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The Economics of Carbon Capture

image credit: Climeworks plant in Zurich
Rakesh  Sharma's picture
Journalist Freelance Journalist

I am a New York-based freelance journalist interested in energy markets. I write about energy policy, trading markets, and energy management topics. You can see more of my writing...

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  • Jun 25, 2020

Carbon capture technology is having a moment. 

The technology had mostly become unpopular after expensive experiments at power plants during the last decade raised important questions about its economic viability. As a consequence, carbon capture was put on the backburner while experts considered other technologies to mitigate climate change. But it is back in the news as the climate change threat has become more urgent and is being touted as one among several solutions to arrest global warming. 

Recently, Climeworks, a Swiss company that was one of the first startups to market this technology, was even shortlisted by the World Economic Forum as a technology pioneer. Previous recipients of this designation include the likes of Twitter and Google. 

Started in 2009, Climeworks was earlier known as ETH Zurich and sells modular CO2 collectors to companies and utilities. In 2019, it also launched the world’s first carbon dioxide removal as a service venture, which enables individuals to invest in CO2 removal from the startup’s two direct air capture (DAC) plants, one in Zurich and another in Italy. The plants consist of massive machines that, according to the New York Times, resemble front-loading machines and are equipped with CO2 filters to capture carbon dioxide. The Zurich-based startup has said it wants to capture 1 percent of global CO2 emissions by 2025. Here's a short video that should give you an idea of their plant. 

The company has impressive fund raises to its credit. But that flow of funds is contingent upon its ability to successfully cut down costs associated with an otherwise expensive technology. The expenses to remove CO2 from the atmosphere still remain prohibitive and future prognostications are not too bright. A 2011 paper concluded that DAC will never cost less than $600 per ton of carbon even at its most developed stage with gigantic industrial plants capturing a million tons per year. Scientists, like Howard Herzog from MIT, have also expressed skepticism about costs moving beyond the $600 to $1000 range, mainly due to a mix of technical and physical reasons. For example, Herzog says the process to capture CO2 requires large equipment and machinery to capture a gas that is only 0.04 percent of our atmosphere.

But a Climeworks’ spokesperson stated that the paper’s estimates, which were for the most developed stage, have already been reached at their plant. “With our first commercial DAC plant, which is far from being optimized and at a small scale, we are already at this level ($600 per ton of CO2),” claimed the spokesperson from Climeworks in an email interview. (For some odd reason, they refused to identify themselves). 

Even if the spokesperson’s claim is true, $600 per ton of CO2 is still an expensive price to extract carbon from air, especially when you compare it with the costs for carbon trading or, for that matter, afforestation, a natural system for removing CO2 from the air through photosynthesis. The cost problem is due to a mix of scale (which is small currently) and ecosystem (the market for carbon capture does not have many players), according to the Climeworks spokesperson. 

The math for calculating carbon capture expenses is a function of several factors. For example, direct air capture (DAC) machines utilize steel, an expensive metal, in their construction. The DAC market also needs to be scaled and optimized for more customers to reduce production costs. In an earlier interview, Christoph Gebald, founder of Climeworks, said the company would need to build 300,000 of its plants to be able to remove 0.3 Gigatons of carbon dioxide from the atmosphere. (I was unable to locate building costs for their plants). Then, there’s the energy source for production processes. The carbon capture machines mentioned above use significant amounts of energy. Using renewable energy sources to manufacture and run plants with DAC equipment is an expensive deal. Natural gas is an option but it doesn’t make sense to capture carbon by expending it during the production process. 

Cutting Down Expenses 

The economics for DAC technology have made significant strides in recent years. A recent paper by Carbon Engineering, a Canadian firm, provided a detailed look at important design considerations to achieve a $100 cost per ton of CO2. Climeworks is targeting a long-term goal of $100 per ton that it says may be achieved in the next 5-10 years. 

“More market interest will help us scale, which, in turn will help us reduce costs,” the anonymous Climeworks spokesperson stated. A paper released by a team of researchers at the University of Finland reached a similar conclusion. “DAC system costs could be lowered significantly with commercialization in the 2020s followed by massive implementation in the 2040s and 2050s, with plant source carbon capture and an affordable climate change mitigation solution,” the paper’s authors wrote. 

Recent policy initiatives have also kept pace. For example, the U.S. government has introduced tax credits of approximately $35-$50 for each ton of CO2 captured. Private investors have also opened up their wallets to fund the technology. Climeworks tapped a mix of government funding and private sources to launch its operations. Just this year, the company raised $75 million from an assortment of investors. It has also signed up new customers for its technology. The Climeworks spokesperson pointed to its joint venture with a host of companies to produce jet fuel using renewable resources. Among the stakeholders in this project are a wind power company, a steel manufacturer, and an energy conversion company that makes solid oxide fuel cells. 

“Reducing costs is one of our central goals in the coming years,” the Climeworks spokesperson stated and added that they already have a detailed cost reduction roadmap in place. “[We] are confident that we will reach a cost level of $200 to 250 per ton of CO2 in three to four years of time. Our long term cost target is $100 per ton, achievable within the next five to ten years.”

Rakesh  Sharma's picture
Thank Rakesh for the Post!
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