Decarbonisation Technology - February 2024 Issue

creating district heating systems. With a capital cost reaching billions for a large steel plant, switching coke-fed blast furnace steel making to direct reduced iron (DRI) using hydrogen can be the ultimate example of a site/process-related decarbonisation project. • Novel technology or application of existing technologies such as advanced electrification (e-furnaces/boilers), hydrogen or ammonia firing heat pumps. • Carbon capture and storage (CCS) is a form of waste disposal. In spite of the high energy consumption and capital cost involved, CCS is a lower-cost emission reduction option for some applications than what is offered by current alternatives. • Carbon capture and utilisation (CCU) can contribute significantly to a decarbonisation strategy. However, it runs into some significant cost constraints:  A techno-economic study evaluated nine different carbon utilisation technologies (Mertens, et al., 2022) (Mertens, et al., 2023). The findings highlighted that most of these technologies require large amounts of expensive green hydrogen, which renders them economically unviable unless the products generated are valued substantially higher than their fossil counterparts. One high-value market already exists for sustainable aviation fuel (SAF). From 2030 onwards, specific e-SAF mandates will provide more support for carbon utilisation.

 Burning fuels produced from CO 2 originating from fossil sources still results in net CO 2 emissions. Therefore, producers of fossil CO 2 should not be exempt from emission taxation or trading scheme obligations, even when the CO 2 generated is used to make products. European legislation will likely mandate that CO 2 used as a raw material to produce new products stems from either biogenic sources or direct air capture rather than from combusted fossil fuels. This approach increases operating costs for carbon utilisation projects and may limit the available CO 2 . Bundling provides a preliminary ranking order of all the emission reduction options. Ranking: Carbon abatement cost, risk, and capital Carbon abatement cost The trajectory development is driven by the carbon abatement cost (CAC) curve that more rigorously ranks the different carbon reduction initiatives according to the costs involved in reducing CO 2 emissions, as shown in Figure 3 . The CAC for decarbonisation initiatives is calculated from cash flow elements, capital expenditures, and capital cost details such as debt and equity costs, IRR/NPV requirements, and loan duration. Abatement cost can be estimated as follows: • Using a financial model that credits CO2 emissions savings, with the abatement cost

CCU/New process technology

Lower revenue energy/Infrastructural/ Novel decarb technology

CCS

CCU

RTO/Energy saving/Flare reduction

CCS

Emission reduction

Figure 3 Carbon abatement cost curve