Decarbonizing the Power Demands of Data Centers with CCS – New York Climate Week

New York Climate Week is well established as an annual get together timed to coincide with the UN General Assembly in New York. It brings together the private sector who are active in climate change mitigation as well as other non-state actors such as academic institutions, with carbon markets being one of the common themes. This year there were over 1,000 events throughout the week. In recent years, the Global CCS Institute had organised an event each year to focus on CCUS.

The event this year was organised by the Global CCS Institute and EPRI, and hosted by Latham & Watkins. The theme was decarbonising the power needs of AI data centres. This appeared to be the main CCS-focussed event at New York Climate Week, and it had a good attendance of over 130 people. This half day event had sessions each focusing on a different aspect relating to the overall theme.

The first session was US-focussed and looked at the changes to tax credits for CCUS, clean fuels and hydrogen. There are very significant changes to tax credits in general due to the One Big Beautiful Bill Act (OBBBA). Whilst tax credit support was cut for other technologies such as wind and solar, the positive news is that for CCUS it was maintained and even enhanced in one aspect, raising the storage by EOR to the same level as straight storage ($85/t). On a less positive note, the new Foreign Entity of Concern (FEOC) requirements, which exclude certain countries’ companies from benefiting from US support, are causing concern because of the uncertainties in compliance requirements and the need for annual updates. A serious negative impact was raised in a later session (and later in this blog). For the tax credits for hydrogen (45V) and clean transport fuels (45Z) there were more mixed impacts of OBBBA.

The next session looked at global market developments and moderated by Jarad Daniels (CEO of the Global CCS Institute), himself an expert in this topic. Mention was made of the global significance of the Longship and Northern Lights projects, and the Net Zero Teesside Power (NZT Power)project in the UK which will be the first full-scale capture on a gas-fired power plant (CCGT). Also mentioned was the Aramco CCS Hub at Jubail in Saudi Arabia, which will be one of the first project-financed CCUS projects. A general point was made that the EU is now providing a more stable policy environment than the USA, and companies are looking there again after being attracted to the USA by the Inflation Reduction Act (IRA), especially as the ETS price is expected to reach Euro 195 by 2035. There is a lot of policy ambition in the EU, and it may overtake the US in terms of CCUS project deployment.

The concluding remarks were US-focussed again. These included that some US states are still progressing on CCS policy-wise, examples given of Wyoming and Louisiana. However, there is a significant problem caused for projects by the proposed repeal of the GHG reporting under EPA Subpart RR, as this is required by the Treasury to demonstrate the security of straight storage projects for 45Q tax credits. For CO2-EOR projects, these can choose to demonstrate storage by using the ISO standard 27916:2019 or Subpart RR. It is therefore expected that there will be growth in commercial deployment of CO2-EOR projects only.

The next three sessions focused on AI data centres and their growth in demand for power. Panellists included CCS project developers, manufacturers, utilities, finance and a leading IT company and data centre developer. A term was used, hyper-scalers, to refer to the scale up sought by IT companies wanting to scale the data centres to meet the demands of AI. Growth in data centres is expected to double from 2024 to 2027, mostly in the US and then Asia. In the US their electricity demand is expected to increase from 280TWh in 2024 to 530TWh in 2028 (equal to current Texas power) with an increase in capacity of 50GW (based upon conservative estimates by S&P Global). This represents the investment in data centres increasing from $250bn in 2024 to $585bn in 2032. The companies building and operating these want to ensure they are low carbon, and so are looking at powering them with renewables, CCS on CCGTs, and SMRs. One of my favourite quotes of the day was from Julio Friedmann, these companies’ priorities are “speed, speed, cost, and carbon”, in that order.

There was discussion of the supply side limitations to the rate of growth, including gas turbine delivery times and also for other major components such as substation transformers. It became clear there is a mismatch between the rate of construction of data centres and the rate that CCS projects can be developed to provide decarbonised CCGT power. Some data centres are using older less efficient gas turbines without CCS as a result. With CCS, the development of storage can take the longest time, and so access to storage is very important for data centres wanting to decarbonise with CCS. The location of the data centres is also being driven by demand and could also be driven by access to geological storage.

The importance of the NZT PowerCCGT project with CCS was reinforced in this context, as it will be the first full-scale capture on a CCGT, although noting that there is a long (and positive) experience with smaller-scale post-combustion capture on gas combustion flue gases. The large IT company developing data centres said that their asks from such CCS projects were: high capture rates, permanent sequestration and low carbon intensity upstream. They are also looking at how CCS compares to other low carbon options such as geothermal energy, SMRs and fusion.

Points were made about public acceptance. There are examples of local communities against new data centres, and it was noted that there can be stronger opposition to solar farms, whereas CCS is more out-of-sight so may fare better.

A point was also strongly made about another role for CCS in decarbonising aviation fuels, with CORSIA rules coming into action soon (see my LinkedIn post (3) Post | Feed | LinkedIn).

In the concluding remarks, it was said to all to keep up the momentum on CCS for power for data centres.

Thank you to the Global CCS Institute (led by Jarad Daniels), to EPRI (led by Jeffery Preece) and to Latham & Watkins (led by JP Brisson) for organising this very interesting event in an important week of climate events.

My takeaways from this event included that the momentum in the USA seems to be still there for commercial CCUS projects driven by the enhanced 45Q, except for the 45Q uncertainty for straight storage, and the momentum is certainly growing from the Hyper-scalers with their data centre growth. Watch this space!

In terms of other events, I should mention another significant event for CCS by the Sustainable Markets Initiative on Unlocking Private Capital in CCS. Organised by Baringa and Barclays, it is aimed at private finance providers and is supported by 11 CEOs of financial institutions with the objective toto report into COP30. There were also a number of events on CDR, including a noted level of interest and activity in marine CDR. A lively and busy week for climate change!

IEAGHG has many members from the USA, and we welcome our two newest members who are coincidentally also US-based, Occidental and GE Vernona. It was reassuring to see that CCUS project activity continues in the USA and around the world with US companies involved. We will be holding our next international members meeting in the USA in Alabama in October, hosted by Southern Company. We’ll use this opportunity to take our members to visit the world-famous National Carbon Capture Centre.