Introduction

It is widely considered that deployment of carbon capture and storage (CCS) for clusters of energy intensive industries (EIIs) will become vital for meeting long-term greenhouse gas (GHG) reduction targets, and is a cost effective way for doing so, according to organisations such as the International Energy Agency (IEA) and Intergovernmental Panel on Climate Change (IPCC). In addition, it will be important to develop the related finance mechanism quickly to prevent carbon leakage, i.e. businesses transferring operations to places with less stringent GHG emission standards. Recent evidence highlights there might be different needs and challenges in deployment of industrial clusters, compared to those involving power generation. IEAGHG’s Technical Report 2015/03 “Carbon capture and storage cluster projects: review and future opportunities” reviews 12 CCS cluster projects and finds that the most successful clusters are currently based on CO₂-EOR in North America. This is to be expected as EOR provides a commercial benefit to investors in such activities.

Further requirements for ICCS clusters include: generating confidence for per-investment in CCS infrastructure, new methods to attract international investment and systematic development of CCS cluster business plans. However, more information is necessary regarding the transferability of conclusions for CCS clusters based on power generation incentives, such as a UK Contract for Difference (CfD), to those involving multiple industry sectors, and especially EIIs.

This study examines the economic and commercial arrangements needed to enable the global deployment of industrial CCS clusters. Over a period of eight months, with significant input from stakeholders from industry, government and the investment community, the project has identified the key enablers to unlock private investment in ICCS and developed four business models, which are expected to work in various regions around the world including North America, Europe, Australia and China.

Key Messages

• The aim of this study is to assess economic and business related issues with industrial carbon capture and storage (ICCS) clusters.

• The results of this study will be of interest to ICCS project developers and governments looking to support ICCS cluster development.

• ICCS is not yet commercially mature. Private investment is likely to occur if the following four key enablers are addressed:

• Mitigate the risk of carbon leakage

• Provide the emitters with margin certainty through appropriate subsidies

• Decouple the business cases for capture and infrastructure

• Share the key risks with government through guarantees

• The necessary level of government support is high. However, without ICCS, governments might need to rely on more expensive solutions to meet decarbonisation targets.

• ICCS plays an important role in supporting local industrial jobs and industrial markets.

• The study investigated four different ICCS cluster business models:
  • Public transport and storage (T&S) company
  • T&S as regulated assets (i.e. regulated fees for T&S access)
  • Anchor CCS project with third party access
  • CO₂ enhanced oil recovery (CO₂-EOR)

• The quantitative assessment shows that guarantees on loans, storage and CO₂ volumes are the key prerequisites for achieving investment.

• The expected costs for governments for an illustrative CCS cluster in Europe are between £29-53 per tonne of CO₂ abated. However, upward movements or regulation of the CO₂ price and provision of grants can significantly reduce these costs.

• At least one of the business cluster models is relevant in each of the focus areas (North America, Europe, China and Australia).

• Recommendations for further work include a cost-benefit analysis for ICCS considering its wider benefits, a comparison of decarbonisation options across all sectors, the development of regional ICCS strategies and refinement of ICCS business models, and a further investigation of some of the key risk mitigation strategies.