Carbon capture and storage (CCS) regulation is developing. For example, the EU’s CCS Directive is designed to ensure potential users are able to access carbon dioxide transport networks and storage sites in a transparent and non-discriminatory manner through fair and open access. However, the commercialisation of CCS remains unclear.
There are many similarities to the oil and gas markets, but there are also fundamental differences. And although all components of the carbon sequestration chain are proven, they have only been implemented at a small scale or in simple point-to-point infrastructures.
Regulatory certainty will be crucial to create the right conditions for CCS to develop as a commercially viable low-carbon technology. Governments must also encourage the early development of an efficient and competitive CCS infrastructure. Some of the key issues concerning the development of business rules and the commercial operation of integrated CCS networks are discussed below.
Transport infrastructure
In the early stages of deployment, a market-driven transport infrastructure is likely to develop as point-to-point links between single emitters and single storage sites. This makes it harder to move towards a more integrated transport infrastructure.
A more efficient network would include capture hubs, which are geographic concentrations of emitters, connected by pipelines of sufficient capacity to storage hubs comprising multiple storage sites. An example is the proposed Humber hub linking three large power stations, two refineries and a steel mill to several storage sites in the North Sea.
If governments can encourage this type of infrastructure from the start, CCS uptake will be more cost-effective and quicker. Later, as further capture and storage sites are added, non-linear transport infrastructures will lead to more complex business rules and commercial operations.
Storage
The UK has the potential to build and manage carbon storage facilities for its own emitters and for other European countries. Worldwide, carbon can be sequestered into geological and ocean storage, mineral carbonation and also as input into industrial processes, including bio-energy. Enhanced hydrocarbon recovery CCS projects also use carbon dioxide. Temporary storage and withdrawal from storage may need to be considered as part of the network.
Storage integrity must also be considered. This is the ability of the store to contain injected carbon safely for a long time. This is better understood for some storage sites – such as oil and gas fields – than others. Impurities in the gas stream must also be considered. For example, wet carbon is corrosive.
Commercial operations
Currently, business rules are driven by the needs of a single party. Business rules to account for carbon throughout the supply chain will become more complex as infrastructures grow, and commercial arrangements will become more like third party access.
For CCS to work, commercial operations must be integrated across the supply chain, taking account of the interfaces between each stage including capture, processing, compression, transport and storage, each of which may be operated by different parties.
CCS infrastructures must be operated to optimise financial returns through the efficient use of capacity. Commercial operations must consider how system operations vary over time. For example, the timing of carbon capture will be determined by electricity demand and may not always align with available transportation capacity.
The different contractual arrangements between various parties in the CCS chain must be identified. A fully integrated project will be different to one with “take or pay” or full variable contracts between many separate power plant, pipeline and storage site operators. Is the whole CCS chain to be managed as an integrated service?
Each method of capture and storage will have different characteristics, and that will affect the commercial business rules, but many of the fundamentals will remain the same. For instance, how might a single contract include capture, processing, compression, transport, injection and long-term storage when different capture technologies may produce carbon streams at different pressures and with different impurities?
Complex business processes will be needed, including capacity forecasting, carbon flow scheduling, carbon production allocation and reconciliation of allocated carbon quantities and charges. Scalability and flexibility are needed to facilitate changes such as new storage sites, extra segments of pipeline to reach them, more complex scheduling of flows, and changes to forecasting and allocation algorithms.
Methodologies are also necessary to estimate shrinkage throughout the CCS chain and physical leakage from storage (both gradual and system failure) and for incorporating these factors into the allocation of fugitive emissions among the parties involved.
CCS projects are long-term, so measurement, monitoring and verification, and leakage from storage must be considered over the long-term. Some allocated quantities may have to be reconciled based on later, more accurate measurements and calculations.
Reporting
This must satisfy company, national and international demands for data transparency and business optimisation, while ensuring commercial confidentiality. This includes carbon accounting under the UNFCCC Kyoto Protocol, national greenhouse gas inventories, the Clean Development Mechanism and Joint Implementation. Interesting reportable quantities include actual and net carbon stored, carbon avoided and whole-chain fugitive emissions allocated per emitter.
There is a consensus among stakeholders that the UK government has made good progress with its wider efforts on regulations and strategies for collaborative research and pilot-scale demonstration projects. But there is a pressing need for a full CCS chain to be set up to gain experience of running it commercially.
Without strong government support, CCS is likely to start small and grow incrementally, in a similar manner to the North Sea oil and gas infrastructure. Over time, CCS networks will incorporate more carbon sources and storage sites and will implement third party access-like frameworks. Organisations will demand ease of operation, visibility of business processes and flexibility to change business rules to address fast-changing regulatory and market conditions.
What is essential is the development of business rules that bring together different components of the CCS chain and manage the transient conditions of different elements in a commercially viable way.
If carbon infrastructure becomes anywhere near as complex as gas networks, we will have to consider trans-boundary interconnected networks run by different operators, marine transportation and temporary carbon storage.
Clive Ashworth – clive.ashworth@logica.com – is senior business consultant, oil and gas, with Logica Business Consulting
This article first appeared in Utility Week’s print edition of 1 June 2012.
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