Green Tech: Should You be Investing in Carbon Capture?

By Kirsteen Mackay

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Carbon capture and storage technologies have great potential but the industry has its fair share of critics. Who are the big players in the CCUS space?

Releasing too much carbon into the atmosphere speeds up global warming and the devastating effects of climate change. One way to combat this is to capture carbon emissions. The carbon dioxide can then be reused, stored underground, or buried in concrete.

A multitude of carbon capture innovations are underway and investment opportunities are arising.

How big is the carbon capture industry?

There are various carbon capture and storage (CCS) techniques being researched and developed both by large corporations and small start-ups. And according to ExxonMobil (NYSE: XOM), CCS could be a $2 trillion industry within 20 years.

Once captured, the CO2 is compressed and transported via pipeline, ship, rail or truck to be reused or permanently stored underground. Some options for carbon storage include injecting the CO2 into oil and gas reservoirs, deep saline formations, coal beds, basalt formations and shale basins.

Despite all the innovations and investment opportunities, not everyone agrees. Climate change researchers, campaigners, and environmental activists argue that CCS technology is not a viable solution to reaching net zero targets.

What are the problems with carbon capture?

While CCS offers a viable way to reduce emissions escaping into the atmosphere, it still has its critics.

Climate activists want to eradicate fossil fuels, but they see carbon capture as a way for companies to continue burning legacy fuels rather than finding renewable alternatives.

In Asia, coal use is still in full swing. Coal-fired plants and mines are powering nations, but burning coal is responsible for more CO2 emissions than any other fuel.

One compromise (also considered a loophole) is to use 'clean coal,' which uses carbon capture, mixed combustion and other technologies to filter the carbon released by coal-fired power plants. Critics say this is not scalable or practical.

In July, The Center for International Environmental Law (CIEL) noted:

“Despite the existence of the technology for decades and billions of dollars in government subsidies to date, deployment of CCS at scale still faces insurmountable challenges of feasibility, effectiveness, and expense,”

Of course, the oil and gas industry disagrees.

Simon Roddy, senior VP for UK Upstream from Shell, recently told Sky News:

"It's really important to stress that even at net zero, we will continue to need - and industry will continue to use - oil and gas. And CCS is a technology that actually helps us reduce the emissions from those industries that still require oil and gas."

Some CCS projects underway

Eleven companies are collaborating to develop a $100 billion CCS plant outside Houston. These include Calpine, Chevron (NYSE: CVX), Dow (NYSE: DOW), ExxonMobil (NYSE: XOM), INEOS, Linde (NYSE: LIN), LyondellBasell (NYSE: LYB), Marathon Petroleum (NYSE: MPC), NRG Energy (NYSE: NRG), Phillips 66 (NYSE: PSX) and Valero (NYSE: VLO). Together they are in discussions to capture and safely store up to 50 million metric tons of CO2 per year by 2030 and about 100 million metric tons by 2040.

Aker Solutions (FRA: 1AKA) has formed a consortium with Siemens Energy (OTCMKTS: SMNEY) and Doosan Babcock to develop solutions for the growing UK CCUS market.

Equinor (NYSE: EQNR) and partners are making good progress with the East Coast Cluster in the UK, named one of the first two CCS clusters in the country.

BP (NYSE: BP) is involved in CCS research, development and projects, including the Net Zero Teesside project in the United Kingdom. BP is also investing in Santos' Moomba carbon capture and storage (CCS) project in South Australia. Here it will capture CO2 from natural gas and reinject it into the geological formations of the Cooper Basin, aiming to capture 1.7m tonnes of CO2 annually. The vision is for Cooper Basin to be a large-scale carbon sink for Australian industry.

Royal Dutch Shell (NYSE: RDS.A) is helping to develop large-scale commercial CCS projects in Australia, Norway, and Canada.

Saudi Aramco (TADAWUL: 2222) is running a pilot project for CCS at a Natural Gas Liquids Recovery Plant in Saudi Arabia.

There are many more CCS ventures underway and new projects appearing regularly. In July, there were reportedly 21 large-scale CCUS commercial projects operating globally plans for at least 40 new commercial facilities in the pipeline.

Case study: Aker Carbon Capture

Aker Carbon Capture (OTCMKTS: AKCCF) (previously a division of Aker Solutions) is a pure-play carbon capture company. It offers CO2 capture solutions to various industries, including cement, bio and waste-to-energy, gas-to-power and blue hydrogen segments.

Aker Carbon Capture is looking to capture carbon at the outset of operations, from the extraction of raw materials from mining and oil to the processing of steel, cast iron, copper, carbon fibers and energy.

By capturing and storing their carbon, the companies operating in these segments improve their ESG scores and become a more viable investment.

ACC went public in August 2020. It is publicly listed on the Oslo Stock Exchange, Norway, under the ticker ACC, and shares can be purchased in the US via the OTC market - Aker Carbon Capture ASA (OTCMKTS: AKCCF).

In its Q3 earnings release at the end of October, Valborg Lundegaard, CEO of Aker Carbon Capture, said:

"We see clear signs of acceleration across the carbon capture market worldwide, and we continue to position our company to be a leading player in this important and fast-growing industry,"

ACC is performing well and reached several milestones in Q3. The ACC share price rose 29% in the quarter and has since risen another 11%.

During Q3, ACC made progress in the Brevik CCS project, the world's first industrial-scale carbon capture plant at a cement factory. ACC also secured several agreements with new customers across its targeted regions and industries.

Soaring demand

In August, ACC issued a private share placing to raise funds to help it grow. The placing was multiple times oversubscribed as demand continues to soar in response to ESG-friendly initiatives. In the placing, ACC raised NOK 840 million with shares priced at NOK 22 per share.

Carbon Capture as a Service

Aker Carbon Capture aims to deliver and operate its Carbon Capture as a Service offering with strategic partnerships. This will provide a unique option to customers, allowing them to pay per tonne of carbon dioxide captured.

One recent partnership is with Carbonor to collaborate on a low-emission char with Carbon Capture as a Service. If all goes to plan, this will be ACC's first Carbon Capture as a Service contract where the customer pays based on the volume of captured CO2.

ACC is also partnering with Viridor, a leading waste management company in the UK.

Overall, ACC aims to help emitters capture their carbon with ease and cost-effective storage.

Future outlook for ACC

According to Aker Carbon Capture, signs the global carbon capture market is accelerating were clear in Q3. There were several major supportive policy announcements in Europe and the United States. This was followed by a growing number of corporate announcements to utilize carbon capture across various emitter industries.

ACC intends to take a leading position in the global CCS industry, aiming to secure firm contracts for carbon capture plants for a total of 10 million tonnes per year by the end of 2025.

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Topics:
ESG
Coal and Consumable Fuels
Industries:
Industrials

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.