Energy transition is now facing additional challenges of 'Energy Security' and 'Affordability.' Countries with abundant fossil fuel resources will rely heavily on CCUS to reduce emissions to mange Paris climate promises. Given the 40 Giga tonne per annum of Co2 emission, this would require monumental efforts to achieve net-zero by 2050.
KEY POINTS TO REMEMBER
- The local energy resources takes precedence over the imported resources given the developing geopolitical challenges that are threatening supply chains
- The countries with largare energy resources especially fossil fuel resources that can be exported (example Russia, USA, Saudi Arabia) will have different speed and direction of energy transition than energy importing countries, that need to look for the alternatives to fossil fuels (China, EU Japan).
- The transition to alternate resources like Wind or Solar or even hydrogen requires metals and materials, which according to Daniel Yergin will require "Big Shovels' and long supply chains.
- The US will also need bipartisan efforts to address and balance the Climate change, energy security and affordability.
- The Northeastern US states, mostly democrats, with high energy demand but with little fossil fuel resources want to transition to Energy companies depending to solar and Wind (including offshore wind). South and Southwestern states, largely republicans have ample oil & gas resources, not only meet us demand but to meets shortages in energy hungry countries. They will rely heavily on CCUS, especially hub development for managing their emissions.
- The Inflation Reduction Act -IRA has raised the limit of 45Q carbon credits from Carbon Capture & Sequestration (CCS). The current operational CCS capacity in USA is about ~ 23 mtpa. The IRA is expected in=crease this to 55 mtpa in 2023. The project pipeline for CCUS projects in various stages is now reaching ~ 1000 mtpa or 1.0 Giga T/annum
- Key challenge is ease of regulatory requirement for CCS - Especially permitting of Class VI injection well for CO2 that can take unto 6 years? The primacy to issue Class-VI permits must be transferred to the states. Currently Wyoming & N. Dakota have this primacy, others need to go through long federal procedure that has delayed many projects.
- he incumbent government supports passing of primacy to states, but has been slow to act due to concerns expressed by EPA. This need to be resolved quickly. With IRA, the technology (CCS) and investment is there, only time is of the essence.
BOTTOMLINE
- CCUS will be a critical tool in the the emission reduction toolbox, something that is recognized by International Energy Agency -IEA.
- Regulatory frameworks and the political environment are clearly going to be critical for the industry’s success or failure.