With the release of the UK’s Net Zero Strategy (the “Strategy”) last year, the spotlight has turned to how the UK can hit its 2050 targets. Whilst much of the focus has been on alternative energy sources such as hydrogen and floating wind, the Government has also sought to promote carbon capture, utilisation and storage (“CCUS”) technology to reduce carbon emissions in traditionally emissions intensive industries.
As part of the Strategy, the Government has pledged £140 million in funding new hydrogen and CCUS technologies via the Decarbonisation and Hydrogen Revenue Support Scheme. Moreover, it has targeted to establish CCUS industrial clusters capturing 20-30 metric tonnes of carbon dioxide (“CO2”) emissions by 2030.
Many countries are considering CCUS technologies within their supply and production chains, a trend which we anticipate will continue in the coming decades. A clear example of such trend is the recent agreement between Yara and Northern Lights (a joint venture between Equinor, Shell and TotalEnergies) of the reportedly world’s first commercial agreement for the cross-border transportation and storage of carbon dioxide.
This article will review the potential opportunities and challenges for CCUS within the context of the Yara / Northern Lights CCUS project as a case study of this technology.
CCUS – Overview
CCUS involves the capture of CO2 emissions which are normally produced during manufacturing or energy production processes, to then be transported and stored securely deep underground. A common application is at large industrial sources, such as fossil fuel powered power stations or steel and cement factories. Organisations are also looking at developing and scaling up CCUS technology which can capture CO2 directly from the air.
Yara / Northern Lights CCUS Project
Yara recently announcedwill [help] demonstrate that CCS is a climate tool for Europe”.
the agreement of the main commercial terms with Northern Lights for the transportation and storage of 800,000 tonnes (approximately 730,000 mt) of CO2 per year from Yara’s Sluiskil ammonia and fertilizer production plant in the Netherlands to a storage location off the coast of Øygarden, Norway. The CO2 will be stored 2,600 metres below the seabed. As commented by Northern Lights’ Managing Director Børre Jacobsen, their agreement with Yara and future strategic applications “
This recent deal is set against the backdrop of Yara Sluiskil having previously cut 3.4 million tonnes per year of CO2 emissions from its plant since 1990. The recent deal is notable for the agricultural industry, specifically the fertiliser industry, as it is estimated that global fertiliser production accounts for 1.1% of global carbon emissions. The deal may be a signal for other large-scale fertilizer businesses to follow suit as the pressure mounts to keep up with fertiliser demand whilst minimising carbon emissions.
For further insights into the agricultural sector and how it could achieve Net Zero, see our recent article here: Hydrogen's Role in Food Security.
Opportunities and challenges of CCUS
A report by Research and Markets published 12 September 2022 has found that “0.1-0.2% of carbon dioxide released from industries and power plants across the globe is captured and stored” via CCUS. This figure is expected to increase in line with an anticipated growth in the value of the global CCUS market– estimated to increase from a value of US$ 4.17 billion in 2020 to US$ 9.42 billion by 2026, a 125.9% increase in just six years.
CCUS therefore has an opportunity to expand in its application globally, which in turn is expected to increase the affordability of this technology provided suitable deployment strategies and support is in place. We anticipate seeing an increase in deals such as the Yara / Northern Lights deal especially as the price per CO2 tonne under the European emissions scheme increases and attracts more players into the market (one of the main incentives for Northern Lights in the Yara deal).
Moreover, CCUS can play a vital role in the adoption of a CO2-neutral energy supply for example, in respect of “grey” hydrogen which is currently a prevalent form in the market (using natural gas or methane to produce both hydrogen and CO2). The hydrogen created using such carbon capture technology is termed “blue hydrogen”. For more information about the business case for blue hydrogen see our recent article ‘The Case for Blue Hydrogen’: new UK HFCA Paper.
A large barrier to CCUS is the challenge of scaling this technology up for commercial application. Such challenge can be alleviated by the correct level of regulation and incentives being implemented. As more commercial CCUS projects come online and “test” the frameworks currently in place, it is increasingly important that regulators and legislators are on hand to adapt and modernise frameworks to ensure they continually suit the CCUS landscape. Without this, there is a risk CCUS’ growth could be hindered, which, for the UK, could impact the role CCUS can play within the Strategy and more generally in the achievement of Net Zero targets.
Finally, as reported by Global Times in discussion of the Yara / Northern Lights agreement, many critics of CCUS emphasise that “carbon capture is no silver bullet for the climate crisis”. CCUS alone will not achieve global emissions targets, however it can be a complimentary technology that works in parallel with other innovate clean energy sources and processes to contribute to the progress towards Net Zero targets.
As with many emerging technologies, CCUS is in the spotlight to show that it can live up to its impressive growth expectations over the next decade. The Yara / Northern Lights agreement shows that there is appetite in the market for the large-scale and international commercial application of CCUS.
Burges Salmon has a leading cross-departmental Net Zero practice, with experience in dealing with all elements of renewable energy projects and carbon capture systems (both new build and retrofitted). We have advised clients with CCUS projects in every one of the UK carbon capture funding rounds Our practice spans all legal specialisms including planning, regulation, construction and financing. If you would like assistance on any of your projects, please feel free to get in touch.
This article was written by Lloyd James, Ross Fairley, Ross Howells and Kayla Urbanski.