It is anticipated that carbon capture, utilization, and storage (CCUS) projects, particularly at ethanol plants, may become more local in scope. In October of last year, the CCUS industry received news that one CO2 pipeline would be delayed two years, and another would be canceled altogether. Moreover, the operator of the delayed pipeline still lacks assurance that it will ever become operational. Resistance to pipelines is not a new development, and this, along with other site-specific factors, may continue to drive CCUS projects to be located nearer to generation sources such as ethanol plants. Evaluation of whether to pursue a “local” CCUS project often begins with an evaluation of geology, funding sources, and risks.
Geology's Crucial Role, Regional Variability, and Localized Solutions
Aside from cost, geology will be the biggest predictor of project success. In most instances throughout the Midwest, there is already amenable geology that would work quite well for a CCUS project, and it’s worth the effort to investigate whether a project site’s geology is advantageous. Except for the cost of the processing equipment on the surface, a project’s capital costs will be tied to the geology. In particular, the storage formation must have sufficient capacity for storage (in the form of porosity), it must have the ability to inject the CO2 (permeability), and its in-situ pressure must be low enough that long-term storage can occur; elevated pressures will limit the amount of CO2 a formation can store.
Navigating Funding Challenges in Carbon Capture, Utilization and Storage (CCUS) Projects
Understandably, funding is often a common concern. CCUS projects require capital for the initial investigation and permitting, surface facilities, injection and monitoring wells, and financial assurance. Funding for local CCUS projects may be pursued either through equity or debt or in the form of partnerships. Some firms have the funding for a project and are eager to deploy those funds, but don’t have an asset. Additionally, the opportunity for regional partnerships also exists, with multiple facilities creating a localized regional sequestration hub.
Mitigating Risk in Carbon Capture, Utilization and Storage (CCUS) Projects
In some cases, local sequestration can increase the risk beyond what was assumed if a pipeline had been utilized; however, in many cases, the risk will be less. Understanding risk requires a thorough review of the project site, geology, prior oil and gas development, surrounding area, and proximity to structures and life. Additionally, project risk can be further mitigated through liability transfer mechanisms such as insurance and bonding, but the costs for these tools need to also be considered in overall project economics.
Will all projects work locally? Unfortunately, no. But this is something that a plant operator will want to know, not assume. It’s worth it.
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Contact Trihydro today to leverage our team's expertise and make informed decisions for your project's success. Our professionals are ready to assist you in evaluating project economics and optimizing the balance between capital costs, operational expenses, and cashflow potential.