CCS Environmental Analysis, August 2021
On a monthly basis, Gassnova prepares an analysis of important CCS international market trends, and what drives innovation in our focus areas. Here is the analysis for August.
IPCC: Little news – but one significant change is worth noting
The publication of the first part of the IPCC’s Sixth Assessment Report (AR6, Working Group 1) in August generated a degree of legitimate interest globally.
Working Group 1 relates to the physical climate system and contains little that was not previously known. It primarily serves to provide a strengthened basis for known conclusions.
The most interesting aspect is perhaps therefore to note that the wording has shifted away from emissions ‘will lead to’ various effects to stating that emissions ‘have led to’ those same effects.
The IPCC will finalise the remaining reports as part of its AR6 work by next year – including a Mitigation Report (March) and the Synthesis Report (August).
UK’s hydrogen strategy proposal launched – including draft consultation on associated business models
August marked the launch of the government’s ‘plan for a world leading hydrogen economy’. The strategy outlines the main ways in which a hydrogen value chain would contribute to meeting the British government’s 6th Carbon Budget (2033-37) and subsequent targets. Hydrogen production may account for up to 1/3 of the country’s energy consumption.
The ambition to achieve 5 GW of production capacity by 2030 (up to 42 TWh/p.a.) remains in place. At present, hydrogen production in the UK is estimated to stand at around 27 TWh/p.a.. After 2030, it is estimated that growth will increase significantly to 250-460 TWh, and may then represent up to 1/3 of the country’s overall energy consumption.
British hydrogen strategy more tangible
The strategy does not set out a distribution between blue and green hydrogen, but it does stipulate a ‘twin track approach’ in which the best aspects of each technology are to be utilised. This means that the choice between ‘green’ and ‘blue’ should balance long-term potential against the necessity of phasing technology in at an early stage – in order to optimise value to the taxpayer over the long-term. A production strategy for hydrogen is due to be published in early 2022. The British hydrogen strategy is more tangible when compared to Europe. It is also approximately equal in terms of ambition when measured by volume (EU: +40 GW green H2 by 2030, Germany total 90-110 TWh H2 by 2030).
Consultation on different business models
Alongside the strategy, there is also a consultation on various mechanisms (business models) for how the government envisions remunerating industry for the additional costs associated with the establishment for hydrogen value chains. It is assumed that this support will be channelled through producers rather than in the consumer sector. The consultation describes various models for how support of this kind might be organised.
A number of support schemes have been established with a focus on investments throughout the value chain, including storage of hydrogen and CCS.
‘Net Zero Hydrogen Fund’ highlighted
In this context, the ‘Net Zero Hydrogen Fund’, which is worth a total of £240 million, particularly emphasises support for investment in hydrogen production facilities. It is assumed that the first contracts for the supply of low-carbon hydrogen will be operational by early 2023. The use of hydrogen is specifically targeted at industries that cannot easily electrify or where the use of CCS will be particularly costly.
Four areas are highlighted: industry, transportation, power generation, and local heating. It is expected that the hydrogen strategy will deliver reductions in emissions totalling 41 Mt CO2e over ten years from 2023 to 2032, and that it will create a hydrogen economy worth £900 million by 2030.
Scientific study casts doubt on climate impact of blue hydrogen
A peer-reviewed scientific report produced by two researchers based at Cornell and Stanford Universities respectively, titled ‘How green is blue hydrogen?’ has made headlines throughout the energy and climate sectors around the world. Based on a life cycle assessment (LCA), the authors draw the conclusion that hydrogen produced from natural gas using CCS has a climate footprint on a par with hydrogen from natural gas without CCS (just 12% fewer emissions of GHG). In short, the reason for this conclusion is that CCS does not have an impact on diffuse methane emissions connected to the production and transportation of natural gas, and that CCS in itself requires increased energy consumption which in turn leads to higher methane emissions. The report has added fuel to what was already a fiery debate on the issue of whether it is really feasible to base the green transition on natural gas and blue hydrogen. In addition to discussion about methane emissions, this debate also touches on the fact that present day CCS technology is unable to achieve 100% capture rates and that we may also become dependent on expensive carbon negative solutions (such as DACCS) if we are to count blue hydrogen as ‘net zero’.
A memo from IEAGHG seeks to address some of the assumptions and figures used by the researchers, including pointing out that there are various opportunities to reduce methane emissions throughout the value chain and that there is new technology on the horizon. For the sake of comparison, the international stakeholder body ‘The Hydrogen Council’ published an LCA analysis earlier this year that showed the climate footprint of blue hydrogen as being dependent on multiple factors, and that in some circumstances it can be almost as low as is the case for green hydrogen from wind power (2-3 times more emissions rather than 10-20 times more without CCS). The climate impact of methane emissions is significant. According to the IPCC, historical methane emissions have contributed to a 0.5°C increase in the global temperature from the pre-industrial era, and approximately 22% of current methane emissions are from the energy sector. Emissions have been on the increase – and the share from natural gas is significant. The IEA has pointed out that major cuts in methane emissions from gas production can be achieved without any extra net costs (depending on gas prices).
SSAB sets new climate standard with the production of ‘fossil-fuel free steel’
In August, SSAB announced that their multi-year project, HYBRIT, which is aiming to create a fossil-fuel free production process for steel, had successfully made its first official deliveries to its customer Volvo. The venture was announced in 2016 and has involved LKAB and Vattenfall.
The process uses electricity as an energy source and hydrogen as a reducing agent, rather than fossil fuel-based energy. This pilot is designed with a capacity of 1 ton of steel per hour. It states that the CO2 footprint will be reduced from 1.6 tons of CO2 to 25 kg CO2/ton of steel, while energy consumption will increase from 235 kWh to 3.488 kWh/ton of steel. SSAB’s plan is to scale up its production facility to enable commercial market deliveries from 2026, and SSAB is aiming to be a fossil-fuel free company by 2045. It was also recently announced that the car manufacturer Mercedes has formed a partnership with SSAB to source fossil-fuel free steel for their auto production line.
Expectations relating to the decarbonisation of steel production through the use of hydrogen have increased somewhat of late. In August, an investor group published a report to help investors accelerate decarbonisation of the steel industry by 2050. The report identifies 12 actions that investors can promote to steel producers, including transition plans for how solutions such as hydrogen and CCS will help to meet climate goals. One of the world’s biggest steel producers, ArcelorMittal, recently published its second climate action report on their ongoing work to meet their NetZero climate goal by 2050. This report states, among other things, that they expect the costs of green hydrogen to fall in future and that this will help to make hydrogen increasingly relevant to the steel industry, while also noting that CCUS will be important primarily in North America due to infrastructure access.
World’s first climate-neutral cement works planned / Unexpected challenges with supply of raw materials
In June this year, HeidelbergCement’s Swedish firm Cementa outlined its ambition to capture and store 1.8 million tons of CO2 per annum from 2030.
HeidelbergCement’s Swedish firm Cementa has spent many years working to develop technology and solutions that will allow it to become the world’s first climate-neutral cement works. This has been subject to necessary state support, infrastructure development, etc. In June this year, Cementa presented is initiative setting out the ambition to capture and store 1.8 million tons of CO2 per annum from 2030. This initiative will build on the work already carried out by Project Longship. Additionally, the company is working in partnership with Vattenfall to develop a solution to electrify cement production – CemZero. Cementa’s venture has received widespread attention internationally. However, during the summer the cement works saw its application to extract further lime from its current mines rejected by Sweden’s Land and Environment Court of Appeal. The grounds for rejection relate to the lack of scientific evidence relating to groundwater conditions in proximity to the mines. Cementa has until next summer to resolve these difficulties.
Maersk ships will run on synthetic fuels – preparing for production of green methanol
The ships will be capable of running both on methanol and traditional fuel. The methanol will be produced with hydrogen from renewable power and biogenic CO2. Maersk says that they hope the initiative will have a ripple effect in other companies and contribute to the more rapid decarbonisation of the industry.
The Environmental Analysis is prepared by Gassnova's analysis team.