When Will Carbon Capture Tech Become Economically Viable?
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The first day at a new job is usually uneventful. There are HR policies to sign and disregard, break rooms to explore, and hours to wait while the Help Desk tries to get you signed into the system. So it was with some surprise that we learned that the head of the new U.S. administration got right to work on the first day and signed a bunch of executive orders. Politics aside, some of the actions underscored how the next four years could be a boon for green technologies that promise to combat the emission of heat-trapping greenhouse gases. Carbon dioxide, or CO2, is the biggest offender. That made us wonder when carbon capture tech will become economically viable.
The Carbon Capture Market
We’re not the only ones. There have been a number of headlines in recent weeks focused on the business of carbon capture, utilization, and storage (CCUS), including a piece in the New York Times that investigates the viability of the latest generation of technologies that directly capture CO2 from the air. We wrote about one of the leading companies in the sector, Climeworks, a couple of years ago and concluded that so-called engineered carbon removal can’t economically compete with planting a few million trees.
The gap between the $100-per-ton cost to produce a product and the $26 a ton – maximum – that you can sell the product for means you don’t have an economically viable business.
At the same time, most experts believe that to avert the sort of planetary Armageddon that even Bruce Willis couldn’t stop requires a broad range of strategies, including CCUS technologies.
Estimates of CO2 emissions vary, but it’s probably somewhere in the range of 35 to 50 billion metric tons of carbon-dioxide equivalents (a measurement that encompasses all greenhouse gases but expressed in CO2 terms) per year. In order to keep the planet cool enough to survive, we may need to remove as much as one trillion tons of carbon this century. That’s a huge source of raw material for any industry. While a crude and probably meaningless comparison, it’s estimated that we’ve drained the planet of between 1.1 and 1.5 barrels of oil since humans discovered the myriad ways to use that precious and poisonous black gold. The oil and gas drilling sector alone accounted for $3.3 trillion of value in 2019.
Carbon capture is first and foremost yet another part of the energy sector, with lesser relationships to industries ranging from materials to agriculture. Boston Consulting Group (BCG) estimates that a global CCUS industry could be worth $90 billion in the next decade. Of course, that number comes with more caveats than a product warning label in California. For starters, it assumes aggressive government policies that encourage and subsidize carbon capture technologies. It also requires a certain faith that we can indeed engineer scalable solutions that can not only sequester captured carbon but repurpose it for new products or purposes, such as (somewhat ironically) pushing out oil from nearly depleted fields, as well as creating new chemicals and fuels.
So far, the results have been pretty underwhelming. BCG says that fewer than 100 CCUS projects have been developed, with a combined estimated capacity of about 32 million metric tons of CO2. Most of that capacity is currently located in the United States, which in 2018 rolled out tax credits that provided $35 for every metric ton of CO2 that is used commercially and $50 per ton that is permanently sequestered. The most recent stimulus bill passed late last year earmarked nearly $450 million for carbon removal R&D. Chances are we won’t see significant effects from engineered carbon removal for another decade, and that’s probably only if governments and industries invest big bucks:
While government subsidies are never a long-term solution, they can certainly accelerate new industries struggling to gain traction. Renewable energies like solar and wind are now cost-competitive with fossil fuels, something that might have taken years longer if government money didn’t help put solar panels on rooftops. An analysis by the Carbon Tracker Initiative, a climate finance think tank, found renewable power was a cheaper option than building new coal plants and was expected to cost less than electricity from existing coal plants by 2030 at the latest. Besides, if it’s possible to create food out of thin air, then eventually we can find a way to profitably capture and use CO2.
Strategies for Carbon Capture
Economic viability obviously depends on which method of carbon capture we’re talking about. Some big brains recently published a perspective on the economic and technological prospects for carbon capture, and later posted an article on the different pathways for storing and using CO2 that us mere mortals could understand. The latter looks at scenarios of breakeven costs – meaning they take into account revenue – for 10 different methods by 2050.
For example, timber grown for use as building materials could displace up to 1.5 billion metric tons by mid-century but is already considered economically viable today. Microalgae is a different story, with breakeven costs ranging from $230 to $920 per ton by 2050 for applications such as biofuels or sustainable chemicals and materials. These businesses could soak up between 200 million and 900 million metric tons.
Direct-Air-Capture Technology for Multiple Uses
One distinction that we should make explicit is that technologies for capturing carbon and utilizing it are sometimes mutually exclusive, especially in engineered carbon removal technologies. Zürich-based Climeworks, which has now raised about $135 million for its direct-air-capture technology after a $105 million venture round in 2020, is a good example. The startup has designed a system that uses fans to suck air across a filter, which is then heated to release the captured CO2 for different applications. In Iceland, as we previously reported, a pilot project is underway to lock up carbon in basaltic rock.
But Climeworks is also looking for added value from products such as alternative fuels. It is part of a joint venture based in Oslo, Norway to produce a renewable synthetic gas using captured CO2, renewable electricity, and water. The first plant is expected to begin production of sustainable fuels such as jet fuel in 2023. At full capacity, it will produce 100 million liters of renewable fuel while reducing emissions from industries such as aviation by 250,000 tons every year. That business model creates tangible revenue and environmental benefits. Of course, we’re not privy to any ROI calculations, which would also have to factor in the future market value of these fuels in a world potentially glutted with cheaper renewable energy.
The World’s Largest Direct-Air-Capture Plant
Something of a carbon copy to Climeworks is a startup out of Canada called Carbon Engineering. Both companies were founded in 2009. Both have also raised more than $100 million in funding. And both have developed direct-air-capture technology that can be used for a variety of applications. You can get an idea of some of those applications by the names of the investors behind the company’s $110 million war chest. Aside from Bill Gates, the list includes Chevron, BHP, and Occidental Petroleum Corporation (OXY) through its subsidiary, Oxy Low Carbon Ventures, LLC. Oxy Low and private equity firm Rusheen Capital Management have formed a joint venture to leverage Carbon Engineering’s technology. The plan is to build the world’s largest direct-air-capture plant on 100 acres in West Texas that can gobble up one million metric tons of CO2 per year.
Like Climeworks, Carbon Engineering employs fans to suck in air that is pushed through a chemically coated mesh that binds with carbon dioxide. Chemical processes lock the CO2 into pellets, which when superheated release carbon dioxide gas. The product will be used in lower-carbon oil production, plastics, and concrete. The venture will also offer permanent sequestration for businesses looking to attract ESG types with net-zero emission claims. The NYT article said the company thinks it can eventually get prices down to $94 to $232 a ton. It’s unclear if those numbers are pre-revenue, but still not cheap or particularly scalable considering the amount of land required to drain only 0.00002% of global annual emissions.
Carbon Capture for Electric Power
Occidental Petroleum is also an investor in NET Power, a North Carolina startup that has developed a technology for turning
water into wine CO2 into electricity. (Well, more specifically, the technology was developed by the startup’s holding company/investment firm, 8 Rivers, which is developing other carbon capture tech, along with a space launch system and wireless networks using light.) Founded in 2010, NET Power has raised $150 million in disclosed funding. Another backer is Exelon Corporation (EXC), one of the biggest utility companies in the United States with reputedly the lowest carbon footprint, since it largely manages nuclear power.
Obviously, both of these energy giants are interested in NET Power’s patented semi-closed loop technology developed by chemical engineer Rodney Allam and engineer Jeremy Fetvedt. The Allam-Fetvedt Cycle burns natural gas (or other types of gasified fuels like coal or biomass) with pure oxygen. The resulting CO2 is recycled through a combustor, turbine, heat exchanger, and compressor, creating power with zero emissions:
Normally, we’re not too impressed when a company claims to have won mention on some top 10 list (the equivalent of a high school trophy), but NET Power’s pilot 50-megawatt natural-gas facility in La Porte, Texas was named one of MIT Technology Review’s 10 breakthrough technologies in 2018. The power plant is in operation and several more facilities with higher power generation are in the works.
Carbon Capture Startups
While the three carbon capture startups above seem to be among the most well-funded today, we did come across a few other companies during the course of our research that deserve a brief mention.
Founded in 2007, CarbonCure out of Canada has raised $12.4 million in disclosed funding, including a couple of venture rounds last year. Bill Gates is apparently pretty bullish on the company, as his Breakthrough Energy Ventures has led a couple of rounds. Microsoft is also among the 20 investors. In addition, payments giant Stripe has created its own carbon capture funding vehicle that pays companies like CarbonCure premium dollars per ton of CO2 removed. CarbonCure represents the end-user of the new carbon capture economy, having developed a technology for injecting CO2 into concrete.
Once injected into the wet concrete mix, CO2 reacts with calcium ions from cement to form a nano-sized mineral, calcium carbonate, which becomes embedded in the concrete and increases its compressive strength by up to 10%.
Founded in 2006, New Yawk-based Global Thermostat has basically developed a sort of catalytic converter that’s designed to be retrofitted on facilities that handle heavy industrial processes such as metal smelting, cement production, and petrochemical refining. Global Thermostat’s carbon capture uses proprietary amine-based adsorbents to remove CO2 from the air. Last year, the startup and ExxonMobil expanded an agreement to determine the scalability of the direct-air-capture technology.
Finally, we have Dublin-based Silicon Kingdom Holdings, which has developed “mechanical trees” based on a technology created by Klaus Lackner, director of the Center for Negative Carbon Emissions at Arizona State University. Funding the company himself, Lackner claims to be the first person to suggest capturing CO2 from air to address climate change. The MechanicalTrees are about 30 feet tall and contain 150 sorbent tiles that extend and retract on a constant capture and regeneration cycle.
The passive direct-air-capture technology will be deployed in 12-tree clusters that can remove one metric done of CO2 per day. The company is working with Arizona State University on a pilot CO2 farm targeting 100 metric tons per day, with the goal to deploy larger facilities capable of scrubbing 3.8 million metric tons of CO2 annually.
Elon Musk Captures Carbon
All the people who can’t even spell Elon Musk are suddenly interested in getting to know the world’s richest man, a title that’s subject to the whims of the most volatile share price known to man. “You’re the world’s richest man, solve the world’s problems!” they’ll scream, as they stamp their feet and wave their placards. Well, days ago Mr. Musk stepped up with a $100 million offer for the best carbon capture technology out there:
If you watch that now famous episode of the Joe Rogan Show, you’ll quickly realize that Elon Musk is a man who spends all his waking hours learning and knows pretty much everything about how technology works – at the level he needs to. In that same episode, he talks about the importance of carbon renewal, so it’s been on his mind for a few years now. It’s safe to say he’s already vetted the major players in the market and didn’t like what he saw. Now, he’s motivating people to come up with better technology. More details will come later, but it’s great to see some of the world’s brightest minds are on the case.
Silicon Kingdom Holdings claims it can get the price point for carbon removal below $100 per ton, but the question of when the technology will become financially viable continues to elude us. Our educated guess is that we’ll see some engineered carbon capture strategies mature over the next decade. Occidental Petroleum is perhaps the most bullish, with the company’s chief executive telling the Financial Times that “carbon management will generate as much revenue for the company as its chemicals business within 15 years” and by 2050 “it would account for more revenue than its oil and gas and chemicals businesses combined.” Another reminder to investors that you have to be in it for the long game.
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