Lessons Learned from Carbon Capture Kickstart | Part 5:  Crunching numbers: The price to capture a tonne of CO2 and what does it really mean for emissions reduction?

Carbon Capture Kickstart Introduction 

In 2022, the Government of Alberta, through Emissions Reduction Alberta (ERA), launched the Carbon Capture Kickstart (CCK) program – a CAD $40 million investment supporting Front-End Engineering Design (FEED) studies for 11 large-scale carbon capture projects across the province. 
 
In our Lessons Learned from 11 Industrial CCS FEED Studies report, developed in partnership with ERA, we share key findings from the CCK program. To help you navigate the report, this blog series will walk through each of the key technical and operational insights from the FEED studies.  

Part 5: Crunching numbers: The price to capture a tonne of CO2 and what does it really mean for emissions reduction? 

In our fifth and final blog of this series, we cover two main outcomes of the CCK program: Levelized cost of capture (LCOC) and calculating emissions reduction.  
 
LCOC is a metric that represents the average cost to capture one tonne of CO₂ across the entire lifetime of a project. It is used to evaluate the economic viability of a carbon capture and storage (CCS) project by incorporating all the costs, including capital (e.g., construction equipment) and operating expenses (e.g., labour, energy, maintenance).  
 
While LCOC is a critical metric, there are several different LCOC methodologies being used globally by policy makers, academia and industry. The problem? This creates inconsistency when comparing LCOC across projects. CCK participants emphasized that aligning on a standardized method for calculating LCOC would benefit the entire industry. 

Some of the contributing factors that lead to inconsistencies between LCOC include: 

• Time-sensitive or jurisdictional factors such as taxes and incentives
• Engineering class of cost estimate
• Cost estimate factors:
  • Facility upgrades if required
  • Pre-treatment/effluent treatment
  • CO₂ transportation and sequestration
  • Contingency
• Key assumptions that may be industry or site-specific, such as discount rate, rate of return, and escalation rates on capital expenditure (CAPEX) and operating & maintenance (OPEX) costs 

As part of this program, we developed our own LCOC calculator for comparing projects. For detailed background and assumptions, go to page 37.   

Key insights from the analysis include: 

• Sensitivity analysis indicates that the discount rate used in the LCOC calculation has a significant impact on the final result. For projects with higher discount rates, the LCOC will be higher, making it more challenging to justify the investment in a business case. The escalation rate of CAPEX and OPEX costs, as well as the capital expenditure period had comparatively less effect on the LCOC.
• It is important to distinguish between levelized cost of CO₂ avoided (LCOA) and LCOC. LCOA considers only the reduction in the host facility’s CO₂ emissions before and after the implementation of capture. It excludes any CO₂ that is captured in addition to what is produced by the host facility, representing the cost of emissions reduction. In most cases, the LCOA will be higher than the LCOC.
• The wide range of values between LCOCs highlight the variability and uncertainty in cost estimates, even when consistent inputs are used. In the base case, LCOC values ranged from $105 – $260 CAD/tCO₂ captured. The LCOA was approximately 20% higher, ranging from $125 – $315 CAD/tCO₂ avoided. Costs are expressed in 2024 dollars.
• CCS costing remains an important issue that requires further analysis and ecosystem alignment. The IEAGHG hosts workshops that bring together international experts from across the CCS ecosystem to share and discuss the most current information available on the cost of CCS. 

Emissions Reduction 

While the primary objective of implementing CCS is to reduce emissions, the energy requirements of the CCS process itself must be accounted for when calculating net emissions reductions. 
 
Capturing CO₂ is a very energy-intensive process. The additional energy required for capture either comes from the host facility’s existing power or steam systems or can be supplied by new equipment such as a dedicated auxiliary boiler or a combined heat and power plant.  
 
When energy is drawn from existing systems, CO₂ capture is limited to the facility’s own emissions. In this case, the existing facility will experience a parasitic load – meaning a portion of its existing power or steam output is diverted to operate the capture system, reducing net output. 
 
When energy is supplied by new systems, the combustion of fossil fuels for energy generation produces additional CO₂ emissions. Therefore, the CCS system must capture both the original and the new CO₂ emitted.  This increases the total amount of CO₂ that needs to be captured compared to cases where energy is drawn from existing facility systems. 

What does this all mean?

The amount of CO₂ captured by CCS does not equal net emissions reduction because additional CO₂ is often generated beyond the baseline when implementing a capture process.  
 
If all projects in the CCK program went to final investment decision (FID), this would result in an 86% reduction in baseline emissions from these facilities. However, the total amount of CO₂ captured would be higher than the baseline emissions because of the additional emissions generated by the CCS processes.  
 
The study looked at a few scenarios and the potential emissions reduction. You can read more on page 41.  

Key insights include: 

If all 27 facilities in the CCK program were to achieve FID, they would collectively capture 29.6 MtCO₂ e/yr once operational. Note, this is slightly higher than the total current emissions from the host facilities of 29.4 MtCO₂ e/yr. The baseline emissions would achieve a net reduction of 86%, or 25.3 MtCO₂ e/year – slightly less than 10% of Alberta’s total annual emissions. 
 
Net reductions by 2050 from all 27 facilities –operational by 2030 or shortly thereafter – are estimated to be 508 MtCO₂ e, assuming all proceed to FID.  While the future of CCS projects in the CCK program remains uncertain, this illustrates their potential emissions reductions. 
 
The CCK program has provided a valuable pathway for proponents to evaluate and advance their CCS projects toward FID. Sharing this knowledge broadly represents one of the most effective strategies to advance CCS, mitigate risks, and lower costs for future projects. As the industry continues to evolve, ongoing knowledge sharing will remain critical to achieving global carbon reduction targets and supporting the transition to a more sustainable energy future.  
 
Note: The lessons learned in this report are as of July 2024. While the studies were initially intended to be complete by end of 2024, the majority will now be completed by end of 2025. At the time of completion, all projects will publish final public reports summarizing FEED outcomes. Final metrics, including costs and emissions reductions, will be collected, analyzed, and disseminated.