced oil recovery options; and an economic optimization
component that identifies the marginal costs of adding CCUS to
different emitters within a net-work.
Our model confirms that the proximity of CO2 emitters to storage
or utilization is the key factor in keeping CCUS costs low. But it
also shows that organizing emitters into small networks is a highly
effective way to reduce the cost of deploying CCUS. We found that
several factors contribute to lower costs when emitters form
networks.
Denser clusters of emitters benefit from significant cost
advantages. Southern Cali-fornia, which has abundant CO2 storage,
is a good example. (See Exhibit 1.) The dens-est cluster of
emitters is within Los Angeles itself (Los Angeles IV in the
exhibit) and generates 8 million metric tons of emis-sions
annually. If emitters there were to form a CCUS network, our model
indicates that the average cost of transporting and storing CO2
(including network connection costs) could be $10 per metric ton.
The neighboring San Bernardino area (Los An-geles II) has a far
more diffuse cluster of emitters but with similar combined annual
emissions of around 6 million metric tons. As a result of this
cluster’s lower density,
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Boston Consulting Group | Think Small to Unlock Carbon Capture’s
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average transportation and storage costs would be around $110
per metric ton.
The number of emitters and the order in which they join the
network are also signif-icant factors in reducing overall costs and
making CCUS more commercially viable. Our model indicates that
combining multi-ple emitters in a network can deliver signif-icant
economies of scale and reduce the weighted average of the network’s
CO2 transportation and storage costs by as much as 80% compared
with standalone CCUS projects.
What’s more, we found that sometimes only a small number of
emitters are need-ed to achieve the lowest average carbon abatement
(capture, transportation, and storage) costs for a network. In
networks that have the potential for low carbon abatement costs,
this point can be reached with just two to three emitters producing
5 to 7 million metric tons of CO2. between them annually. After
this point, the net-work’s average abatement costs start to slowly
rise as more widely dispersed emit-ters are included.
Because small, localized networks have sig-nificant cost
advantages over individual emitters, they can bring down barriers
so that others can join. A handful of high- concentration emitters
with low capture costs can form a network. Then, once the network
is up and running and early-stage technical risks have been
resolved, low- concentration emitters (which are larger and offer
additional economies of scale in transportation) can join at a
lower incre-mental cost.
Current projects in Edmonton, Canada, are starting to show how
networks reduce key CCUS costs in practice. (See Exhibit 2.)
Car-bon capture technology has been installed at three
high-concentration emitters (two oil refineries and an ammonia
plant), and a pipeline—the Alberta Carbon Trunk Line—has been built
to transport CO2 for storage and use from two of them. Our model
indicates that by including the opti-mal mix and number of emitters
at the outset and avoiding significant disecono-mies of scale by
preventing more dispersed emitters from joining, this emerging
net-work could deliver average transportation
101 103 9170
25
102
Los Angeles I
131
Los Angeles II
5
9
510711
Los Angeles III
55
Los Angeles IV
214
80
Capture Transport and storageNetwork connection
Costs ($ per metric ton of CO2)
Wide variations in network connection costsacross CCUS clusters
are driven by emitter density
Los Angeles I
Los Angeles III
Los Angeles IV
Los Angeles II
CO storagecapacity
High-concentration emitters: chemicals (fermentation), hydrogen,
and refining (process only)
Low-concentration emitters: gas power generation and
conventional oil and gas
Source: BCG global hub identification and characterization
tool.Note: Network connection costs refer to the average costs per
ton for the pipeline transporting CO2 from the emitter to a central
gathering point.
Exhibit 1 | Dense Clusters of Emitters Dramatically Improve CCUS
Economics
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Boston Consulting Group | Think Small to Unlock Carbon Capture’s
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and storage costs that are half those of a larger and less
efficient network.
Opening Up New Regions Our research suggests significant
potential for small-scale CCUS networks to both kick-start the
development of large-scale CCUS hubs and introduce low-cost
networks out-side of potential hub regions. Across the ge-ographies
assessed, we estimate that there are nearly 200 clusters that can
be devel-oped into low-cost networks with average carbon abatement
costs below $100 per metric ton, based on the current costs of
carbon capture. (See Exhibit 3.)
Many of these clusters are in geographies that are less
frequently considered for CCUS projects. These include Greece,
Po-land, Lithuania, India, and South Korea. Opportunities also
exist in oil- and gas- producing countries outside of regions with
the potential for large-scale CCUS hubs, in-cluding Nigeria,
Angola, Azerbaijan, and Trinidad and Tobago.
Together, these clusters could reduce CO2
emissions by more than one gigaton per year, with abatement
costs below $100 per metric ton based on the current economics of
CCUS. This reduction would be a major step toward delivering the 4
to 6 gigatons per year that the International Energy Agency
estimates must be abated through CCUS by 2040 to keep global
warming well below 2°C. And through scale and learning curve
effects, the clusters would also en-able further cost improvements
in low- concentration carbon capture technologies.
Action Steps to Promote CCUS Networks The development of
low-cost networks will depend on support from multiple
stake-holders, including the following:
• Governments. Policymakers will need to think about how to
promote the development of local networks that integrate different
emitters, rather than viewing CCUS purely in terms of individual
projects. They should consider tax and other financial initia-tives
that foster innovation and pro-
Edmonton
Smart cluster selection avoids diseconomies of scale1
40
20
60
0
100
80
120
57
Minimal-cost cluster
Costs ($ per metric ton CO2)
Full cluster
87
1.2million metric
tons/year
14million metric
tons/year
Example from Edmonton, Canada
Minimal-costcluster
Fullcluster
Alberta CarbonTrunk Line
Capture
Chemicals (synthesis)
Conventional oil (including natural gas processing)
Gas power generation Ammonia
Petroleum refining
Cement
Oil sands Petrochemicals
Transport and storageNetwork connectionCO storage
capacity
Source: BCG global hub identification and characterization
tool.1Modeled not actual costs.
Exhibit 2 | Optimizing Initial Cluster Size Can Significantly
Lower Abatement Costs
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Boston Consulting Group | Think Small to Unlock Carbon Capture’s
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mote investment in specific local regions. These initiatives
will likely also benefit employment and job retention strategies in
industries that might otherwise be hard hit by energy
transitions.
• Emitters. Industries that emit CO2 should examine the
feasibility of using CCUS and determine whether any of their plants
could be combined with those of other emitters to form a network.
They can start by considering whether there is scope to build
strong local partnerships and regulatory and policy support to
develop CCUS infra-structure. They may find that the cost structure
of CCUS is radically different when they work in partnership with
others rather than pursuing projects on their own.
• Investors. The investment community increasingly needs to
assess the compet-itiveness of industrial companies and their
specific assets in a lower-carbon future in order to identify the
possible danger of stranded assets. But they should factor into
their calculations the potential for low-cost CCUS networks to
mitigate those risks and identify opportunities to develop CCUS
net-works. In the future, assets at risk of being stranded will be
determined not just by the scale of their emissions but also by the
relative cost competitiveness of abating those emissions.
Carbon capture technology may be about to realize its
long-mooted poten-tial. The creation of small networks of emitters
sharing CO2 transportation and storage infrastructure can play a
central role in achieving that goal and help to bring abatement
costs down sharply. Such networks could also extend the use of CCUS
into low-concentration industries, a vital step toward building the
capacity needed to reduce global warming. While the long-term
future of CCUS may be in large, geographically concentrated hubs,
the development of small, localized net-works is an important first
step.
Americas Europe Africa and the Middle East Australasia
Low-cost clustersCountries with potential low-cost clusters
Counties not yet modeled
Clusters with potential abatement costs of $100/metric ton of
CO2 or less
Countries modeled
Source: BCG global hub identification and characterization
tool.Note: The model currently covers 51 countries.
Exhibit 3 | Low-Cost Networks Are Viable Across a Wide Range of
Geographies
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About the AuthorsAlex Dewar is a senior director at the Center
for Energy Impact in the Washington, DC, office of Boston
Consulting Group. You may contact him by email at
[email protected].
Bas Sudmeijer is a managing director and partner in BCG’s London
office. You may contact him by email at [email protected].
Oluseye Owolabi is a consultant in the firm’s London office. You
may contact him by email at [email protected].
Pol-Hervé Floch is a principal in BCG’s London office. You may
contact him by email at [email protected].
Acknowledgments We are grateful to Ben Clark and Valeria Boesso
of BCG Gamma for their expertise and help in building and deploying
our CCUS cluster tool. We would also like to thank Julio Friedmann,
of Columbia Universi-ty’s Center on Global Energy Policy, and
Cameron Hepburn and Steve Smith, of Oxford University’s Smith
School of Enterprise and the Environment, for their expert
guidance. Finally, we thank the Oil and Gas Cli-mate Initiative for
sharing its expertise, notably on hub economics, and for supporting
our work. This arti-cle builds on the insights BCG has gained
through its support of OGCI Climate Investments in developing an
approach to catalyzing deployment of CCUS at scale and to building
a portfolio of CCUS projects. In addition, we conducted work for
OGCI’s CCUS KickStarter program, which aims to leverage economies
of scale on CO2 transport and storage and make CCUS commercially
viable.
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