Opinion: Unlocking Potential: Policy Frameworks To Enable CCUS Growth In Europe

Opinion: Unlocking Potential: Policy Frameworks To Enable CCUS Growth In Europe - Carbon Herald

by James McAreavey, Head of CCUS, Xodus  

As global efforts towards net zero accelerate, carbon capture, utilisation, and storage  (CCUS) has shaken off initial skepticism and is now widely viewed as a crucial enabler of  the energy transition. Recognised as a key solution to tackling emissions in hard-to-abate  sectors, the process opens the door for Europe, with the North Sea at its core, to become a  leader in sustainability efforts.  

Despite previously trailing behind expectations, and indeed other sustainable industries,  momentum for CCUS has grown substantially in recent years. More than 500 projects are  in various stages of development across the CCUS value chain, with governments across  the world now actively formulating policies to encourage investment in the sector. 

However, Europe is still some way off having a working CCUS system, and even further  away from the levels of storage required to achieve mid-century decarbonisation targets.  As it stands, the worldwide CCUS industry capacity sits at about 40 megatonnes per  annum. For context, global emissions are currently in the region of 38 gigatonnes a year,  and stark figures from the International Energy Agency (IEA) show that net zero hinges on a  100-fold increase in the current CCUS capacity in the next three decades.  

An area of particular interest for CCUS infrastructure in the coming years is Europe, and  the North Sea specifically. The geological storage potential of this mature oil and gas basin  is well above any potential domestic need for CCUS within the countries that border the  North Sea. At Xodus, we have produced a whitepaper, entitled ‘Forecasting the North Sea  CCUS infrastructure to 2050’, which charts the relative cost efficiency of the region’s  projects and determines in what market conditions or timeframes they are likely to get up  and running. A total of 560 potential storage sites were assessed, alongside North Sea gas  pipelines and potential new infrastructure, to generate scenario-based forecasts for the  rollout of CCUS.  

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By the end of the decade, Xodus expects there to be eight operational CCUS projects in  Europe, including Northern Lights in Norway, Porthos in the Netherlands and the Acorn  cluster in the UK. The majority of these CCUS projects will be situated near or linked to high  emitting regions, offering a decarbonisation solution for vast swathes of heavy industry.  

Each project will also be anchored in the North Sea. Over time, it is thought the basin’s  share of the global CCUS market will decrease as other projects around the globe get up  and running. Still, based on Xodus’ high case estimates for emissions reduction, the North 

Sea could retain a 60% market share of a 500 megatonnes per annum (MTPA) European  CCUS market by 2050.  

Under this scenario, it is expected that the volume of CO2 being injected in the North Sea  will be equivalent to the natural gas currently being extracted. To achieve this level of  injection, we predict that Europe will need 100 storage sites, over 7,000 kilometres of new  pipelines, and numerous onshore capture and gathering sites. These requirements will not  be met unless appropriate policies are in place. 

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The European Union is off to a good start in this area, launching the Net Zero Industry Act in  March of 2023, which proposes an annual CO2 injection target of 50 MTPA by 2030,  alongside improved permitting procedures for CCUS. These initial efforts to spark  investment have proven worthwhile, with the pilot phase of Project Greensand in Denmark  becoming operational last year, transporting CO2 from Belgium for storage in a depleted  oil field in the Danish North Sea. As the early stages of a carbon management programme,  such policies seek to de-risk CCUS exploration, supporting project developers while  improving sustainability.  

Equally, the UK has actively invested in progressing CCUS processes, successfully hosting  two rounds of government funding competitions, in which four clusters were chosen to be  at the vanguard of the country’s burgeoning sector. However, despite these efforts to place  the nation as a leader in the regulatory landscape around CCUS, industry confidence  remains low. This primarily stems from concerns surrounding the long-term profitability of  the industry in contrast to the risks associated with ensuring application of a perfect  model. Stark financial consequences for organisations who fail to meet the requirement  for no CO2 to “escape” once captured add to the concerns around the profitability of the  industry going forward. 

Government support in this area is a fundamental requirement to provide the variety of net  zero energy sources required to power Europe beyond 2050. Other regions are getting there  – in the US you get tax deductions for sequestering carbon – but there must be a  government line drawn in the sand, because it’s currently cheaper to simply emit CO2 into  the atmosphere. As it is though, we are still seeing projects progress across the North Sea.  The likes of Shell, bp, Harbour Energy, and Perenco would not be investing vast sums in  CCUS if they didn’t think there was going to be a business case for these projects.  

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Interestingly, one of the biggest remaining obstacles to successful CCUS deployment could be cultural, as opposed to commercial. As a society, we currently fail to place value  on carbon, despite the huge cost associated with its production. The price of emissions  allowances (UKA) traded on the UK’s Emissions Trading System is currently around the £58 

per metric tonne mark; if you look at decarbonising through floating offshore wind, CCUS,  hydrogen or nuclear, the figure is significantly in excess of this. 

It is no secret that to meet the decarbonisation targets set by the Paris Agreement we must  invest heavily in various sources of energy. Wind and solar don’t yet provide the certainty of  supply that more than 746 million people demand; opening the door for an industry like  CCUS. However, if we expect companies to invest millions into the high-security  transportation and storage of carbon dioxide, we need to alter our perception of carbon,  else the future of this necessary sector will continue to be uncertain. 

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