3.6 Challenges to deployment

3.6.1 Survey results – ranking of challenges

The survey provided CCS proponents with the opportunity to identify and rank their perceptions of the challenges to CCS deployment. A total of 134 responses were received.

Based on the literature, four challenges to deployment were identified to act as prompts in seeking responses to this question.

The four challenges to deployment provided were:

  • regulations;
  • public acceptance;
  • costs; and
  • financing.

The results indicated that all four of these challenges are considered to be significant as they were all ranked similarly.

When given the opportunity to select two other key challenges to CCS deployment, the majority of respondents identified issues around technology and storage.

Further examples of the challenges articulated by project proponents in the survey are listed below.

  • Inconsistent and often conflicting government policy. For example, applying a tax to a government funding grant.
  • In some jurisdictions, early mover CCS projects will be required to purchase permits for their CO2 emissions despite the fact that they are attempting to demonstrate low emission technologies at a time when the business case is uneconomic.
  • Timeframes associated with the permitting of large-scale projects involving CCS are very long.
  • The costs associated with offshore storage options may be an order of magnitude higher than that for onshore storage due to the difficulties and distance of transport and the costs associated with the equipment required to develop the storage site. This is weighed against the increase of public acceptance as a challenge for onshore storage.

3.6.2 Survey results – challenges of cancelled or delayed projects

Fourteen of the 26 cancelled or delayed projects provided information on the issues encountered that resulted in the delaying or cancellation of their projects. These are listed and described below.

  • Project economics – Some of the projects were uneconomic due to the high cost of CCS, the forecast low value of CO2 and the lack of a CO2 price signal. The global financial crisis (GFC) and the impact this has had on raising finance was also specifically identified as a challenge.
  • Policy / regulations – The uncertainty surrounding CCS including CO2 pipeline regulations, future emissions policies and the lack of, or ambiguity concerning existing CCS regulations were also identified as key issues.
  • Stakeholder issues – Some project proponents met opposition from the public and a specific issue identified was on the perceived negative effect of CCS on property values in project areas.
  • Storage – Some project proponents identified issues such as the effects of CO2 storage on oil/gas reservoirs, seismic activity around the CCS site, and difficulties in establishing a strong case for the safe and long-term storage of CO2 as major reasons for cancellations and delays.
  • Financing – A number of proponents stated that they were unable to obtain funding. As stated above, some specifically highlighted the GFC as a significant contributor to their project being cancelled or delayed.

3.6.3 Dependent projects

Some potential challenges associated with the dependent projects introduced in Section 3.5.9 are listed below.

  • Processes such as obtaining contractual agreements could be time consuming, given that the capture, transport and storage components are being proposed by separate entities.
  • The dependence on separate entities exposes project proponents to increased risk. For example, if the CO2 storage element of the CCS chain was found to be unviable, the business case for the capture and transport proponents will fail.
  • There is the potential for schedule delays associated with the development of a particular element of the CCS chain lagging behind. For example, if the development of a transport and storage network is delayed, this also imposes significant delays to the capture plant project.

It should be noted that business models for CCS projects involving multiple parties successfully exist for EOR projects. The challenges identified above imply that the development of the business case for these dependent CCS projects could be more complex and time consuming. This could affect the ability of these projects to contribute to the G8 objective.

3.6.4 Potential failure rates for CCS deployment

The successful development of CCS projects is subject to a constellation of factors. While there is a great deal of literature on general deployment challenges, there are few, if any, specific studies on CCS project failure rates. This may be due to the fact that the historical experience in developing CCS projects is very limited. Furthermore, and as this study has experienced, many proponents associated with failed projects do not wish to disclose any information. Therefore, it is difficult to quantify failure rates with a high degree of certainty.

However, to address this gap, this study attempts to provide a rudimentary framework on the potential failure rates of commercial scale, integrated CCS demonstration projects. This is done by using as a proxy the failure rates of other low emission renewable energy sources such as solar and wind articulated in a report prepared by KEMA, Inc. for the California Energy Commission in 2006. As stated above, the authors acknowledge that this approach is rudimentary given gaps in the literature, time constraints and the scope of this project.

If CCS project failure rates comparable to those observed for renewable energy projects occur, 50 to 80 percent of the projects in early stages may never be completed.

Therefore, using the asset lifecycle model, a hypothetical scenario of failure rates suggests between five and eight in 10 CCS projects will not proceed to the Operate stage. These scenarios are described below as applied to the 55 commercial scale, integrated CCS projects that are not currently operating as found in this study.

  • Scenario 1 – pessimistic (11 projects proceed)
  • Scenario 2 – optimistic (26 projects proceed)
  • Scenario 3 – realistic (18 projects proceed)

The pessimistic scenario adopts the upper end of the estimate of failure rates across all projects that are not already in operation.

The optimistic scenario considers those integrated CCS projects that are proposing EOR or natural gas processing CO2 capture plants. Assuming that all of the 19 proposed projects with either EOR or natural gas processing succeed and applying the 80 percent failure rate to the remainder, there may be a total of 26 projects that make it to operation.

The realistic scenario applies a failure rate to the EOR or natural gas projects of 40 percent. With this assumption, it is possible that 18 of these projects proceed to the Operate stage.

These scenarios are presented graphically in Figure 3-13.

As described in Section 3.5.9, of the 62 active or planned, commercial scale, integrated CCS projects, 30 of these were classified as ‘dependent’ projects. The failure rates of these projects could be compounded relative to those fully integrated CCS projects as these are dependent on the success of separate project owners’ and/or operators’ projects.

Figure 3-13 Hypothetical failure scenarios for 55 integrated, commercial scale, CCS projects currently not operating