$100 Million from Elon Musk Won’t Enable Carbon Capture — New Energy Risk

$100 Million from Elon Musk Won’t Enable Carbon Capture

By Brentan Alexander, PhD; Chief Science Officer & Chief Commercial Officer

Last Thursday, Elon Musk announced (in well under 140 characters) his intention to donate $100 million to the “best” carbon capture technology, chosen through a competition whose details and judging criteria are yet to be announced. Musk promised further details next week. The problems holding back the mass deployment of carbon capture technology are primarily economic. As such, funding for research and development of carbon capture technologies is most welcome, and Musk’s donation will surely lead to technological advances. However, a Silicon Valley mindset like Musk’s, one that champions disruptive innovation as the solution to all problems, is the wrong fit for this important industry.

One difficulty with carbon capture technology is that uses for its recovered CO 2 are still limited. The predominant usage today is in enhanced oil recovery, a process that increases oil reservoir yields by injecting CO 2 into the well. Multiple other commercial uses are in development, but until there is an offtaker willing to purchase CO 2 at scale, projects are having a hard time gaining traction with capital investors.

Those investors are direly needed, however, because carbon capture technology is costly. For example, separating CO 2 from the emissions of power plants or industrial facilities (e.g. Petra Nova in Texas) doesn’t happen spontaneously: it takes loads of energy. Separating CO 2 from air (e.g. Carbon Engineering) is more costly still because the CO 2 is thinly dispersed, making up only 0.04% of the air we breathe. Then on top of the expensive power needed to perform the separation, the equipment itself is still extremely expensive. Even as equipment costs come down, no technological advancement can overcome the laws of nature and make this process free.

Proposals to avoid the need for complex equipment by utilizing kelp, trees, soil, and other natural processes to capture and sequester carbon face the usual challenges associated with funding, creating, and managing forests or farms, but with the additional challenge that the true efficacy of these potential carbon sinks is still widely debated.

Whether the technology performing carbon capture is chemical, biological, or otherwise, somebody has to buy the resulting CO 2 or otherwise incentivize its capture and sequestration to make the upfront and ongoing costs worthwhile.

To find markets for the captured carbon, some are looking at chemically converting CO 2 into high-value products, like carbon nanotubes. The downside of this approach is scalability: the most attractive products hold high value precisely because they are hard to make or have small and limited markets. As one scales up carbon capture technology to impact climate change, the sheer quantity of produced material would swamp the niche markets for these high-value products, cratering prices and undermining the original business case.

A more scalable solution aims to create a circular economy wherein CO 2 is used to make fuels; the kerosene used by Musk’s SpaceX could be made this way. Even here, however, fundamental laws of thermodynamics show that the energy input required to convert CO 2 into chemicals or fuel is higher than the energy available in the products themselves. For an idealized system that converts CO 2 and water into gasoline using only exactly as much energy as ends up in the fuel, the cost of the energy to perform the conversion would be $3.69 for each gallon of gasoline produced, assuming electricity at 10 cents per kilowatt-hour. It’s physically impossible, no matter the advancement of technology, to use less energy to synthesize that fuel. Real systems aren’t 100% efficient, and further, add in the cost for maintenance, overhead, water, energy for the CO 2 separation from its source, and financing costs for the equipment to do all this work, which leads to still higher costs per gallon produced. Competing against cheap fossil fuels on a dollar for dollar basis is nearly impossible.

The only durable solution that enables the scaling of carbon capture technology is a regulatory regime that makes it more expensive to emit CO 2 (through taxes, fees, or otherwise), that pays companies to capture CO 2, or that does some combination of the two. Thankfully, some of these tools are already in place. Just weeks ago the United States Internal Revenue Service (IRS) finalized its rules for a program colloquially referred to as 45Q, a tax credit that provides projects with up to $50 per metric ton of CO 2 stored underground. The California Low Carbon Fuel Standard (LCFS) provides credits to facilities that capture and store CO 2, with the value of the credit floating based on a mandated trading market and the number of granted credits dependent on the overall carbon intensity of the process. Similar programs exist in the Pacific Northwest and a federal program is under development in Canada.

These programs are not enough. 45Q is temporary and will expire in a few short years. The LCFS program has limited scope and jurisdiction, and its market would be quickly overwhelmed if carbon capture reaches scale. But these programs provide mechanisms to help support the burgeoning industry today and provide blueprints for new programs in the future. The solution to carbon capture deployment lies in expanding financial programs like these to provide further incentives to technology developers.

Carbon capture today looks a lot like solar technology did 20 years ago, when it was on the brink of growing 500x over the next two decades. Research and development money did not unlock the solar market at the turn of the century; rather it was the emergence of a viable business model driven by mandated renewable energy targets that allowed solar to rapidly expand and run down the cost curve, driving further growth. Carbon capture is ready to make that jump.

Musk’s prize will surely help some firms further their technology and reduce their costs, but Silicon Valley-type solutions won’t create the market that unlocks carbon capture. Instead, carbon capture is ready for Wall Street and Capitol Hill. It will take the deployment of today’s technologies supported by billions of dollars in incentives and investment from governments, banks, and corporations to demonstrate the much-needed business case for carbon capture and truly enable it to scale.

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Originally published at https://newenergyrisk.com on January 31, 2021.

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