Speaker 1: Hi, everyone, So cc S taking c O two out
Speaker 1: of the air and pumping in underground to stay forever.
Speaker 1: It was wont to be a way to keep burning
Speaker 1: coal but still reduce emissions, and a way to squeeze
Speaker 1: more oil out of old wells. To be fair, these
Speaker 1: things are happening. Projects got built big ones, but it
Speaker 1: didn't scale as people who once thought it might. What
Speaker 1: happened well the shale revolution. Coal got nudged out by
Speaker 1: less emissions intensive gas fired power. So we stopped hearing
Speaker 1: about CCI yes for a while, at least for power.
Speaker 1: But it seems like CCS is making a comeback, especially
Speaker 1: in steel and cement production. The production processes release a
Speaker 1: lot of c O two that can be captured and
Speaker 1: stored and even used in making concrete. This week on
Speaker 1: the show, we've got Julia Atwood, head of Advanced Materials
Speaker 1: Research for bn F, and Advanced Materials analyst Ryan Anderson,
Speaker 1: who actually has his pH d in carrying cement with
Speaker 1: c O two instead of water. They'll walk us through
Speaker 1: the basics of CCS, where it's at now and what
Speaker 1: it would take for it to grow. Our discussion is
Speaker 1: based on a report titled c c U S applications
Speaker 1: in oil and gas, power and industry. Beanof users can
Speaker 1: get this report on dot com, beanf mobile app and
Speaker 1: the Bloomberg terminal. As a reminder, if it's not provide
Speaker 1: investment or strategy advice, and you can hear the full
Speaker 1: disclaimer at the end of the show. I'm Mark Taylor,
Speaker 1: you're Dana Perkins, and you're listening to switch on bean
Speaker 1: podcast today. On switched On, there are four of us.
Speaker 1: We've got Mark, Ryan and Julia. Hey Dana, So we're
Speaker 1: here today to talk about carbon capture and storage, or
Speaker 1: rather carbon capture utilization and storage, which are really I
Speaker 1: guess two concepts that are put together. Ryan, as we
Speaker 1: dig in, can you explain to all of us what
Speaker 1: CCS is, and then a little bit more into what
Speaker 1: the utilization part is as the add on, certainly CCS
Speaker 1: carbon capture and storage. This is where you're taking the
Speaker 1: CEO two that's coming out of a point source such
Speaker 1: as a power plant. Oh, that CEO two is compressed,
Speaker 1: transported to a site where you's injected underground hundreds or
Speaker 1: thousands of meters into most often a saline aquifer. The
Speaker 1: CEO two hopefully on every leak so it's supposed to
Speaker 1: just stay there forever, right, and it kind of turns
Speaker 1: to rock I think, is that right? In some cases? Yeah,
Speaker 1: So theoretically you're paying for this land in order to
Speaker 1: just capture something, well, to capture the emissions, because you
Speaker 1: don't want emissions in the air, so we're putting them
Speaker 1: in the ground exactly. And then the U part because
Speaker 1: storing CEO two underground is just a cost, there's no
Speaker 1: revenue that included. The U part is where your c
Speaker 1: U two is sold or used to create products they
Speaker 1: generate revenue. Most typically this is currently for enhanced oil recovery.
Speaker 1: This is where c U two is pumped into an
Speaker 1: oil well that's kind of been depleted, it's in its
Speaker 1: last legs of production, and the CEO two changes the oil.
Speaker 1: Especially it enhances production. It can takes well, it's producing
Speaker 1: five barrels per day to five thousand barrels per day.
Speaker 1: The companies that are interested in CCS as a technology
Speaker 1: and in developing it um what industries and what sorts
Speaker 1: of companies are we really looking at here. So most
Speaker 1: of the CCS or CCUS being performed currently is coming
Speaker 1: from the high concentration industries. Because they can produce the
Speaker 1: cheapest c O two. The cheap CEO two is important
Speaker 1: because they're supplying it to someone who's most likely buying it.
Speaker 1: No one wants to pay for expensive c O two
Speaker 1: when they can pay for cheap c O two. This
Speaker 1: means that the most high concentration sources of c O two,
Speaker 1: such as after gas bussing, hydrogen production, in ammoni production,
Speaker 1: ethanol production, all all these create cheap c O two
Speaker 1: that can be sold for e er. So they want
Speaker 1: it for advanced oil recovery. Who are they, I mean,
Speaker 1: who are the other buyers? Then? Yeah, so there's not
Speaker 1: a ton of other applications that were the c O
Speaker 1: two is being stored for the long term. You're probably
Speaker 1: familiar with C two being used in your beverages to
Speaker 1: make carbonated soda, but those are all kind of temporary
Speaker 1: storage of CEO two and it's released later. Industrial carbonates
Speaker 1: such as you know, sodium bike carbonate, baking soda, and
Speaker 1: fertilizers such as urea it also temporarily store the CEO two,
Speaker 1: but it depends on what happens later on in that
Speaker 1: product's lifetime, when that CEO two will inevitably be released.
Speaker 1: There's a few applications except for underground storage where the
Speaker 1: CEO two will be stored for a long time. So
Speaker 1: I am not a chemist, and I apologize to anybody
Speaker 1: who is listening that is because my question is going
Speaker 1: to be pretty basic here in that so cement companies,
Speaker 1: iron and steel companies, and then chemical companies are all
Speaker 1: interested in this. Why are they interested in cc US?
Speaker 1: So these giant industries steal cement. They have some of
Speaker 1: the largest corporate emissions of all the industries, right, so
Speaker 1: they have a handful of things they can do to
Speaker 1: reduce their emissions. C c US is in a lot
Speaker 1: of their eyes, the last level they're going to be
Speaker 1: able to pull to actually get to net zero if
Speaker 1: that's their goal. So Cement companies in general, they produce
Speaker 1: CEO two through a lot of different processes in their
Speaker 1: at their facilities, and they don't really have a ton
Speaker 1: of options to reduce the emissions from cement. And the
Speaker 1: industry is not going anywhere you need it. It's for
Speaker 1: basic infrastructure development. So in any kind of corporate emissions
Speaker 1: targets or global sustainability goals, CCUS is expected to step
Speaker 1: in to capture some fraction potentially very large fract of
Speaker 1: the industry CEO two. So here it's cement and concrete
Speaker 1: actually kind of represents a bit of a Goldilocks problem
Speaker 1: in terms of utilization. You have a lot of materials
Speaker 1: and industries that are huge, like aggregates that could soak
Speaker 1: up a lot of c O two as a really
Speaker 1: useful additive, but because they're so cheap and CO two
Speaker 1: is not, that doesn't really work. Then you also have
Speaker 1: the super specialized things like carbon nanotubes that sell for
Speaker 1: hundreds of thousands of dollars a kilogram. They're totally happy
Speaker 1: to pay a higher price for CEO two, but we're
Speaker 1: not selling very many of them right now. So concrete
Speaker 1: really represents this space where they're generating a lot of
Speaker 1: c O two, they want to get rid of it.
Speaker 1: They're going to be incentivized to get rid of it
Speaker 1: by policy and happy days, they can actually use it
Speaker 1: at a reasonable cost that fits with what they sell
Speaker 1: their product for. So that's why there's so much attention
Speaker 1: being focused on concrete at the moment. It's because they
Speaker 1: generate it, they use it, and it's gonna help make
Speaker 1: some greener, which is what a lot of people are
Speaker 1: starting to ask for Julia, I love that you brought
Speaker 1: up policy, because my understanding is that CCS is expensive.
Speaker 1: This is an expensive technology that's still in development, and
Speaker 1: we need to see some pretty massive cost declines to
Speaker 1: see wide scale adoption. So there are places where policies
Speaker 1: pushing this forward. Ryan, can you give us a little
Speaker 1: bit more ordinally, I, can you give us a little
Speaker 1: bit more clarity on where this is thriving from a
Speaker 1: policy incentive standpoint. Yeah. So in the United States there's
Speaker 1: a policy called the fort Q Tax Credit. This policy
Speaker 1: pretty much offsets the cost of capturing CEO two for
Speaker 1: many industries by providing them with tax credit for all
Speaker 1: the CEO two that capture. The European Union has their
Speaker 1: Emission Trading scheme, the EU e t S, which is
Speaker 1: practically a cap and trade program where each industry has
Speaker 1: a certain amount of emissions that they can release and
Speaker 1: they have to pay for the difference. These prices on
Speaker 1: emissions are guess fees are being put back into research
Speaker 1: for things like cc US fit are spurring its development.
Speaker 1: But these policies, they're really not as simple as like
Speaker 1: the production tax credits that we're used to seeing in
Speaker 1: the energy industry the four five Q and Ryan correct
Speaker 1: me here if I if I'm wrong, But it's a
Speaker 1: tax liability. And Ryan and I were actually talking the
Speaker 1: other day that's with the oil price shocks, so many
Speaker 1: of these companies are not doing that well. So how
Speaker 1: do you claim a tax liability if you know you're
Speaker 1: not looking at your usual year of revenues. We also
Speaker 1: mentioned the California standard. That one is tough because that
Speaker 1: one is specifically saying you have to make me a
Speaker 1: fuel that is going to be lower carbon than what
Speaker 1: you were selling before. So you have to go through
Speaker 1: life cycle analyses and you and that two dollars a ton.
Speaker 1: That's hard to access because that's like the maximum you
Speaker 1: can get. You have to have a really low carbon
Speaker 1: fuel in order to get there. So it's these policies
Speaker 1: they're they're inching their way bit by bit towards supporting
Speaker 1: the industry, but there are a lot of technical hurdles
Speaker 1: and a long way to go. Um. But what's really
Speaker 1: interesting is what California has said about direct air capture.
Speaker 1: And I'm gonna let Ryan explain that because it's really interesting.
Speaker 1: So director capture is a little bit like magic. You're
Speaker 1: taking CEO two from the air and pulling it up
Speaker 1: just the air your breathing is now CEO two free.
Speaker 1: You know, it's it's more complety in that, but it's uh,
Speaker 1: it doesn't use a point source emission. It literally is
Speaker 1: just reducing the atmosphere concentration at CEO two. Where the
Speaker 1: California Low Carbon Fuel Standard will pay you to reduce
Speaker 1: the carbon intensity of your fuels that you're producing for
Speaker 1: their market. If you are anywhere in the world and
Speaker 1: you're performing director capture and storing that CEO two underground,
Speaker 1: they will pay you. They'll pay for that entire cost.
Speaker 1: So this is the sort of thing where people talk about, Okay, well,
Speaker 1: maybe we'll just start scrubbing our air if we're really
Speaker 1: concerned about emissions and climate change, and you know the
Speaker 1: one point five degree scenario. We just stick these things
Speaker 1: all over the world and we start scrubbing the air,
Speaker 1: and suddenly problem solved. Yes, over simplification, but it isn't
Speaker 1: it comforting to know that if we truly truly screw up,
Speaker 1: there's still director capture. Well okay, so let's say there
Speaker 1: is still direct air capture and we want to see
Speaker 1: this kind defruition, Uh, the economics are going to have
Speaker 1: to be behind it. How do we get there? How
Speaker 1: do we drive down the cost of CCS or c
Speaker 1: c U s or whatever you want to call it.
Speaker 1: How do we make magic happen policy? Honestly so, the
Speaker 1: current plans for the largest direct air capture facility in
Speaker 1: the world are being spurred that this is through carbon
Speaker 1: Engineering partnered with oxy Low Carbon Ventures, the venture arm
Speaker 1: of Oxidantal Petrileium to build a one million metric ton
Speaker 1: per year c R two director capture plant, and that
Speaker 1: CR two will be used for e o R enhanced
Speaker 1: oil recovery. And that means they're going to get the
Speaker 1: US forty f Q tax credit, they're going to get
Speaker 1: the most likely the California Low Carbon Fuel Standard credit
Speaker 1: for reducing the corbonency the fuels. All these policies are
Speaker 1: going to pay for direct their capture in voila invola,
Speaker 1: simple as that. One fact that I read in the
Speaker 1: report that I thought was really interesting is that c
Speaker 1: O two emissions are actually coming from just four percent
Speaker 1: of companies, So we actually know, oh who the stakeholders
Speaker 1: are that are going to care pretty deeply about this
Speaker 1: are those companies. Are you seeing signs that pretty much
Speaker 1: of that four percent of companies? Are they looking at
Speaker 1: this pretty closely right now or is it something just
Speaker 1: kind of they're keeping tabs on. Maybe they're listening to
Speaker 1: this podcast right now, trying to decide. The major emitters
Speaker 1: all have plans for CEO two reductions. For power companies,
Speaker 1: a lot of them are hoping to move to renewables,
Speaker 1: but then we get into dispatchability issues. So power with
Speaker 1: gas rocal power with ccs may make sense if the
Speaker 1: policies drive them to needing baseload power source that is
Speaker 1: a low carbon stealing Cement industries both emit enormous amounts
Speaker 1: CEO two, and those companies have emissions diductions plan. Each
Speaker 1: of these is also going to rely on cc US
Speaker 1: to some extent. Which applications do you think are most promising?
Speaker 1: So let's look at this from an emissions lens. Is
Speaker 1: it sement, is it the iron and steel side? Is
Speaker 1: there something else that I'm missing? I think the industry
Speaker 1: that has the most likely chance of standing on its
Speaker 1: own is the cement and concrete industry. They can use
Speaker 1: c O two at pretty much any cost of capture.
Speaker 1: They can use CEO two in their products on a
Speaker 1: potentially very large scale. I'm just kind of sitting here
Speaker 1: and I'm just thinking back to my old CCS coverage
Speaker 1: stays and my conclusion when I stopped covering it was Okay,
Speaker 1: i'll see you later. I don't think this is ever
Speaker 1: gonna work. But having been away from it, people keep
Speaker 1: coming up to me and saying, hey, we're gonna start
Speaker 1: covering CCS again because it's it's back. CCS is back,
Speaker 1: and friends from oil companies they'll call me and say, hey,
Speaker 1: guess what we're doing e O R CCS. It's back.
Speaker 1: So what I want to get from you guys is
Speaker 1: whether or not like is CCS back? What drove the
Speaker 1: initial development of solar projects. Solar power was not competitive
Speaker 1: early on, but it was driven by subsidies and incentives. Right,
Speaker 1: the same thing is currently driving all carbon capture and
Speaker 1: the current pipeline carbon capture projects. Everyone who's going to
Speaker 1: be capturing CO two and receiving some kind of benefit
Speaker 1: from the governments or policies, those will most likely continue
Speaker 1: to develop for as long as the incentives make the
Speaker 1: projects economical. But costs are coming down. Every project that
Speaker 1: builds carbon capture. Let's say the Petronova coal fired power
Speaker 1: plant in Texas. They've sayd that next time they built
Speaker 1: it, it it will be cheaper on the CAPEX front. The
Speaker 1: same thing was said for a project in Canada. There's
Speaker 1: a startup called Sponting that's using a kind of a
Speaker 1: new capture technique that says they can cut capics in half,
Speaker 1: so costs a coming down. There will always be some
Speaker 1: parasitic load on power production, and so it's always going
Speaker 1: to be more expensive to capture CEO two from power
Speaker 1: than just generating power without emissions capture. I think the
Speaker 1: big thing here is CCS always comes up when a
Speaker 1: very polluting industry is kind of sensing its death. You know.
Speaker 1: We saw that with a lot of coal. So coal
Speaker 1: plants were like, oh no, I'm gonna get shut down.
Speaker 1: How do we keep operating ccs. We're sort of at
Speaker 1: that point now with a lot of industrial emissions. We're
Speaker 1: talking more and more about industrial decarbonization, and those industries
Speaker 1: that will be very difficult to bait are like, oh no,
Speaker 1: I'm about to get regulated CCS. So that's partly why
Speaker 1: this is coming up again. I think the reason why
Speaker 1: it feels like we're sort of two groups of people
Speaker 1: standing on either side of a chasm. It's like one
Speaker 1: person is in the present and they're like, I don't
Speaker 1: know what to do. The others on the other side
Speaker 1: and they're like, it's great, this is a low carbon future,
Speaker 1: and I got here with CCS. And the reason why
Speaker 1: we can't figure out what that bridge is and how
Speaker 1: you get there is about costs in order to cross that.
Speaker 1: In order to build that bridge, you need to know
Speaker 1: how much does this cost. There are very very few
Speaker 1: large scale CCS projects, so we don't know what it costs.
Speaker 1: When we talk about what it will cost, we're talking
Speaker 1: about what cost you get to after you've built a
Speaker 1: ton of plants. So the reason why we don't have
Speaker 1: a solid like, yes, CCS is the answer right now
Speaker 1: for you, is because we need a lot of people
Speaker 1: to take the leap. Every CCS project is different. It's
Speaker 1: not like turning out hundreds and thousands of giga watts
Speaker 1: of solar panels from China. It's very bespoke, and we
Speaker 1: need a lot of people to jump over the chasm
Speaker 1: before they can tell us how to build a bridge back.
Speaker 1: Consider me interested. Once again, They are coming in guys, pleasure,
Speaker 1: no problem, I'm glad to hear it. Bloomberginny F is
Speaker 1: a service provided by Bloomberg Finance LP and its affiliates.
Speaker 1: This recording does not constitute, nor should it be construed,
Speaker 1: as investment advice, investment recommendations, or a recommendation as to
Speaker 1: an investment or other strategy. Bloomberg An e F should
Speaker 1: not be considered as information sufficient upon which to base
Speaker 1: an investment decision. Neither Bloomberg Finance LP nor any of
Speaker 1: its affiliates makes any representation or warranty as to the
Speaker 1: accuracy or completeness of the information contained in this recording,
Speaker 1: and any liability as a result of this recording is
Speaker 1: expressly disclined