deep dive
Where should carbon capture companies invest?
The CCUS Investment Index boils down the many complicated questions around carbon capture to a simpler one: where should an investor go?
Capital is mobile but the sheer breadth of opportunities and challenges can be daunting. The Global CCUS Investment Index aims to provide a screening tool, matching countries’ overall outlook to with how they offer opportunities to private capital.
The scale of the CCUS challenge is enormous. The International Energy Agency (IEA) reported 45 million tonnes of CO2 were captured in 2022.
By 2030, it projects this number will pass the 1 billion tonnes and 6.04bn tonnes in 2050.
“Rapid progress is needed by 2030,” the IEA says. However, it continues, “the history of CCUS has largely been one of underperformance.” There has been a surge of interest in such projects but final investment decisions (FIDs) – when a company commits to going ahead – remain elusive.
Four drivers
The IEA called for policy support to underpin demand and new enabling infrastructure.
GaffneyCline’s Global CCUS Investment Index agrees on the importance of policy, but brings in additional conditions that we see driving progress in this sector.
First, track record. While some companies are happy to trail blaze with their investments, most prefer to see examples of others having gone before. The index awards points for commercial projects in operation, for emissions captured and for committed projects.
The second area is around the conditions required to begin a development. To what extent has a government committed to supporting the CCUS industry, is there cash available and to what extent is the value chain open to investors.
The index’s third area is around revenue. The index focuses on where companies and investors can make money. This can manifest in various ways, such as carbon pricing and targets for large emitters, while also including the possibility to transfer CO2 across boundaries.
The fourth area is investment opportunity. How much storage is available? What is the volume of emissions available?
Totting it up
Unsurprisingly, the US takes the top spot and Canada second. This North American double act has a strong history of companies and projects in the CCUS space, driven historically by a focus on enhanced oil recovery (EOR).
While the two are leading the pack, there remain some challenges. High-level political support for CCUS has not always driven similar support at the local level, whether in regional government or activist groups.
The US’ Navigator CO2 opted to abandon its 10 million tonne per year Heartland Greenway pipeline in October, citing the “unpredictable nature” of regulatory and governance processes.
However, while there are challenges, the US is still the most attractive of the countries in the CCUS Investment Index. The influx of funds and interest to the country is testament to its ongoing attractiveness.
Canada’s oil sands, meanwhile, are likely to play a leading role in driving demand for CCUS. Given concerns around emissions, and how the Canadian oil sands will compete in a world where this is an increasing concern, there is scope for CCUS growth.
North America has taken a leading position in driving progress in CCUS, but Europe has a keener interest in the energy transition. As such, the continent takes a leading role in the mid-ranks of the CCUS Investment Index.
Europe
While the determination to capture emissions is strong, Europe has struggled to make clear the commercial case for CCUS plans.
Norway, Denmark, UK and the Netherlands share a determination for carbon capture to play a major part in their transition. The four also share access to the North Sea. Storing CO2 offshore should avoid some of the onshore challenges seen in North America.
The UK is ranked fifth in the Global CCUS Investment Index. While there is a strong policy driver in the UK, the country’s score is hampered by slow progress in moving ahead with projects. While there are signs of big plans coming together in the UK, as the report explores, the competition is not sitting idly by.
There are no easy answers when choosing where to invest in carbon capture. The US is ahead, but there is competition. As project design moves into execution over the next 12 months, the order may well change. But, for now, here is the Global CCUS Investment Index 2023.