3.1 Introduction

The business case for a project provides the strategic, financial, commercial, technical, operational and other information and analysis necessary to make a FID about whether an investment or project should be implemented. It also provides justification for the project/investment in terms of its alignment with the objectives of the organisation. In the context of CCS and government support programs for CCS demonstration projects, these objectives can include:

  • technology development and commercialisation opportunities;
  • market leadership;
  • achieving a commercial return;
  • satisfying expected regulatory changes; and
  • protecting value of the existing portfolio.

The business case also provides the basis for managing and controlling the delivery of the project on time, within budget, and to the agreed quality standards and timeframes.

Developing a business case requires significant efforts and work streams running in parallel, and is a difficult and complex undertaking. A wide range of technical, commercial, financial, and operational considerations must be considered and captured within the business case for a project (Figure 25).

FIGURE 25 Complexity of the business case

For many CCS projects these complexities are magnified from the need to integrate the elements of the CCS chain (CO2 capture, compression, transport, injection and storage). Despite the lack of carbon pricing arrangements and other complexities faced, 16 LSIPs around the world have successfully constructed their business cases and made positive FIDs. These projects are predominantly in gas processing, synfuels, ethanol and fertiliser production where capture costs are lower and integrating capture technology is better understood (Table 3). In contrast, carbon capture project development in sectors such as power, steel and cement production faces significantly higher costs.

TABLE 3 Comparison of production cost increases with the addition of CO2 capture

  POWER GENERATION HIGHER COST CO2 CAPTURE FROM INDUSTRIAL SOURCES LOWER COST CO2 CAPTURE FROM INDUSTRIAL SOURCES
  Post-combustion Oxyfuel IGCC NGCC Steel production Cement production Natural gas processing Fertiliser production
Percentage increase in cost of production with CCS (first-of-a-kind) 61–76 53–65 37 40 10–14 39–52 1 3

Source: Global CCS Insitute and WorleyParsons (2011).

As pointed out in Chapter 1, by 2050, the role of CCS in decarbonising energy emissions is evenly split between capturing emissions in the power sector and industrial sector, meaning that demonstration projects are needed now to support significant commercial deployment prior to 2050. If CCS were to be excluded as a technology option in the electricity sector, the IEA (2012b) states that investment costs would increase by 40 per cent, or approximately US$3 trillion, over the period to draw on relatively more expensive abatement options to provide electricity.

CCS, as a range of technologies applicable to a number of power and industrial applications, is currently considered to be in a pre-commercial stage in many of those applications and only at the pilot stage for several of them (such as iron and steel or cement applications).

Governments around the world are seeking to advance the development of CCS applications, particularly in the high-cost, low CO2 concentration power generation sector as well as iron and steel and cement production, through support for demonstration projects. Improved understanding of the cost and performance of large-scale CCS plants is a key motivation for these demonstration projects.