BY Tariq Siddiqui
CCS Hubs : Road to Success
To combat emissions from hard-to-abate industries, Carbon Capture and Storage (CCS) must remove nearly 5 GtCO2 annually—emissions that can't be mitigated by conventional means. CCS, particularly geological sequestration in saline aquifers, is the most viable technology to scale this challenge. However, despite CO2 injection for Enhanced Oil Recovery (EOR) since the 1970s, we’re capturing only about 40 Mt CO2 annually.
The lack of commercial investment stems from perceived technology and project risks. To unlock CCS’s potential, it must reach commercial readiness (TRL-11), similar to solar and wind. The US federal supportive policies that underpin robust carbon value have already enabled several CCS hubs unlocking MtCO2 per annum in saline asquifers. This article explores CCS's maturity across its value chain and how the right business models can drive venture success.
Business Model for CCS Value Chain
A robust business model for CCS incorporates the entire value chain: carbon capture, transportation, and geological sequestration; each with distinct Technology Readiness Levels (TRLs), impacting financing risks. Higher TRLs indicate proven technologies, reducing risks and attracting more favorable financing options.
Capture
The most capital-intensive phase. Amine-based plants (TRL-9) are well-established, while emerging solutions like Direct Air Capture (DAC) are more expensive (around $1,000 per tonne).
Transportation
Pipelines (TRL-11) are the dominant CO2 transport method in the U.S. (68 Mtpa over 5,200 miles’ network), while shipping and rail are emerging alternatives in Europe.
Geological-Storage
Geological sequestration (TRL-9) is the most mature and scalable storage method. While nature-based solutions are cheaper, they have lower capacity and long-term sustainability.
How Business Models Create Value?
Business models define how companies create and capture value. A well-structured CCS business model includes:
Identifying customer segments
Developing value propositions
Establishing communication channels
Acquiring necessary resources (human & financial)
Forming strategic alliances
Understanding revenue streams and costs
CCS Financing – Key to the Resilient Business Model
The success of CCS projects largely hinges on how well the business model addresses risks, as higher risks increase the weighted average cost of capital (WACC) and required return on investment (ROI). In the early stages, when risks are high and regulatory frameworks are still evolving, projects tend to be stand-alone and rely heavily on public sector funding and strategic investors. As regulations mature and technology advances, risks decrease, enabling greater involvement from both government and project financing. In the final, more mature and liberalized market stage—where risks are minimal—commercial projects can secure long-term debt financing, especially for large-scale hub projects.
Navigating Venture and Project Risks
Business model must address two types of risks that CCS projects face:
Project Risks: Managed by the project developer (technology, pricing, operations, social acceptance).
Hard-to-Reduce (HTR) Risks: Handled by governments (revenue risk, storage liability, cross-chain coordination) early in project.
Revenue Streams – Drive the Business Model
Business model must have robust Revenue Stream that comes in a project from various sources:
CO2 as a Commodity: Captured CO2 (by emitters) is sold to industries or used in EOR.
CO2 as an Emissions: Captured CO2 (by emitters) is transported & stored for a fee
Government Tax Credits: Programs like 45Q in the U.S. incentivize CCS capture.
Compliance Credits: Carbon allowances in emission trading schemes (ETS).
Voluntary Carbon Credits: Carbon credits sold in voluntary markets.
Proven Business Models for CCS
Successful CCS business models balance value creation, revenue generation, and risk mitigation. Four key models include:
Vertically Integrated CCS Model
A single entity handles capture, transport, and storage. A preferred model in past, this model is capital-intensive and dominated by large national oil companies. Example: Sinopec’s Shengli government financed CO2-EOR project.
Joint Venture (JV) Model
Partnerships between emitters and storage/utilization companies. Example: NRG’s Petra Nova CCS project (Government funded EOR utilization) and Shell’s Quest project (Government funded saline-aquifer storage)
Emitter/Operator CCS Model
Industrial plants pay for CO2 capture, while CO2 sale and tax credits cover costs. Example: CVR Energy/Chaparral CCS project (EOR utilization)
Transporter/Storage CCS Model
Third-party transporters move CO2 for emitters and sell it to storage operators, spreading risks as they leverage advantage of economies of scale. This new class of CCS model is suitable for commercial-scale projects and is the basis for emerging U.S. CCS hubs.
CCS Projects: Legacy and Emerging Models
Mature & Emerging CO2-EOR CCS Projects
The historical trend reveals that the most successful CCS applications have been in North America, where CO₂ has been captured from natural gas processing plants and used for Enhanced Oil Recovery (EOR) since the 1970s. These legacy stand-alone projects typically captured up to 1.0 mtpa of CO₂, injecting it into onshore oilfields. They benefited from stable cash flows derived from EOR, the 45Q tax credit, and established infrastructure, resulting in cost-effectiveness (less than $30/ton). However, their ability to scale for global CO₂ removal remains limited. The Emitter/Operator model is best suited for these types of projects.
Recent CO2-EOR projects are scaling up to capture CO2 from multiple sources and sinks, including direct air capture (DAC). These projects leverage the 45Q tax credit and incremental oil production for revenue. Transportation/Storage CCS business model is also suitable for this.
Emerging CO2-Saline Aquifer Storage CCS Projects
The emerging trend in the CCS project pipeline indicates a shift toward larger-scale projects designed to capture several million mtpa of CO₂ from multiple sources (clusters) in hard-to-reduce emission industries. These projects transport CO₂offshore and store it in saline aquifers through hub-based systems. This approach is essential for achieving the Giga tonne-level emissions reductions required to address the climate challenge by 2050. Statoil’s Sleipner CCS project in Norway pioneered CO₂ storage in saline aquifers into offshore formations. The Transportation and Storage CCS business model is particularly well-suited for the development of these hub-and-cluster systems.
While no U.S. projects inject CO2 in saline aquifers yet, the federal policies have unlocked several large-scale CCS hub initiatives that are in development, including ExxonMobil’s Houston Ship Channel Hub.
Final Recap
Scaling CCS is essential for meeting climate goals, but it requires commercial readiness and effective business models. With the right mix of risk mitigation, financing, and strategic partnerships, CCS can evolve into a robust, global solution to combat emissions.
The UEPA : Navigating CCS Complexity for Client Success
For your next CCUS project, trust the expertise of UEPA. With our in-depth knowledge of CCS project development, we offer precise and efficient support for your project. Our comprehensive services cover the full lifecycle of project development and reservoir characterization, ensuring successful Class VI permit applications. Partner with UEPA to ensure your CCUS project is executed smoothly and sustainably.
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