Carbon capture gap getting wider

Hey Reader, welcome to The Energy's weekly data newsletter. This week we explore carbon capture and the gap between its promise and delivery in the energy transition.

Close, but no cigar

If ever there was a picture that aptly summed up the gap between the promise and reality of carbon capture and storage, it‘s this one.

Announced and operational carbon capture, utilisation and storage capacity

It comes from the International Energy Agency’s recent update to its Carbon Capture, Utilisation and Storage (CCUS) database, which shows while there has been some renewed momentum in moving projects forward in recent years, operational capacity is flatlining.

The IEA sees CCUS as an important technological option essential to achieving the goal of net zero emissions, including playing a role in tackling emissions from energy assets as well as sectors where emissions are hard to abate.

Australian governments of both stripes have consistently committed taxpayer dollars to CCUS projects, which include those where carbon is turned into other products.

Some money was clawed back in the Albanese government’s first budget, in which several grants were cancelled on the basis that the private market could do the heavy lifting.

The IEA says globally more than 60% of operational capture capacity remains at natural gas processing facilities, such as the Santos (ASX: STO) operation that went online last year at its Moomba Gas Plant. In April Santos said it had injected more than 685,000 tonnes (gross) of CO2-equivalent in its first 6 months of operations.

But everything else on the horizon in Australia and NZ is still in the ‘planning’ phase, as opposed to construction.

Operational and planned capture capacity, Australia and New Zealand.
Source: IEA CCUS Projects Explorer

AI kills CCS darling

Hopes had been high for 2024’s darling of CCS, direct air capture (DAC).

Under the Carbon Capture Technologies Program the government invested $65 million in 7 projects using emerging tech including DAC to directly remove carbon dioxide from the atmosphere.

One of these investments led to a JV between oil and gas explorer Pilot Energy (ASX: PGY) and US climate tech firm Capture6. No news yet on how that demo project, expected this year, is coming along.

Meanwhile, in the US, Bloomberg recently reported Pitchbook data showing the private investment market has plummeted for DAC.

Why the slowdown? It’s because DAC relies on low-carbon electricity to be viable, and most of the renewable PPAs are being snapped up by data centre operators who need the power now, not in some potential future world.

Expert view

“In the US, there was a surge of optimism around direct air capture, but it's still an early-stage technology largely dependent on carbon removal credits. A small group of tech companies supported the market through forward purchase agreements to help underwrite project costs.

This is a relatively fragile market and the parallel rise of AI has compounded the challenge. The rapid growth in data centres has driven up demand for renewable energy — exactly what DAC projects rely on to keep their carbon footprint and costs low. As a result, by the time many projects reached execution, access to low-cost renewables had diminished, absorbed by the data centre boom.”

William Acworth
Executive Director, Pollination

Back to the IEA data, it shows CCUS projects in the early stage have actually decreased, countered by growth in projects at advanced stages of design/engineering or under construction.

If all of the projects at the advanced stages of design/engineering or under construction are delivered, the IEA says it would almost double existing capacity.

But for now the gap remains between promise and reality.