Carbon Capture and Storage

Few words of context:
 

• The International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) recognizes Carbon Capture and Storage (CCS) as a critical technology to achieve the Net Zero target by 2050
• The IEA’s Sustainable Development Scenario suggests ~15% of the world’s emission reductions to be achieved using CCS, which will require at least $1.5 trillion investment on an international scale
• Private-sector investments are needed to achieve this level of funding, including debt financing, capital markets and other sources of capital
• This report provides an overview of emerging CCS business models, specifically focusing on their bankability - financial viability and attractiveness for potential private-sector investors
• Although various CCS projects and models are emerging across the world, this report focuses on recent developments across advanced CCS domains - Europe and the US
• While licensing and permitting processes for CO₂ transport and storage are very important elements in the investment decision process, the detailed analysis of those is left for the future study

Carbon Capture and Storage (CCS) overview

Since the 1970s, some elements of CCS technologies have been used in the oil & gas and chemical industries.

Sources: Deloitte analysis

However, to achieve the required scale, CCS should develop into a comprehensive commercial solution for various emitters underpinned by massive infrastructure.
Full-scale commercial CCS clusters are actively developing in Europe and the US, with the first 1.5 Mtpa CO₂ storage project launching in Norway in 2024. Meanwhile, European governments are actively introducing various regulations to grow the storage capacity by a factor of 100 by 2030.

"Investability" of CCS projects

While the first CCS projects receive significant government subsidies, scaling up the solution will require private-sector investments, primarily from banks and large infrastructure funds. However, for CCS to become ‘bankable’, key investment hurdles should be addressed.

Overview of CCS business case and specific investment hurdles

Not exhaustive

Sources: Deloitte analysis

Firstly, CCS should be economically attractive for emitters, and secondly, various technical and commercial risks for both emitters and CO₂ transport and storage providers should be mitigated.

CCS commercial frameworks are still under development across Europe and the US, with current focus mainly on making CCS economically acceptable for emitters. The analysis indicates that only the UK has implemented an investable CCS business model. This was achieved through a structured approach to clusters development and adopting the regulated asset base approach, which determines the allowable revenue.

Key actions to overcome investment hurdles