A new type of carbon capture is gaining ground: What investors need to know
Carbon capture, a process that intercepts industrial carbon dioxide emissions before they’re released into the atmosphere, may finally be gaining traction. CO2 Solutions Inc. (TSX-V: CST), a cutting-edge carbon capture firm that uses a proprietary enzyme to catch and store the greenhouse gas, recently announced that its unique technology is ready for commercialization. A demonstration project at Salaberry-de-Valleyfield ("Valleyfield"), near Montreal, Québec has exceeded 1,000 hours of successful operation since June 19, 2015, the company announced earlier this month.
Most existing carbon capture operations use solvent-based scrubbing techniques that require heat. This energy requirement has so far made carbon capture inefficient and expensive, and its reach has been correspondingly limited.
CO2 Solutions uses enzymes, rather than solvents. Its proprietary, high-performance enzyme named 1T1 mimics the way humans remove CO2 from inhaled air. It essentially acts as an “industrial lung,” Jonathan Carley, Vice President for Business Development states in a YouTube video.
The low-temperature process significantly reduces energy consumption. The technology also can be retrofitted into existing infrastructure at coal-fired power plants, oil production operations, power and steam plants, and metals production facilities. These two advantages allow the technology to reduce the capital and operating expenditures involved in carbon capture by at least one-third, as compared with conventional carbon capture approaches.
According to the company, the pilot facility at Valleyfield has seen 1,200 hours of successful operation with 1T1, with CO2 capture consistently at design capacity and no observed performance degradation. The preliminary results are conclusive, and confirm the company’s expectations.
“The unit's set-up has proven effective in a downstream setting from a boiler, thereby mimicking conditions that CO2 Solutions would encounter in typical industrial settings,” the company stated in a press release. CO2 Solutions will continue to operate the pilot unit until it reaches the planned 2,500 hours of operation in early Fall 2015.
“The full results, once verified by an independent third party, will allow us to complete work on detailed engineering and costing models for commercial units at various scales,” Evan Price, President and CEO of CO2 Solutions, said in a recent press release. The milestone “signals the near-completion of our pre-commercial scale up and de-risking programme. The results to date have fully met our expectations, and we are confident that the experience gathered in this demonstration will facilitate and accelerate our efforts to transition to the commercial launch of the technology."
Carbon Capture and Storage
What to do with the captured gas is a pivotal question. For the past several years, efforts have mainly focused on geologic storage, where the gas is pumped underground and stored there permanently. The Intergovernmental Panel on Climate Change (IPCC) recognizes carbon capture and storage (CCS) as one of several strategies needed to tackle climate change in its Fifth Assessment Report, Climate Change 2014: Mitigation of Climate Change.
While the technology has had a slow start, Canada’s SaskPower announced in October 2014 that it had connected one of its 45-year-old coal-fired power plants to the world's first utility-scale CCS facility, which removes about 90 percent of the plant's CO2.
Similarly, in the United States, an Archer Daniels Midland (ADM) corn ethanol plant in Decatur, Illinois finished a three-year demonstration run in November 2014, as part of the Illinois Basin-Decatur Project. The plant’s fermentation process produces 2,700 tons of CO2 per day, one-third of which was pumped 2,100 meters beneath the surface, into the geologically stable Mount Simon Sandstone formation. The plant is the first major demonstration project for carbon storage in the United States.
Opportunities and Risk in Carbon Capture and Storage
The global CCS market is expected to grow at a CAGR of 31.63 percent over the period 2014-2019, analysts at Technavio say. Successful demonstration projects and government initiatives promoting CCS technology are contributing to the growth of the market.
The IPCC estimates that there is at least two trillion tons of CO2 storage capacity in appropriate geological formations worldwide. “Based on this, there is approximately 136 years of storage for present worldwide large-source CO2 emissions,” CO2 Solutions states on its website.
Domestically, 600 to 6,700 years of current level emissions from large stationary sources in the United States could be stored underground, the U.S. Environmental Protection Agency states.
Still, to reduce American carbon emissions by only 20 percent would require thousands of injection facilities like Decatur's, according to a Science News article. In addition, some warn that “not every injection site … can be guaranteed to be far from hidden faults,” that could cause geological instability and leakage, the article states.
The prohibitive cost of carbon storage is yet another limiting factor. "By the time we bury billions of tons of carbon it will be too late for the climate," Stanford University geophysicist Mark Zoback told Science News.
The Future of Carbon Capture: Utilization
Fortunately, underground storage isn’t the only possible fate for captured carbon; it can also be used for a growing number of industrial applications. This mix of approaches is collectively referred to as carbon capture utilization and storage (CCUS).
Enhanced oil recovery (EOR) is one example of CCUS. Oil firms inject CO2 into aging oil wells to re-pressurize them and temporarily increase production. The CO2 is then separated from the crude and recycled.
CO2-EOR is a well-established technology that already provides approximately 5 percent of U.S. oil production. The U.S. Department of Energy estimates that CO2-EOR could potentially add 60 billion barrels of crude oil to U.S. recoverable resources. It could also add 2.5 million jobs over 30 years, the U.S. Carbon Sequestration Council estimates. The CO2 produced by burning this oil could be captured and reused to produce more crude, or stored back underground.
The recovered carbon can also be used to regulate and stabilize pH in pulp and paper production and water treatment. It can be used in chemical production, or pumped into greenhouses as “plant food.” This option offers a method of biological sequestration where the CO2 is absorbed and stored by plants. CO2 Solutions’ process generates high purity CO2 (up to 99.9 percent) that can even be used for beverage carbonation.
Market Outlook for Carbon Capture, Utilization, and Storage
Limited funding for CCUS is a significant hurdle, particularly for conventional, solvent-based CCUS projects. Policy parity for carbon capture with regard to funding, extending tax credits, and other subsidies that renewable energy sources receive will help drive the industry forward, a study released by the National Coal Council states.
Ultimately, the market for carbon capture technology will depend on continued use of fossil fuel for energy, and the abundance of the fossil fuel supply, analysts at Technavio say. If coal continues to be a major energy player, the success of lower-cost, enzyme-based approaches like CO2 Solutions’ may make carbon capture a more viable carbon mitigation tool.
Companies to Watch
* General Electric Company (NYSE:GE) - GE's Integrated Gasification Combined-Cycle (IGCC) plant in the Midwestern United States uses solvent-based carbon capture to sequester coal-based emissions. GE Global Research also works with the National Energy Technology Laboratory (NETL) to enhance sensors for CO2 storage wells.
TheStreet has rated GE a hold (as of September 17, 2015). "The primary factors that have impacted our rating are mixed — some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks," the report states. "The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally higher debt management risk."
* Schlumberger (NYSE:SLB) - Schlumberger Carbon Services is involved in more than 80 carbon capture and storage (CCS) projects around the world.
TheStreet.com rates Schlumberger a buy (as of September 17, 2015). “This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover,” the ratings team writes. “Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."
* Royal Dutch Shell (NYSE:RDS.A) – Shell is involved in a number of demonstration projects around the world. The company is also heading up Quest, the first commercial-scale carbon capture and storage project in the oil sands industry.
Shell is currently rated a hold. “The primary factors that have impacted our rating are mixed – some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks,” analysts at TheStreet write. “The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.”
* Alstom (EPA:ALO) - Alstom offers integrated CO2 Capture Systems that recycle and allow beneficial uses of waste CO2. The company is also developing CO2 capture post-combustion technologies.
* Chevron (NYSE:CVX) – Chevron is partnering with GE to build the world’s largest carbon sequestration project at the Gorgon natural gas fields, located off the coast of Australia.
Chevron is currently rated as a hold. “The primary factors that have impacted our rating are mixed – some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks,” TheStreet report states. “The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.”
* Fluor Corporation (NYSE:FLR) – Fluor has experience with CO2 recovery from flue gas with a very high oxygen concentration.
Fluor Corporation is also currently rated as a hold. “The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures and notable return on equity,” TheStreet’s ratings team writes. “However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself.”
* Hitachi (OTCMKTS:HTHIY) – Hitachi partnered with SaskPower to construct a Carbon Capture Test Facility (CCTF) at Shand power station in Saskatchewan, Canada.
* Mitsubishi Heavy Industries (TYO:7011) - MHI offers post-combustion CO2 capture systems for coal-fired power generation plants. MHI's CO2 capture technology is the KM CDR Process®, which uses a proprietary KS-1™ high-performance solvent for CO2 absorption and desorption that was jointly developed by MHI and the Kansai Electric Power Co., Inc.
Kate Dougherty is a freelance writer and geographer specializing in stories about where science, technology, and the environment meet. Her work has been published by Earth Island Journal Online, Next City, EnvironmentalScience.org, and the American Society for Mechanical Engineers. Prior to her freelance career, she was contracted to the U.S. Environmental Protection Agency libraries for six years, and also served as Assistant Professor/Geosciences and Maps Librarian at the University of Arkansas.