CCUS: Clean Coal Is So Last Season

less emissions intensive gas fired power. So we stopped hearing about CCI yes for a while, at least for power. But it seems like CCS is making a comeback, especially in steel and cement production. The production processes release a lot of c O two that can be captured and

stored and even used in making concrete. This week on the show, we've got Julia Atwood, head of Advanced Materials Research for bn F, and Advanced Materials analyst Ryan Anderson, who actually has his pH d in carrying cement with c O two instead of water. They'll walk us through the basics of CCS, where it's at now and what it would take for it to grow. Our discussion is based on a report titled c c U S applications

in oil and gas, power and industry. Beanof users can get this report on dot com, beanf mobile app and the Bloomberg terminal. As a reminder, if it's not provide investment or strategy advice, and you can hear the full disclaimer at the end of the show. I'm Mark Taylor, you're Dana Perkins, and you're listening to switch on bean podcast today. On switched On, there are four of us.

We've got Mark, Ryan and Julia. Hey Dana, So we're here today to talk about carbon capture and storage, or rather carbon capture utilization and storage, which are really I guess two concepts that are put together. Ryan, as we dig in, can you explain to all of us what CCS is, and then a little bit more into what the utilization part is as the add on, certainly CCS carbon capture and storage. This is where you're taking the CEO two that's coming out of a point source such

as a power plant. Oh, that CEO two is compressed, transported to a site where you's injected underground hundreds or thousands of meters into most often a saline aquifer. The CEO two hopefully on every leak so it's supposed to just stay there forever, right, and it kind of turns

to rock I think, is that right? In some cases? Yeah, So theoretically you're paying for this land in order to just capture something, well, to capture the emissions, because you don't want emissions in the air, so we're putting them in the ground exactly. And then the U part because storing CEO two underground is just a cost, there's no revenue that included. The U part is where your c U two is sold or used to create products they

generate revenue. Most typically this is currently for enhanced oil recovery. This is where c U two is pumped into an oil well that's kind of been depleted, it's in its last legs of production, and the CEO two changes the oil. Especially it enhances production. It can takes well, it's producing five barrels per day to five thousand barrels per day. The companies that are interested in CCS as a technology and in developing it um what industries and what sorts

of companies are we really looking at here. So most of the CCS or CCUS being performed currently is coming from the high concentration industries. Because they can produce the cheapest c O two. The cheap CEO two is important because they're supplying it to someone who's most likely buying it. No one wants to pay for expensive c O two

when they can pay for cheap c O two. This means that the most high concentration sources of c O two, such as after gas bussing, hydrogen production, in ammoni production, ethanol production, all all these create cheap c O two that can be sold for e er. So they want it for advanced oil recovery. Who are they, I mean, who are the other buyers? Then? Yeah, so there's not a ton of other applications that were the c O

two is being stored for the long term. You're probably familiar with C two being used in your beverages to make carbonated soda, but those are all kind of temporary storage of CEO two and it's released later. Industrial carbonates such as you know, sodium bike carbonate, baking soda, and fertilizers such as urea it also temporarily store the CEO two, but it depends on what happens later on in that product's lifetime, when that CEO two will inevitably be released.

There's a few applications except for underground storage where the CEO two will be stored for a long time. So I am not a chemist, and I apologize to anybody who is listening that is because my question is going to be pretty basic here in that so cement companies, iron and steel companies, and then chemical companies are all interested in this. Why are they interested in cc US?

So these giant industries steal cement. They have some of the largest corporate emissions of all the industries, right, so they have a handful of things they can do to reduce their emissions. C c US is in a lot of their eyes, the last level they're going to be able to pull to actually get to net zero if that's their goal. So Cement companies in general, they produce CEO two through a lot of different processes in their at their facilities, and they don't really have a ton

of options to reduce the emissions from cement. And the industry is not going anywhere you need it. It's for basic infrastructure development. So in any kind of corporate emissions targets or global sustainability goals, CCUS is expected to step in to capture some fraction potentially very large fract of the industry CEO two. So here it's cement and concrete actually kind of represents a bit of a Goldilocks problem

in terms of utilization. You have a lot of materials and industries that are huge, like aggregates that could soak up a lot of c O two as a really useful additive, but because they're so cheap and CO two is not, that doesn't really work. Then you also have the super specialized things like carbon nanotubes that sell for hundreds of thousands of dollars a kilogram. They're totally happy to pay a higher price for CEO two, but we're

not selling very many of them right now. So concrete really represents this space where they're generating a lot of c O two, they want to get rid of it. They're going to be incentivized to get rid of it by policy and happy days, they can actually use it at a reasonable cost that fits with what they sell their product for. So that's why there's so much attention

being focused on concrete at the moment. It's because they generate it, they use it, and it's gonna help make some greener, which is what a lot of people are starting to ask for Julia, I love that you brought up policy, because my understanding is that CCS is expensive. This is an expensive technology that's still in development, and we need to see some pretty massive cost declines to see wide scale adoption. So there are places where policies

pushing this forward. Ryan, can you give us a little bit more ordinally, I, can you give us a little bit more clarity on where this is thriving from a policy incentive standpoint. Yeah. So in the United States there's a policy called the fort Q Tax Credit. This policy pretty much offsets the cost of capturing CEO two for many industries by providing them with tax credit for all

the CEO two that capture. The European Union has their Emission Trading scheme, the EU e t S, which is practically a cap and trade program where each industry has a certain amount of emissions that they can release and they have to pay for the difference. These prices on emissions are guess fees are being put back into research for things like cc US fit are spurring its development.

But these policies, they're really not as simple as like the production tax credits that we're used to seeing in the energy industry the four five Q and Ryan correct me here if I if I'm wrong, But it's a tax liability. And Ryan and I were actually talking the other day that's with the oil price shocks, so many of these companies are not doing that well. So how do you claim a tax liability if you know you're not looking at your usual year of revenues. We also

mentioned the California standard. That one is tough because that one is specifically saying you have to make me a fuel that is going to be lower carbon than what you were selling before. So you have to go through life cycle analyses and you and that two dollars a ton. That's hard to access because that's like the maximum you can get. You have to have a really low carbon

fuel in order to get there. So it's these policies they're they're inching their way bit by bit towards supporting the industry, but there are a lot of technical hurdles and a long way to go. Um. But what's really interesting is what California has said about direct air capture. And I'm gonna let Ryan explain that because it's really interesting. So director capture is a little bit like magic. You're taking CEO two from the air and pulling it up just the air your breathing is now CEO two free.

You know, it's it's more complety in that, but it's uh, it doesn't use a point source emission. It literally is just reducing the atmosphere concentration at CEO two. Where the California Low Carbon Fuel Standard will pay you to reduce the carbon intensity of your fuels that you're producing for their market. If you are anywhere in the world and you're performing director capture and storing that CEO two underground, they will pay you. They'll pay for that entire cost.

So this is the sort of thing where people talk about, Okay, well, maybe we'll just start scrubbing our air if we're really concerned about emissions and climate change, and you know the one point five degree scenario. We just stick these things all over the world and we start scrubbing the air, and suddenly problem solved. Yes, over simplification, but it isn't it comforting to know that if we truly truly screw up,

there's still director capture. Well okay, so let's say there is still direct air capture and we want to see this kind defruition, Uh, the economics are going to have to be behind it. How do we get there? How do we drive down the cost of CCS or c c U s or whatever you want to call it.

How do we make magic happen policy? Honestly so, the current plans for the largest direct air capture facility in the world are being spurred that this is through carbon Engineering partnered with oxy Low Carbon Ventures, the venture arm of Oxidantal Petrileium to build a one million metric ton per year c R two director capture plant, and that CR two will be used for e o R enhanced

oil recovery. And that means they're going to get the US forty f Q tax credit, they're going to get the most likely the California Low Carbon Fuel Standard credit for reducing the corbonency the fuels. All these policies are going to pay for direct their capture in voila invola,

simple as that. One fact that I read in the report that I thought was really interesting is that c O two emissions are actually coming from just four percent of companies, So we actually know, oh who the stakeholders are that are going to care pretty deeply about this are those companies. Are you seeing signs that pretty much of that four percent of companies? Are they looking at this pretty closely right now or is it something just kind of they're keeping tabs on. Maybe they're listening to

this podcast right now, trying to decide. The major emitters all have plans for CEO two reductions. For power companies, a lot of them are hoping to move to renewables, but then we get into dispatchability issues. So power with gas rocal power with ccs may make sense if the policies drive them to needing baseload power source that is a low carbon stealing Cement industries both emit enormous amounts

CEO two, and those companies have emissions diductions plan. Each of these is also going to rely on cc US to some extent. Which applications do you think are most promising? So let's look at this from an emissions lens. Is it sement, is it the iron and steel side? Is there something else that I'm missing? I think the industry that has the most likely chance of standing on its own is the cement and concrete industry. They can use c O two at pretty much any cost of capture.

They can use CEO two in their products on a potentially very large scale. I'm just kind of sitting here and I'm just thinking back to my old CCS coverage stays and my conclusion when I stopped covering it was Okay, i'll see you later. I don't think this is ever gonna work. But having been away from it, people keep coming up to me and saying, hey, we're gonna start covering CCS again because it's it's back. CCS is back, and friends from oil companies they'll call me and say, hey,

guess what we're doing e O R CCS. It's back. So what I want to get from you guys is whether or not like is CCS back? What drove the initial development of solar projects. Solar power was not competitive early on, but it was driven by subsidies and incentives. Right, the same thing is currently driving all carbon capture and

the current pipeline carbon capture projects. Everyone who's going to be capturing CO two and receiving some kind of benefit from the governments or policies, those will most likely continue to develop for as long as the incentives make the projects economical. But costs are coming down. Every project that builds carbon capture. Let's say the Petronova coal fired power plant in Texas. They've sayd that next time they built it, it it will be cheaper on the CAPEX front. The

same thing was said for a project in Canada. There's a startup called Sponting that's using a kind of a new capture technique that says they can cut capics in half, so costs a coming down. There will always be some parasitic load on power production, and so it's always going to be more expensive to capture CEO two from power than just generating power without emissions capture. I think the big thing here is CCS always comes up when a

very polluting industry is kind of sensing its death. You know. We saw that with a lot of coal. So coal plants were like, oh no, I'm gonna get shut down. How do we keep operating ccs. We're sort of at that point now with a lot of industrial emissions. We're talking more and more about industrial decarbonization, and those industries that will be very difficult to bait are like, oh no, I'm about to get regulated CCS. So that's partly why

this is coming up again. I think the reason why it feels like we're sort of two groups of people standing on either side of a chasm. It's like one person is in the present and they're like, I don't know what to do. The others on the other side and they're like, it's great, this is a low carbon future, and I got here with CCS. And the reason why we can't figure out what that bridge is and how you get there is about costs in order to cross that. In order to build that bridge, you need to know

how much does this cost. There are very very few large scale CCS projects, so we don't know what it costs. When we talk about what it will cost, we're talking about what cost you get to after you've built a ton of plants. So the reason why we don't have a solid like, yes, CCS is the answer right now for you, is because we need a lot of people to take the leap. Every CCS project is different. It's not like turning out hundreds and thousands of giga watts

of solar panels from China. It's very bespoke, and we need a lot of people to jump over the chasm before they can tell us how to build a bridge back. Consider me interested. Once again, They are coming in guys, pleasure, no problem, I'm glad to hear it. Bloomberginny F is a service provided by Bloomberg Finance LP and its affiliates. This recording does not constitute, nor should it be construed, as investment advice, investment recommendations, or a recommendation as to

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