Session 1: The future of CCS

Discussing the Australian Federal Government's Technology Investment Roadmap.

How do we create a CCS ecosystem to support the development of low emission industries?  In this webinar recording, we consider:

• Why this is a priority low emission technology;
• What is needed to meet this stretch goal; and 
• Likely impediments and opportunities

JL: As I said, a moment ago, my name is Jeff Lynn, and I'm a partner in the Energy and Resources team at Ashurst and I'm based in Melbourne office.  And today, I'm very pleased to be joined by Alex Zapantis.  Alex is the General Manager commercial at the Global Carbon Capture and Storage Institute, and I'm also joined by Philip Vernon.  Phillip is one of my partners.  He's a partner in the Ashurst Infrastructure team, and he's based in our London office.  So a particular shout out to Philip for getting himself out of bed very early this morning to join us from his home in London.

So, as I said a moment ago, this is session one of the Ashurst Low Emissions Technology Roadmap Series.  We'll be talking today about carbon capture and storage.  But in coming weeks, we'll be running two further seminars, focused on other priority technologies that have been identified by the Australian government in their low emissions technology statement.

So, on 26 October, we have a session on low carbon materials, and on 4 November we have a session on energy storage.  So, I hope that a number of you can also join us for those sessions as well.

The format for today will be quite simple, after some brief remarks from me, you'll hear some short presentations from each of Alex and Phillip followed by a discussion.  Given the number of people that we've got on the line, it might be a bit difficult logistically to open the mics up and organise in an orderly way for people to ask their own questions.  So what I'm going to do is ask that you take advantage of the questions function that exists on the platform that we've all logged into.  So if you look at the toolbar on the right-hand side of your screen, you'll see there's a little drop-down for questions.

So if I could ask you to please drop your questions into that, into that tool bar.  That will come through to me and also to Alex and Philip.  When we get to the Q&A part of this discussion today, then we'll be able to work our way through those questions and hopefully cover as many of them as we possibly can.

I'm also going to use the online platform to launch a couple of polls.  I'll do two polls and we'd love you to participate in those, and we'll try and weave the results of those polls into our discussions as we go along.

Now, the final introductory matter is I need to note that this session is being recorded and may be uploaded onto our website.  And, I need to let you know that in case it causes any privacy concerns for any of you, there's not a lot I can do to address that other than ask you perhaps just to drop off the line if that does cause you any problems.  But I need to let you know that the session is being recorded.

So it seems to me that CCS is back on Policy Makers agenda in a way that it hasn't been for many years.  And I recall when I was first introduced to the concept of carbon capture and storage in about 2010, it was following amendments that were made to the Commonwealth Offshore Petroleum Act to incorporate a greenhouse gas storage regime into that Act.  We were doing some work at the time for a number of clients that held offshore petroleum tenements and they were, of course, interested in understanding how the new geo sequestration regime, the new carbon capture tenement regime that was introduced into that Act, would work.  At that time those amendments were introduced in anticipation of the carbon pricing mechanism being introduced into Australian law and it appeared at that point as though a wholesale economy-wide carbon price would provide the market incentive for the broad uptake of carbon capture and storage across a range of sectors.

But, of course, you know, the carbon pricing mechanism has passed now into history, in an Australian context, and it seemed to me that as a consequence of that, carbon price for appeal, that somewhat, interest in the technology has waned.  And certainly, it seemed again, the case in those years that, to the extent that carbon capture and storage played a significant role in Australia, it would be allied with the development of clean coal.  It was seen very much as a technology that would be applied in the power generation sector to enable the decarbonisation of coal fired power.

Certainly, the world has changed an awful lot since then.  We've now got, you know, incredibly cheap renewable energy coming online, renewable generation now is cheaper than new coal fired stations, without CCS incorporated into them.  And so, it follows from the change in the relative cost of those technologies that the development of coal with CCS or the retrofitting of CCS to existing coal, is just simply not going to be economically viable.  And so, you know, the domain where CCS was perhaps seen as being potentially most applicable in the Australian context, it seems that the future of CCS is likely to lie somewhere else if, indeed, it's to have a future.

So it seems, you know, appropriate, therefore, that discussions around CCS have become, you know, more nuanced and there's a greater degree of discussion about the particular technologies that CCS might work most efficiently with and for those that have read the low emissions technology statement that the government has recently released. You can see that they have flagged some areas where they foresee CCS playing a role.  And what we're going to do today, and particularly through Alex, is just explore, you know, some of the thinking that underpins that statement and explore some of the areas where CCS, you know, may grow to have a particularly important role in the Australian context.

So, just to, sort of, highlight on a couple other points that statement makes.  The low emissions technology statement notes that large scale deployment of CCS will underpin new emissions … new low emission industries including hydrogen and provide a potential decarbonisation pathway for, hard to obey, industries such as natural gas processing and cement.  The statement also notes that CCS offers strong potential where a facility produces a pure and high pressure carbon dioxide stream as this negates the need for capture technology.  Such processes include oil and gas extraction, natural gas processing and coal gasification or methane reforming for hydrogen production.  So you can see that the Commonwealth Government have really identified a number of particular industrial settings where they see CCS as being most applicable in the Australian context.

Now that statement also sets a stretch goal of providing for CO2 compression transport and storage at under $20 per ton.  And if it was the case that that $20 target was met, then you can, you know, you can see that that CCS would start to be competitive without a long-term form then if I, you know, contrast that $20 price with the price of, sort of, $13 or $14 per ton that we see the ERF option being conducted by the Commonwealth Government in recent years, you know, achieving prices of around $13 or $14 per ton.  You can see that the, you know, the cost of CCS is starting to move into the ballpark of other forms of abatement.

The government's also, you know, gestured towards some of the regulatory reform that might be necessary or useful in support of CCS, so there's work underway to develop a new method under the Emissions Reduction Fund to enable CCS.  And, of course, there's talk about changing the mandate of Arena and the CFC onto a more technology neutral platform to enable those organisations to provide funding for CCS as well.  So you can, you know, you can see that the government have started thinking through what the challenges to deployment will be.  And, you know, time will tell, you know, how effective those are and what other regulatory reforms and support will be required to take this technology forward.  

So, look I wasn't going to say anything more by way of introduction.  I'm going to hand to Alex in a moment.  I'm just going to though, firstly, launch the first poll that we've got.  So, if I can …  there it goes.  So if I could ask everybody to click on, you know, which of those answers there they regard as being the primary barrier to CCS deployment, and while I do that, I'll just introduce Alex.

So, Alex is the General Manager of Commercial at the Global Carbon Capture and Storage Institute, as I mentioned a moment ago.  He joined the Institute in 2016 and he's accountable for managing the Institute's consultancy services and thought leadership research.  He's a physicist who lost his way and got an MBA, he tells me.  The first 12 years of Alex's career were in government and the university sector, focused on Radiation Management and Safety, Nuclear Policy and Environmental Regulation and Policy.  In 2004 Alex left the Australian Government where he was an Assistant Secretary in the Environment department, to join Rio Tinto as the Environment Safety and Health Manager for the Ranger Uranium Mine and he subsequently had a range of other roles at Rio Tinto Energy and Rio Tinto Coal before joining the Global CCS Institute in 2016.

So Alex, I'm going to hand to you now, hopefully I can access the answers to the polls, there we go.  So you can see … thank you to those that have participated in that.  So you can see that overwhelmingly people regarded costs as the primary barrier for CCS, then risk of leakage and technology development being the other two factors.  So with that introduction, Alex, and with that point there is to what our audience regard as being the largest barriers, I'm going to hand to you now and you can set us straight in relation to those matters, so, thank you very much, Alex.

AZ: Great, well thank you very much, Jeff.  And thanks for the opportunity to speak today.  I'll just spend 30 seconds advising the audience what the Global CCS Institute is.  We're actually a global institute, we're not for-profit, we have 70 something members now, I think.  Both private sector and public sector and our mission is to accelerate the deployment of carbon capture and store it for the purpose of climate mitigation.  Offices here in Melbourne, one in Tokyo, one is Brussels, one is Beijing, one in Washington DC, but a small company, total staff complement of less than 40. 

Okay, so we'll get straight into it, so what I'll talk about briefly over the next 10 minutes or so is my observations of what we've seen globally around CCS over the past little while, couple of years.  I'll talk a bit about what I think the drivers are for what we have seen.  I'll talk a bit about what the Australian Government has recently announced and my views on that, and then we can hopefully have some discussions and questions after the next speaker tells us what's happening in Europe and in the UK.  

So I guess the headline that I would draw your attention is that we've seen very significant growth and interest in carbon capture and storage over the past couple of years.  In particular, over the past 12 to 18 months, and what's my evidence for that?  Well, we track the development of CCS projects, both those that are operating and those that are in construction or in planning.  And we've seen very strong year on year growth from 2017 onwards.  That pipeline of new facilities is growing and has been growing strongly, year on year, and when we launch our next global cap, the global status of the CCS report, which is, will be early December, I think.

You'll see that that has continued in 2020.  In fact, now it's difficult for us, as a small company, to keep track of all of the new developments, which is a nice problem to have if you're in the CCS business.

So, for example, last year, we added about 10 new projects, new facilities to our core database.  These are facilities that have entered in the pipeline and our infeasibility studies, or field studies, for example.  And there are more than that which we're currently vetting.  We actually have a backlog of facilities which we are vetting to determine whether or not they're actually real facilities or just academic studies. Because we don’t report academic studies.

Anecdotally, we've seen our membership grow enormously over the past 12 months.  I think we've added 15 or 20 new members.  They include large companies, small companies, and some governments.  Our small consultancy business that I run has been literally fully subscribed flat out since April last year. So, you know, I think, I think they're pretty strong indicators that the market for CCS related services, and therefore the interest in the market for CCS itself, is certainly growing, and growing quite, quite strongly.

The other interesting thing that I've observed is that the nature of the work that we're doing, both as part of the member services we provide to our members, particularly our larger members, and the consultancy work that we provide to clients on a consultancy basis.  The nature of that work has changed. It's changed from what I would describe as general advice, quite fluffy in some circumstances, a couple of years ago, around CCS, to now being much more focused on specific real deployment opportunities, investment opportunities.  Much more focused on deployment, so it's become much sharper, and much more real, I guess, is how I would describe that.

So, everywhere I look, what I see is significantly growing interest in carbon capture and storage.  One of the very significant things that has emerged over the past couple of years is the emergence of hubs and clusters, and there are good reasons for that, of course.  CCS is a large industrial technology that you can apply across any … a large range of industries.  It's, in fact, it's a number of technologies.  And like any other industrial technology, its cost benefits enormously from scale, from economies of scale.  So now we are seeing new projects emerge, which are almost always, I'm going to say always, but there … I've no doubt there's probably an exception there which someone will draw to my attention, I'm sure, but almost always, or always, associated with hubs.  Where the economies of scale associated with shared use of infrastructure for CO2 compression, transport and storage deliver really quite significant reductions in the cost of CO2 transport and storage.

So what's driven this renaissance, I guess, in CCS.  Well, I think, I think fundamentally it goes to an increased recognition of the urgency around climate action, around the world.  You know, no longer are we talking about significant emissions reductions by mid-century.  Now we're talking about net zero.  That is the language of climate change.  It's gone from two degrees celsius to 1.5 degrees celsius.  We see a growing number of governments around the world, and literally, literally hundreds of companies, some very large corporations, that have committed to net zero targets by the middle of this century.  And this has driven much more rigorous, much more detailed analysis of what's required to achieve net zero.

And when one does such an analysis, essentially you always get the same answer.  And that answer is the lowest risk, lowest cost pathway to net zero involves everything. You need absolutely everything, including the kitchen sink in order to decarbonise the global economy and CCS is just one of the things that you need.  So, I think what we're also starting to see is a reduction in the destructive counter-productive technology tribalism, as I call it, which sets renewables against CCS against nuclear.  You know, that's counter-productive, it's disruptive, it is a significant threat to effective climate action.  I think that's now starting to reduce, there's a much more mature debate emerging now, which is good for all involved, and ultimately good for the global climate.

So this increased recognition of the need for climate action has driven a number of things, I mentioned one already.  The language has changed to net zero, there are now net zero commitments.  But ESG, environment, social and governance factors are now playing a much stronger role in starting to cause boardrooms of companies with large carbon dioxide footprints to look at CCS as a way of mitigating their climate and climate policy risk.  These days E is, to a significant extent, equals climate.  Of course, other factors associated with environmental management are also … remain equally important, remain incredibly important.  But, but if you look at how the E dimension of ESG is driving activity and investment and risk mitigation activities, I would say that climate has a very strong representation there.

So, climate risk is rising up the risk register of large companies, and those which have a large CO2 footprint, of course, in some instances, CCS is quite literally the only option available, in order to significantly reduce the emissions from their value chain, from those activities.  So that's driving increased interest from the private sector, increased investment, increased research, and some of the consultancy work that I mentioned earlier that we are able to do.  One of the other things which has emerged over the past 12 months to two years, I guess, is hydrogen.  I'm going to say re-emergence of hydrogen, because I remember a decade ago there was a lot of enthusiasm about hydrogen and then it all went away.  It was all too hard and we didn't hear anything more about hydrogen until really, quite recently, maybe two or three years ago.

So, what's different?  Well, quite frankly, everything is different.  This time around the fundamental drivers have strengthened, the technology has improved.  There is a lot more money going into the development of technologies, both for the production of hydrogen and for the utilisation of hydrogen.  And, of course, CCS is one of the technologies that can produce zero or near zero emissions hydrogen and, in fact, right now, has a significant cost advantage over renewable hydrogen using electrolysers and it's likely to remain the case for some time, almost everywhere around the world.  So, that's driving growing interest in hydrogen and if you look at the technology roadmap that Jeff mentioned earlier, which I'll talk a little bit more about shortly.  But if you look at the strategy that the UK has developed, that we'll hear about from the next speaker, from Philip, you will see that hydrogen plays a role, and quite a significant role.  And for good reason, because it's, it's zero emissions, a point of view, so as long as it's produced in a clean way, then it can play a very significant role in decarbonising transport, particularly heavy transport, where batteries don't really have the energy density necessary to make sense.  It can be decarbonise various industrial processes where hydrogen can be an input, a feedstock.  It can also decarbonise stationary energy.  And you can use it to dispose methane in your reticulated gas supply.  So helping to reduce emissions from domestic use of methane, but as well as producing a source of zero emissions, high heat for industry.  Where electricity is simply can't provide the temperatures high enough for those industrial processes in a practical, in a practical way.

So, production of hydrogen.  Another strong driver for interest in CCS, because it's operating right now around the world at the scale.  There are seven of these things operating, producing hydrogen between a few hundred to a thousand tons of clean hydrogen per day.  With carbon capture and storage, so literally orders of magnitude larger than the largest renewable hydrogen producing facilities right now.  So that's driven a lot of interesting carbon capture and storage.

So, I think … why has the Australian government included CCS in its technology investment roadmap, which the Minister announced a week or two ago.  Well I think they've done the maths, you know, and they can see that CCS has the opportunity to make a significant contribution to emissions reduction, along with everything else, right, along with everything else.  Both globally and, in particular, in Australia.  So that roadmap, as Philip mentioned earlier, sorry, as Jeff mentioned earlier, sets targets.  It sets a target of $2 per kilogram for the production of clean hydrogen.  I would argue that we're very close to that right now, here in Australia, from fossil with CCS.  It also sets CCS explicitly as one of the priority technologies, and it sets a target for the compression transport and storage of carbon dioxide at $20 per ton a list.  Now, why have they done that?  Well because CCS is not just one technology with one cost, CCS actually is a whole family of technologies.  And the capture cost is the part of the CCS value chain which has the broadest range of costs, depending upon, right down to the simplification, the partial pressure of carbon dioxide in your gas stream.

In simple terms, low concentration gas streams, such as those which you get when you burn fossil fuels like gas, are higher cost to capture.  High concentration, high pressure gas streams, like you get from the gasification of coal, to my hydrogen, for example, or from gas separation to produce LNG which is effective, which seen significantly growing emissions in this country and will continue to see growth in emissions.  The cost of capture there is, approaches zero, because you have, already, a near pure, if not pure, stream of carbon dioxide and, in some circumstances, at high pressure.  So, all you're left with is compression, transport and storage.  So the government has set a target of $20 per ton for the compression transport and storage.  And there are significant low cost opportunities available right now in this country.  Where, I think we can get very close, if not, we can actually hit that target in the short-term.  I would say there is probably two million tons of abatement utilising CCS available right now at, if not $20 per ton, certainly less than $25 dollars per ton.

Particularly, if lower costs sources of the capital are available, such as that which might be provided by the Clean Energy Finance Corporation, if the legislative changes necessary for it to be able to support this is able to pass through the parliament.  So, the other significant factors, of course, associated with that investment roadmap is significant new money is being made available from the Commonwealth Government to support these technologies.  $1.9 billion is going to Arena and … mostly Arena, which is fantastic. There are $70 million specifically to support the establishment of hydrogen export hubs in Australia, and another $50 million to support the scale up of CCS in Australia.  So we come back to hydrogen once again, of course we already have fairly significant foreign direct investment, in the state of Victoria, where I am, in the hydrogen energy supply chain project, and that direct investment is coming from Japan.

So Japan is actually leading the way in terms of driving demand for zero emissions or low emissions hydrogen as part of their broader strategy to decarbonise their economy.  They've invested in a hydrogen energy supply chain project here in Australia, the intention of which, or the purpose of which, is to prove the transport logistics of transporting up, producing hydrogen from brown coal here in Victoria and transporting it up the Kobe.  They built the gas fire or they're building the gas fire, they've built the export and receiving terminals and they've actually built a ship to transport the CO2 which is undergoing sea trials.

Japan has also invested in hydrogen production in Saudi Arabia, we had the first shipment of, actually ammonia, so hydrogen in the form of ammonia, transported from Saudi Arabia to Japan.  I think it's probably on the seas right now, it probably hasn't arrived yet in Japan.  That's produced from fossil fuels with carbon capture and storage.  They're also trying to develop clean hydrogen production, investment in Brunei, I think that's from gas with carbon capture and storage.  

So the opportunity for Australia to carve out a niche for itself in providing large amounts of zero emissions hydrogen, to what is, right now, an Asian market, but which will certainly grow, is not being lost on the Australian Government, in my view, and hence their investment, early investment in trying to support the development of that clean hydrogen technology in this country. Remember, of course, at the end of the day, this is going to be a market and the supplier who is able to supply reliably at material volumes, you know, of the scale of thousands of tons per day, of hydrogen, at lowest cost, will win the market.  And I think that's the prize that the Australian Government is trying to win as part of its investment strategy.

So, I know we're short on time, I should probably wrap up there, I guess.  The final question I'll answer is the … with respect to the poll, you know, what is holding CCS back globally and in Australia. And the number one answer there was cost and that's partly right, but it's more around the business case for investment.  The cost of CCS is actually significantly lower than the cost that many other abatement policies which are currently very well established.  So, for example, if you convert the current value of renewable energy certificates to a cost of carbon, the abatement cost from that very important and successful policy endeavour is north of $40 per ton of carbon dioxide abated.  

CCS can deliver millions of tons, literally millions of tons in one project, right now, at certainly less than $25 per ton, and possibly less than $20 per ton in Australia.  And all that is required are the policy settings that enable private sector investment to proceed in a way which enable those private sector investors to make a return on investment.  So, I think I'll stop there, but looking forward to lots of interesting questions in the rest of the session.  Thank you. 

JL: Thanks very much, Alex.  That was, that's very interesting, and certainly, on the topic of questions, we've already got a couple of questions coming through, so I encourage people to keep their questions coming.  So look, yeah, following that discussion about the, sort of, the current state of play, both in terms of the technology and the cost curve and the objectives that the Australian Government is seeking to pursue.  We're now going to hear from Philip Vernon.  Phillip's one of my partners, he's based in our London office, as I've said.  He's Ashurst's Client Relationship Partner for the UK government.  So he's been involved in a number of major infrastructure projects, acting for the UK government and for public sector regulators in the UK.  So that includes acting for the UK Energy Regulator on the UK government's new nuclear program, acting for the UK Water Regulator on its latest program for major water infrastructure upgrades.  And one of his current mandates is acting for the UK government on its carbon capture use and storage programme in the UK.  

Now, just before I throw to Phillip, and … I've neglected to launch the second poll.  So I'm just going to, very quickly, launch that second poll.  There it is.  So, thanks very much for people's participation in relation to the first poll.  And, if people can equally respond on this one as well.  Give me a moment while people do that.  So, Philip, you know,  brings you a unique perspective to this discussion.  As he's, you know, right at the heart of the action, so to speak, in relation to the work that the UK government is currently doing in this space.  And I think it's, you know, as we'll hear from Philip, the UK government is a little further up the curve than the Australian government is in relation to putting in place the policy framework and thinking through some of the infrastructure challenges that really will need to be resolved to develop scale in relation to carbon capture and storage.  So hopefully we've now got some data that we can share there in relation to that policy.  

Yeah, we can see … look the focus that people on this broadcast have is, yeah, focused largely on capture and storage with some carbon transport and usage, and other also attracting interest.  So I think, hopefully, Phillip will be able to talk to the way in which each of those issues is being dealt with in the UK.  So, again, I encourage people to send their questions through.  I've got a couple, but it would be great to get some more, and with that I'll hand over to Philip.  So, thanks very much, Phillip.

PV: Thanks Jeff, and good afternoon to you all from a rather dark early morning in the UK.  And it's been really interesting hearing what Jeff and Alex had to say about the Australian position in the CCUS market.  And I'm going to try and give you just a bit of a snapshot on the UK Government's approach to CCUS.  I'm using … the government uses the CCUS acronym, and I'll come onto the U a bit later in the session.

And I'm going to divide this segment into two parts.  Firstly, I'm going to look at the wider policy objectives that drive and inform the UK government's approach to CCUS.  And then, secondly, I'm going to look at some of the structural thinking the UK Government's been employing as to how best to catalyse CCUS.  And obviously the premise there is the CCUS market does need a catalyst, and Alex mentioned renewables market, which clearly has benefited from government intervention around the globe, and wouldn't be where it is now without that.  And I think that the UK Government's view on CCUS is it also needs a kickstart.

So, just starting first with policy objectives, I'm just going to pick out three, and the first is the UK government's policy on net zero, which Alex also alluded to.  The UK government claims to be the first major economy to set a target in law, with its net zero 2050 target.  And that policy objective alone is driving the CCUS approach by the UK Government.  A second policy is building resilience into the UK economy, and CCUS investment is seen as potentially part of the, sort of, backbone, I suppose, of decarbonisation of the UK economy, making it fit for the future.  But also, in the nearer term, CCUS investment does provide an economic stimulus which is important in the current headwinds that the UK is face facing, partly because of COVID, as, indeed, the rest of the world is facing in that respect.

The third policy objective is perhaps a little bit parochial to the UK, but is a levelling up agenda.  In the UK there is concern over disparity between different regional economies and CCUS investment naturally falls to those industrial heartlands in the UK which tend to be towards the north of the UK.  So it does help contribute to that levelling up agenda, as well, in the UK.

What I wanted to do in the second part of the session was now pick out three particular aspects of the structural thinking that UK government's been doing in its approach to CCUS.  My main source for this is the August report that the UK government issued, which you can access online, and that's part of an ongoing consultation process that the UK government is currently undertaking, and that's the latest staging post in that process.  So the first of those three key aspects I want to draw out is the approach to business modelling.  And interestingly I see one of the questions we've had is about the commercial commercialisation of CCUS, and I think this is key to that.

And what the UK government has concluded is that you can't actually create a business model for the full CCUS chain, you actually have to break it down into its component parts.  So their approach is very much to look at the individual components of the CCUS chain, and by that I mean, starting with the capture plant.  So, for the UK government, the main focus, in terms of catch plant currently, is powerplant and industry plant, steelwork, cement works, etc, but also looking forward, hydrogen production plant, as Alex mentioned, and I'll come onto in a minute.

So they're looking first at the capture, carbon capture element of the CCS chain, and then moving on separately to look at the transport and storage business modelling and working out how that can be made economically viable.  And obviously they're conscious that, in doing that, they need to make sure that those different business models will interact sufficiently.  And so some of the key issues there looking, across the CCUS chain, include the risk allocation approach, making sure that project participants in each part of the chain are bearing the risk the best able to manage.

There's also been a focus on understanding the impact of a transport and storage fee, making sure that's adequate to fund the transport and storage network business.  But also, is at the right level to incentivise the use of a transport and storage network by the capture plant emitters.  And then thirdly, there's also been a need to understand carbon pricing, which Alex has also referred to.  In the UK, we currently have the EU Emissions Trading Scheme which puts a price on emissions allowances.

But, as you'll know, the UK is about to depart from the EU.  And it will lead to set up its own emissions trading scheme or other, some other form of carbon tax pricing.  Those are all key components to making a workable CCUS economy.  Second aspect I wanted to draw out is the low carbon hydrogen, and this is more of a look forward element of the thinking.  But the preponderance of current anticipated uses of a CCUS network would be power and industry.  But hydrogen is seen as an increasingly important component of the whole economy, and obviously, with that, comes considerations of how do you actually incentivise the use of hydrogen.  So it actually feeds into wider issues around how transport networks will be incentivised to use hydrogen in the future.

So hydrogen is definitely seen as one of the potentially larger uses of a CCUS network in the future.  Then the third and final aspect I wanted to draw out was carbon utilisation, that's effectively the U in CCUS.  The UK government has already provided funding for a pilot scheme in the UK, which is reducing the first purpose built carbon capture and usage plant, producing soda ash and soda bicarbonate, used in glass and food and pharma industries.  This is still very much an emerging market.  But is also seen as an important part for the future in the CCUS economy.

So, summing up, the UK government's … why the policy objectives are creating a real drive and ambition, particularly that net zero target in the CCUS world.  It's taking a systematic approach to breaking down the business models to ensure that there is a commercially viable proposition. I'm working out how government needs to intervene to make that happen.  Given the storage available in the UK, in the North Sea, it sees this as a potential area where the UK can be a leading player.  And, actually, the catalyst for the CCUS needs … what it recognises is, that catalyst for the CCUS, needs to not just look at the near term issues, but also to look at the, sort of, longer term issues about how the CCUS economy might look with the advent of hydrogen and broader carb and utilisation.  So, I'll leave it there.

JL: Thanks very much Phillip.  I'm particularly interested in the observations that you've made about the business modelling work that's going on, and I'm going to ask Alex a question about that in a moment.  But, I'll just encourage, again, people to, to drop their questions into the questions function on the on the toolbar.  We've got a couple of questions that have come through already, and I'm going to ask one of those of our panel, in a moment.  Just giving people a chance to start to think about their own questions.  So the first question I'll ask is, how do you respond to criticism that CCS is greenwashing and that it just allows the continued production of fossil fuels?  I don't know, Alex, whether that was something that you wanted to respond to?

AZ: Absolutely.  So you may not have noticed this but fossil fuels actually don't CCS to continue production.  Fossil fuels are continuing production couldn't quite nicely.  Thank you very much, if you're a fossil fuel producer.  There is certainly going to be growth in demand for natural gas, for example, it's often portrayed as one of the transition fuels.  But natural gas, actually, it's not a zero emissions fuel.  If you burn it to make power, you are still 400 odd kilograms of CO two per megawatt hour. Which is not consistent with 1.5 or 2 degrees or a net zero approach.  You know, coal continues to be the background of steelmaking.  Coal continues to be the backbone of energy, electricity generation, particularly in Asia, where it's growing.  

So, I don't know whether there's any other people, other than Philip, from Europe, on this call today.  But, if you're in this region of the world, that's very clear.  But if you're in Europe, perhaps it is less clear.  Just the extent to which coal continues to grow in Asia.  So, I think the simple fact of the matter is that fossil fuels will continue to be produced for, goodness knows how long, with or without carbon capture and storage.  And what carbon capture and storage provides is the opportunity to use those fuels in a way which removes their very significant downfall or disadvantage which, of course, is a carbon dioxide, greenhouse gas emissions.  Let us not also forget that fossil fuels are used in many other things other than power generation.

So, that's how I generally respond.  Fossil fuels are continuing to be and will continue to be produced.  CCS will provide the mechanism to use those fossil fuels in a way which is consistent with climate objectives.

JL: Okay.  Thank you Alex.  We've got another question here which asks, how critical is proximity to suitable storage sites in relation to the relative cost of CCS implementation?  So, Philip, I don't know whether that's something that the UK government has been doing some work on, is there a concern that CCS is only going to work if you can identify storage sites in proximity to source sites?

PV: Yes.  I think the UK government's approach is to be looking at this by reference to clusters, in different regions of the UK, and therefore, there is a, sort of, economy of scale and proximity.  I think that is a factor.  The UK has been looking at clusters in the north-east of England, focused on the North Sea, sort of, geosequestration areas, and then also looked at north-west of the UK, for the Irish Sea.  And therefore, there is a sort of economic sense in trying to focus on clusters of powerplants or industrial plants that are closer to the, sort of, offshore storage sites.  

Having said that, I think that … I was chatting to Alex yesterday, I think some of the costs of the actual pipe work are not necessarily the greatest cost in this equation.  And so I don't think that creates huge limitations but certainly there is a common sense, I think, in actually using clusters around particular storage sites.

AZ: Absolutely, if I can just add to that, in fact, almost every CCS facility that's operating today transports their CO2 between tens to hundreds of kilometres in a pipeline.  And there are some, which are fortunate, their storage resources are nearby, but most of them, through the pipeline.  What's more important is scale.  And Philip mentioned that, with respect to clusters, and what clusters do is they bring scale.  So if you've got sufficient scale, piping your CO2, 1 … 200 kilometres to your storage resource, really doesn't add a lot of cost.  You know, it might add less than $10 a ton to your total cost of CCS.  For say 200 kilometres.

PV: And we also have the added advantage in the UK that nowhere is very far from anywhere, in the UK, compared to Australia, so.

JL: It doesn't, kind of, work that way down here Philip.  Yeah, we don’t have the same issues that you have.  Look, we've got some more questions coming in and I certainly haven't run out of questions of my own. But I appreciate we've now got ourselves to just after quarter past six. We had intended to wrap this at 6.15, but I'm certainly happy that we extend by another five minutes or so and see if we can get another two or three questions in.  But, look, I'll appreciate that some people will need to go, and, if you do, then certainly we'd like to thank you very much for your attendance and hope that you've enjoyed and been stimulated by the discussion.  But those of you that can hang around for another few minutes, then please do so, and we'll have some more questions and discussion.  Alex, I was just wondering if you could reflect on the work that you've been doing and observations you might have about the business model or the business models that are required to implement CCS at scale. We've heard Philip talk about the way in which the UK government's approaching this question, which is to, sort of, break down the component parts and look to build business models around each of them. But ultimately, you know, we need to be able to get, at some stage, to a bundled price.  And somebody's going to have to, sort of, you know, to make this work, somebody's going to need to make money out of it.  And somebody's going to need to be able to stitch all of the different services together to enable an end to end product to be delivered.  So I just wondered if you can reflect on, what you see as being necessary, in terms of infrastructure, or in terms of the, you know, the business modelling that would support that infrastructure to actually enable the scale, that you've described, to be developed?

AZ: So ultimately there needs to be a value on storing your CO2 rather than emitting it.  I mean, that's a no brainer, right.  And there is many ways you can do that, you can do that through a reward. You can do that through a tax credit, like they do in the US.  You can do it through a carbon price, like there has been adopted in Europe, so there are many ways of doing that.  What we are seeing is the desegregation of the CCS value chain.  

So, whereas a decade or more ago, there tended to be vertically integrated projects, you would have one company or one project that was looking after capture. Was trying to build a pipeline, was looking after the storage.  We're seeing that, now, is no longer the case, in the majority of cases.  New facilities often tend to be a disaggregated value chain, where you have one particular operator, who is a specialist in transport and storage, doing the transport and storage, because that's what they are good at, that's what they can deliver competitively, cost competitively.  

You have another source of that CO2 capturing the carbon dioxide and providing it into that network. And sometimes you might even have a third doing the storage, particularly if it's being used for oil recovery, where there is a third party, oil and gas producer. Who does this every day and I can store the CO2 very cheaply and very effectively.  But ultimately there needs to be a value attached to putting that CO2 into the ground, rather than putting it into the atmosphere.  Because if this is not profitable, no one's going to invest in it.  And that is entirely a function of government.  

So what can government do.  Well they can establish a value on carbon dioxide.  As I've mentioned, many ways of doing that.  It can provide support to this industry to kick it off, just like governments have done for telecommunications, for transport, for power generation, in renewable generation, and many other industries, when they have been … kicking off, government has been the first investor, and often the first owner of infrastructure that's required to enable the investment of the private sector.  

You know, I personally work with Columbia University, Julio Friedman likes to say that every week, between now and 2030, needs to be infrastructure week.  That is absolutely true, whether it's infrastructure for CCS, for CO2 transport and storage, for hydrogen, transport and storage for power generation, distribution lines to connect renewable sources to demand sources, etc.  Really, that infrastructure, which makes no sense yet for private sector investors to invest in, is an area where governments, I think, should be putting a lot of support.  

Because if that infrastructure is available and there is a necessary value on CO2 storage, then the private sector will do what it does, and that is invest.  And that will bring down the cost, as, in exactly the same way as we've seen pretty much every other industrial technology, the most topical example, of course, being renewables.  

JL: Thanks, Alex. Now, we've got another question here that's focused on, on CO2 usage. So I might throw this one to Philip.  So the question, whoops, sorry I've just lost the question.  There we go.  The question that has been asked is, is there any cumulative abatement benefit from a lifecycle emissions approach looking at CO2 usage?

PV: Yes, sure, I mean, I didn't touch on that in my segment, and I think there is … that is a potential part of the economy.  For the CCUS.  I would say the prime focus, I think, at this point, would be, in terms of current initiatives, would be on the powerplant and industry plant in the UK.  But actually the, you know, the government's thinking is very much also looking forward, as I mentioned, to those other, sort of, capture plant, like hydrogen production, but also the potential U in CCUS, the usage of carbon.  And I think that is seen as a potential important part of the sort of value, if you like, to carbon.  Because actually there's a, sort of, cost, I suppose, that you could say, of, sort of, transport and storage.  But actually if revenue can be derived from the use of carbon, that creates a different dynamic to the overall economics.

JL: Thank you.  We've got a question here about, you know, how do we manage the politics of this and how do we get people to start to, you know, buy into a belief in CCS.  So how do we get over the widespread view that CCS, in inverted commas, doesn't work?  What are the messages we need to be giving around the ability to manage geosequestration of CO2 underground?  Alex, do you think that CSS has a PR problem?  What do you think the way to be communicate the message is?

AZ: Enormous PR problem. It's unfortunate. So, yeah, it does have a PR problem. And the reason for that, quite frankly, is that it has been associated with fossil fuels that are unpopular, that are seen as the cause of climate change, because of the high emissions associated with fossil fuel use. And the view that that CCS is some sort of fig leaf to enable business as usual for fossil fuel producers. It's one that's been propagated quite successfully, by some.  So, also, it's not as visible as renewable technology. 

So, there's another question here about how many how many facilities are successfully operating.  Well, I actually can't tell you, exactly, it's more than 20.  And you can look at our … you can look at our CCS Status of CCS Report, which will be released in December, the updated number will be in there. But it's more than 20, with, cumulatively storing, something like 30 or 40 million tons of CO2 per year.  And these are large facilities, right.  It's not like solar, for example, where people are very familiar, they look around the neighbourhood, at least here in Australia, every second house has got three to five kilowatts of solar PV installed on the roof. It's nowhere near visible.  

So, unless you actually understand where CCS is operating now, and has been operating for literally almost 50 years, since 1972, for the purpose of enhanced oil recovery, and for pure storage purposes since 1996, you just wouldn't know. So, you know, try … but I think that understanding is starting to grow now.  I think the maths, you know, the diabolically difficult mathematics of the feeding climate change, is forcing many to have a closer look at this, to do the research required, to understand that, in fact, CCS is operating today. It's real and it's absolutely necessary.  

JL: Okay, thanks Alex. Look, we might just ask one more question, and that relates to the liability regime, or the potential liability regime that applies.  So, Alex, you'd be aware of it, in the Australian context, under the Commonwealth offshore petroleum regime.  There is an ability at the end of the operating life of a reservoir, for that reservoir to be capped and for a monitoring programme to be undertaken, and then for that tenement to be surrendered back to the Commonwealth. Now there's a, you know, there's a hook in that in the sense that the Commonwealth Regulator needs to, you know, effectively except the surrender of that reservoir back to the Commonwealth, and they've got an option as to whether or not they do that.  

So the prospect that a tenement may not be capable of surrender, or the surrender might not be accepted by the regulator, you know, raises the prospect of the operators of those reservoirs holding a long-tail liability, you know, long after they've ceased to receive any remuneration for the storage services that they're providing. So, I just wonder whether you've got any observations in relation to, you know, questions about liability, and I also wonder, Philip whether, you know, that's an issue that's playing out in the UK.  And whether that's seen as being, sort of, a particular impediment to, you know, the development of business models in this space.

AZ: Well, no doubt, liability is an important issue, but it's far from a show stopper.  So, as I've mentioned, there's more than 20 facilities operating right now.  The Australian legislation made provision for the Commonwealth to take liability off the operator between 15 and 20 years after they finish injection. And, essentially, the test that the Australian government would apply there, is it fair to be behaving in a way which is acceptable and expected.  

We actually understand, when I say we, I mean scientists, particularly the oil and gas industry, understand very well how liquid fluids behave in the subsurface, including carbon dioxide, curtesy of more than 100 years of oil and gas production and a lot of research, in more recent times, at … specifically focused on CO2 storage.  So, it is, in an appropriately selected storage reservoir, which of course, must be the case, the risk of leakage to the atmosphere is diminishingly small. 

It's not zero, the risk of nothing is zero.  But it's so close to zero, as to be manageable, in most circumstances, even where the liability attached to that is perhaps a little uncertain. Having said that, the Australian legislation and other legislation do make provision for the transfer of that liability, subject to certain circumstances, and that is an important issue.  But there are commercial ways of trying to mitigate the risk associated with that liability.  And in some research that we have done, in talking to insurers, they've said to us, look, we ensure far more risky things than this and the risk of carbon dioxide leaking from a storage facility.  So, it's something they can absolutely take on, as an insurance product.

JL: Okay, Phillip, did you have anything to add to that? I think I'll wrap us up in just a moment. So, Philip, if you had any further remarks in relation to questions of liability from the UK perspective, we'll finish with that.  

PV: Sure, I mean, that's been really interesting to hear what Alex has got to say about the risk of leakage.  And, you know, as part of what I alluded to, in terms of risk allocation analysis, that is one of the risks that, you know, is being considered.  But I think the important thing is that the government is trying to look, in the UK, at the risks over the whole profile of the project, including decommissioning costs and any risks associated with leakage.  And so I think that is an important consideration but, I'm quite heartened actually, by what Alex has got to say about the actual risks involved there.

JL: Okay.  Look it's 6.31 everybody. So thank you very much for those of you that have that have stayed on to listen to that discussion in the last 15 minutes. We appreciate people's patience and also their interest in the topic. I'm just going to end by thanking both Alex and Philip for their time today. Both of you have contributed your expertise and your insights in relation to this fascinating topic, so, thank you for your time. 

Thank you for everybody that has attended. I hope that you found that to be a useful and stimulating discussion. And, of course, get in touch with any one of the three of us if you'd like to continue with the discussion.  This webcast will go up on our website and we'll circulate it to those that couldn't attend. So, certainly, let your friends know, and we'd love to be in touch with all of you again in the future.  So, thanks very much and have a good evening, and thanks Alex, and thanks Philip.