?? The industry capturing carbon and the world's attention - Curation Collective
Why you should care about Aker Carbon Capture and the carbon capture and storage (CCS) industry:
A diminishing carbon budget
In 2022, the world emitted 41 billion tonnes of CO2. To put this figure into context, studies suggest that our remaining carbon budget to stand a 50/50 chance of keeping global warming to 1.5C is just 250 billion tonnes.
That leaves us with just six years of our current emissions rate for an even chance of achieving Paris Agreement targets.
So, the question is, how do we dramatically reduce the volume of carbon entering the atmosphere?
Clean energy sources in the form of wind, solar, nuclear, and green hydrogen will all play a key role and are well-documented solutions. Alongside these, CCS technologies that capture carbon produced by "hard-to-abate" industrial processes and the burning of fossil fuels will also be required to keep the net-zero dream alive.
After all, even an increasingly electrified world will still produce carbon, and we should realistically expect continued (but reduced) levels of fossil fuel use in the years ahead.
?
A divisive but crucial technology
Despite the pressing need to roll out CCS technologies, scepticism remains strong in some quarters. Some argue the technology is unproven. Others point to CCS providing the fossil fuel industry with a free pass to continue its polluting activities unchallenged. Others have raised eyebrows at the cost of deploying CCS plants.
However, governments and industry leaders are increasingly viewing CCS as an integral cog in the portfolio of solutions the world needs to achieve net zero goals.?
CCS is one of the International Energy Agency's "key pillars of decarbonisation" outlined in its "Net Zero by 2050 - A Roadmap for the Global Energy Sector" report, while the Intergovernmental Panel on Climate Change argues CCS and carbon dioxide removal "is not a substitute for immediate and deep emissions reductions...but is required to achieve global and national targets of net-zero CO2 and greenhouse gas emissions."
Carbon capture is still a relatively nascent sector, but Aker has positioned itself as a leader, providing a rare "pure play" investment opportunity in the sector. Aker's David Phillips returned to speak to the Curation Collective for the second time in February to give us an update on?the company and the burgeoning industry.
??? The clip below provides a brief overview of CCS' uses, how the technology works in practice, and Aker's "Carbon Capture as a Service" offering.
Positive policy movements
The company anticipates a significant increase in government policies and subsidies aimed at boosting CCS capacity in the years ahead.
领英推荐
For example, the EU finalised the Net-Zero Industry Act (NZIA) in February. While reporting focused on the bill's attempt to bolster domestic green tech manufacturing and stave off competition from the US and China, the NZIA also established an ambitious target of generating 50 million tonnes of annual CCS capacity.
Currently, there are ten planned CCS projects but?zero fully operational plants in the EU. Aker will soon resolve this situation as the company will deliver seven facilities in Europe, with one almost completed, one due for completion in H2 2024 and five set to go live in 2025.
In the US, CCS has enjoyed bipartisan support from Republicans and Democrats alike. US firms engaged in CCS development are eligible for generous subsidies and tax credits, with 2021's Infrastructure Investment and Jobs Act providing $8.2bn in investment, while the 45Q incentive has generated $1bn in tax credits. The Inflation Reduction Act also eased requirements to qualify for the 45Q incentive and increased its value.
The UK, on the other hand, has strong CCS potential given its high concentration of industrial hubs and impressive storage infrastructure in its North Sea gas fields and aquifers, but the "government subsidy process...is a little bit behind," explained Phillips.
Deployment with a difference
The company has won approximately half of the Final Investment Decisions (FIDs) for the European carbon capture projects it has applied for over the last three years, signing contracts with the likes of ?rsted and Heidelberg Materials. On 2 April, Aker won its latest contract, securing a preliminary front-end engineering and design (pre-FEED) contract for the Statkraft Heimdal waste-to-energy plant, which will capture 220,000 tonnes of CO2 annually.
The secret behind this success is Aker's range of "modular" carbon capture units, including the "Just Catch 100" and "Just Catch 400," each with a different carbon capture capacity. For example, the Just Catch 100 can catch 100,000 tonnes annually.
The modular approach means Aker can progress a small to medium-sized plant from inception to completion in under two years - a significantly shorter timeline than standard carbon capture construction projects of a similar scale.
In a licensing environment heavily reliant on government subsidies, the carbon capture plant provider able to deliver facilities at the lowest cost and the shortest time frame will likely come out on top - a permitting landscape working firmly in Aker's favour.
?? In the club call highlight below, David Phillips explains why investing in carbon capture and storage (CCS) technology is so appealing for enterprises operating in Europe and the US.
Where next?
News broke on 28 March that technology firm SLB had bought an 80% stake in Aker for around $380m, with a further $125m in additional performance-based payments potentially due over the next three years.?
Before the acquisition, Aker was already in a healthy financial position, with over $100m in cash on its balance sheet, indicating a robust capacity for sustaining operations and investing in growth. The company's projects are also self-funding, with advance payments covering the costs, suggesting a financially sustainable model as they expand. Phillips expects Aker to achieve profitability in the near term.
In an era of increasing policy focus on CCS technologies and the firm's strong track record of winning government contracts, Aker is well-positioned to play an integral role in facilitating corporate and sovereign climate goals across the US and Europe.?
?? You can watch the full recording of our discussion with David Phillips here.
Analyst: Sam Robinson, ESG Specialist at Curation - [email protected]
Senior Analyst: Nick Finegold, Founder at Curation - [email protected]