A UK-focused industry debate following the release of a report on prospects for carbon capture, utilisation and storage (CCUS) has highlighted how CCUS project costs are still rising and the UK government needs to get a better handle on the role it must play to better manage risks. The consensus among participants was that more subtle mechanisms were needed to deliver what’s needed for the long term.
The remarks were made in a freewheeling discussion following the release of a new report on driving cost reductions and value for money from the Carbon Capture and Storage Association (CCSA), which is a UK-based industry association for accelerating the commercial deployment of CCUS.
David Parkin, Director at UK-based low-carbon project developer Progressive Energy, said industrial carbon capture models were complex and relatively untested and had seen significant cost escalation over the past five years.
“There are lots of reasons [for this],” said Parkin. “We’ve seen high inflation and inevitably a level of optimism bias … [in] a competitive process. When some of these bids were submitted early on, there were relatively small amounts of development capital allocated, and only when they’ve got certainty on the process have they spent more.”
The report itself noted how costs are rising due to a lack of predictable carbon prices, barriers to full value-chain collaboration, and also uncertainty in the negative emissions market, which facilitates the trading of credits for removing CO2 from the atmosphere.
Parker also noted how risk allocation between the UK government and CCUS projects works now, and talked about alternative approaches.
“There’s something called OCPs [operational condition precedents] and these are essentially cliff-edge performance guarantees … what we’re seeing with carbon plants is they are over-specified because of these OCPs. With a more nuanced approach to risk allocation, we can reduce the capture plant costs.”
Parker said that capture plants were all taking on “a fixed price, fully risked construction for what are large, first-of-a-kind projects … that means government is getting cost certainty across a number of projects, but if [it] took a more portfolio approach, and [did] more cost sharing, that would reduce costs. It would reduce cost certainty but it would … reduce cost as well.”
Greg Williams, Head of External Affairs at UK waste wood-into-energy business Evero Energy, said that greenhouse gas removal business models are unique in the CCS landscape for their ability to bring in revenue from the voluntary carbon market, which should reduce the subsidy that projects need.
“People buying carbon dioxide removal (CDRs) are largely the big tech firms, at around £200 to £600 a tonne, and they have a high profitability-to-emissions ratio. But the cost of capturing carbon in BECCs [bio-energy with carbon capture and storage] is around £200 to 300 a tonne, so you can immediately see the difference. The challenge is the volume – in 2024 there were only 8 million tonnes of CDRs purchased globally, and that’s not just for delivery last year but over the next decade.”
Williams said that ultimately someone would have to pay for CO2 removals. “It’s not the emitter who pays – it will be us, so that’s where we get into the realm of political choices.”
Emma Harrison, Manager of Engineering at EPC business Bechtel Energy, took up the theme of standardisation to save on project costs.
“We are learning from each other, and also within organisations – you’re not starting from scratch each time. In the procurement space, a lot of vendors are putting huge amounts of effort into their technology – there’s lots going on with compressors, for example. As an industry, we are driving innovation and cost reduction.”
But she added when doing something for the first time every operator naturally adds a bit of contingency. “If you had a more open book [approach] then ultimately you [would] get a cheaper project – but government and lending rules don’t like that kind of model.”
