Carbon Capture and Storage (CCS) is a technology and process intended to mitigate carbon dioxide (CO2) emissions from diverse sources. It involves capturing CO2 emissions at their point of origin, such as power plants and industrial sites, as well as directly from the atmosphere using Direct Air Capture (DAC) technology. The captured CO2 is subsequently transported and stored deep underground in geological formations to prevent its release into the atmosphere, thereby addressing its contribution to global warming and supporting climate change mitigation efforts.
In the pursuit of sustainable and environmentally responsible practices, impact investing has gained substantial momentum, particularly in the realm of CCS businesses. In September 2022, a fresh data analysis from PitchBook revealed that the second quarter of the same year witnessed a record-high venture capital investment in carbon capture startups. A substantial $841.5 million was invested across 11 deals during this period. This data coincide with a report by BloombergNEF that total investment in CCS surged in 2022, more than doubling compared to the previous year (2021), reaching a historic peak of $6.4 billion.
However, as the focus on environmental impact intensifies, so do the challenges surrounding the evaluation of these investments. Navigating these complexities demands a comprehensive understanding of the unique evaluation landscape that surrounds CCS businesses in the context of impact investing.
In evaluating the commercial viability of a CCS project, the assessment primarily focuses on its technical, economic, and environmental aspects. However, it’s worth noting that social costs, including factors like health and safety concerns and potential land use implications, are often overlooked but hold significant importance as ancillary considerations.
Technical Assessment
Technological complexity stands as the most significant barrier to understanding the value of a CCS business. Carbon capture technologies can be highly intricate, involving numerous processes and components. Assessing the performance, efficiency, and reliability of these technologies demands expertise and specialized knowledge, which might be limited.
Zhao et al. (2017) exemplifies the technical assessment of CCS by evaluating the performance of two distinct CO2 capture technologies: vacuum-pressure swing adsorption (VPSA) and pressure-temperature swing adsorption (PTSA). The performance of these technologies is primarily assessed based on the criteria of minimum separation work and second-law efficiency.
Minimum separation work (Wmin) represents the least amount of energy or work required to separate CO2 from a gas mixture. A lower Wmin signifies a more efficient separation process, demanding less energy for CO2 separation. Second Law Efficiency can be understood as a measure that helps us see how well a process manages its energy use. It is calculated as the ratio of the minimum amount of energy needed to perform a task to the amount actually used. In summary, the results indicate that while PTSA boasts a lower Wmin, its second-law efficiency is relatively diminished compared to VPSA.
Economic Assessment
The economic evaluation of CCS projects is typically conducted using the most commonly used capital investment criteria: net present value (NPV) or internal rate of return (IRR).
The intricacies of operating costs play a pivotal role in calculating NPV and IRR. This aspect embodies significant complexity and hinges on numerous variables, including the technology’s specifics and the energy source employed in the CCS process. For instance, Jakobsen et al. (2017) explore various options for implementing CCS in a cement plant context. The variable operating cost is directly tied to the volume of captured CO2, encompassing various utility consumption aspects such as electricity, steam, cooling water, MEA make-up, vessel fuel, and harbor fees.
It’s important to note that the cost of CCS projects may change over time. Nemet and Brandt (2012) suggests that after the commercialization of DAC, the costs of DAC systems are expected to decrease rapidly due to economies of scale and the benefits of learning by doing.
An alternative to NPV and IRR is the CO2 avoidance cost, calculated as the ratio of the total cost of carbon capture to the total amount of CO2 avoided within the same timeframe. This metric signifies the expenditure required to prevent or avert the emission of one metric ton of CO2 into the atmosphere. Such a measurement provides valuable insights into the relative cost-effectiveness of various approaches to reducing CO2 emissions.
Environmental Assessment
The environmental impacts of CCS depend on various factors such as the type of technology used, the source of energy, and the specifics of alternative technologies. Life cycle assessment (LCA) is a widely accepted approach for evaluating the environmental impacts of products and processes throughout their entire life cycle, from the extraction of raw materials to post-consumer disposal. It is well suited for complex processes such as CCS.
Terlouw et al. (2021) showcases an LCA study of various DAC systems. The study incorporated 15 impact categories from the International Reference Life Cycle Data System 2.0 (ILCD 2.0), a comprehensive framework developed by the European Commission’s Joint Research Centre (JRC) to facilitate LCA studies. These categories encompass a wide range of environmental impacts, including climate change, human health, ecosystem quality, and resource use. Additionally, the study introduced an extra impact category to account for water depletion. Furthermore, the research evaluated the total amount of transformed land linked to different DAC configurations.
The U.S. Department of Energy (DOE) released the “Best Practices for the Analysis of Direct Air Capture with Storage (DACS)” in 2022. This guideline is intended to complement, rather than replace, the ISO standards. It addresses specific issues related to the application of these standards to DACS analysis. The guideline can be accessed at this link: https://www.energy.gov/sites/default/files/2022-11/FECM%20DACS%20LCA%20Best%20Practices.pdf (accessed 08/17/2023).
Social Costs
CCS technologies offer potential climate benefits but also come with associated social costs. These costs encompass safety concerns related to CO2 handling, challenges regarding land use and displacement, diversion of resources from sustainable alternatives, ethical dilemmas concerning prioritizing CCS over renewables, economic effects on industries and communities, public skepticism, complex regulatory challenges, and potential disparities in benefit distribution. Addressing these social costs effectively requires sound regulation, careful planning, and open communication, all of which are vital for balancing the advantages of CCS implementation.
References
Jakobsen, J., Roussanaly, S., & Anantharaman, R. (2017). A techno-economic case study of CO2 capture, transport and storage chain from a cement plant in Norway. Journal of Cleaner Production, 144, 523–539.
Nemet, G. F., & Brandt, A. R. (2012). Willingness to pay for a climate backstop: liquid fuel producers and direct CO2 air capture. Energy Journal, 33(1), 59–81.
Terlouw, T., Treyer, K., Bauer, C., Mazzotti, M. (2021). Life cycle assessment of direct air carbon capture and storage with low-carbon energy sources. Environmental Science & Technology 55 (16), 11397-11411. DOI: 10.1021/acs.est.1c03263
Zhao, R., Zhao, L., Deng, S., Song, C., He, J., Shao, Y., & Li, S. (2017). A comparative study on CO2 capture performance of vacuum-pressure swing adsorption and pressure-temperature swing adsorption based on carbon pump cycle. Energy, 137, 495–509.
Like (0)