To its supporters, BECCS – or bioenergy with carbon capture and storage – offers a near-miracle solution to the challenge of climate change. In the BECCS process, carbon trapped in plants from the sun’s energy is turned into electricity and heat in a power station, and the carbon in the waste gases is then captured and stored underground – carbon dioxide in, energy out, whilst reducing the amount of CO2 in the atmosphere. On paper it is a brilliant solution.
For developers of BECCS projects, remuneration comes from not only selling the energy, but also from issuing carbon credits equivalent to the amount of CO2 sequestered. These credits can be purchased by corporates looking to offset their own emissions.
Recent deals
This rapid growth in interest in BECCS is evidenced by a flurry of recent commercial deals. In May this year, Drax Group announced that the environmental consultancy C-Zero Markets had agreed to buy 2,000 tCO2 from the UK generator’s first BECCS project in the US, at $300 per tonne. Drax followed this announcement a few days later, saying it would develop more than 20 million tonnes of “carbon removals”, with 14 MtCO2 per year reached by 2030. It said it was aiming for 8 MtCO2 per year of removals at its giant UK-based power station, and had its eyes on nine sites for possible development in the US, on top of the two it has already selected there.
Microsoft also announced that it had penned a 11-year contract to buy 2.76 MtCO2 of BECCS credits from Danish energy company Ørsted. The credits will be generated by capturing emissions from two of Ørsted’s power stations in Denmark, the wood chip-fired Anæs Power Station in Kalundborg and straw-fired Avedøre in Greater Copenhagen, from 2025 onwards. The captured CO2 will be shipped to the Northern Lights storage reservoir in the Norwegian North Sea. Alongside Microsoft, the Danish Energy Agency will be providing significant funding to the project as part of its broader $2.2 billion policy commitment to developing CCUS technologies and projects.
Also in May, the carbon removal initiative, Frontier, which Stripe, Alphabet, Shopify, Meta (Facebook) and McKinsey set up last year to channel $1 billion into permanent carbon removal by 2030, said it would pay Charm Industrial to remove 112 ktCO2 from the atmosphere and store them underground during the 2024-2030 period. This would be done using pyrolysis of waste biomass from agriculture and forests, in a high-temperature, oxygen-deprived process that produces bio-oil, which can would be locked away underground. Charm calls this biomass carbon removal and storage, or BiCRS – not the same as BECCS but with the same aspiration of removing CO2 from the atmosphere.
The US bank, JPMorgan, which recently joined the Frontier scheme, has announced the forward purchase of 800 ktCO2 of carbon removals, including 28.5k tCO2 from Charm, and more significantly 450 ktCO2 of BECCS credits over 15 years from Canadian developer CO₂80.
While these purchases represent major developments within the BECCS market, they remain small relative to the overall voluntary carbon market. For context, 63 MtCO2e of credits were retired in the first four months of 2023, almost 20 times the volume of forward purchases of BECCS announced during May.
However, in terms of financial commitment, they are significant. While exact prices haven’t been disclosed in many of the above announcements, some will likely have closed at prices of at least 20 times the $6.5/tCO2e average price at which more conventional credit types have traded in the voluntary market this year.
All that glitters…
The Intergovernmental Panel on Climate Change (IPCC) also hopes BECCS can play an important role in tackling climate change. In its 2022 report the IPCC envisaged BECCS sequestering 3 to 7 billion tCO2 by 2050 in their 1.5°.1Chapter 2 — Global Warming of 1.5 ºC (ipcc.ch). Link This is over a thousand times the current volumes of BECCS credits being transacted.
In spite of recent investor and commercial interest in BECCS, support for these projects is not universal, and there are challenges with its scalability and cost effectiveness. For example, the IPCC qualifies its bullish projections for BECCS, adding that “It is not fully understood how land-use and land-management choices for large-scale BECCS will affect various ecosystem services and sustainable development, and how they further translate into indirect impacts on climate, including greenhouse gas emissions other than CO2.”
At present, utility-scale biomass-to-power plants are operating in just a few countries, notably the UK and Japan, and one power station – the Drax complex in Yorkshire, England – is estimated to account for more than half of world demand for biomass pellets. Independent research has raised questions about the reliability and sustainability of biomass feedstocks for this plant.2Can BECCS deliver sustainable and resource efficient negative emissions? - Energy & Environmental Science
(RSC Publishing). Link 3Can BECCS help us get to net zero? | The Bartlett - UCL – University College London. Link
The issue of the sustainability of the feedstock has been at the heart of press and NGO criticism of the technology. This led to an announcement by UK energy regulator Ofgem, at the end of May, that it would launch an investigation into the wood pellets used at Drax’s plant.
Trove Research’s own modelling suggests that the supply of carbon credits from BECCS projects could be more constrained than those from conventional CCS facilities. This is due to limitations on the availability of biomass that passes sustainability standards with emissions from the planting cycle, harvesting and transport having to stay within the net-negative lifecycle emissions of the BECCS project.
Outlook
Like other voluntary carbon credit project types, BECCS is likely to be subject to increasingly rigorous integrity and validation regimes. These may be particularly exacting, given the number of steps taken in the growing, harvesting, transport, combustion, capture and storage processes.
Those projects that do pass muster are likely to command a high price for the carbon credits they create due to the ability to permanently remove carbon from the atmosphere. Certainly, high prices for early purchases of BECCS project credits could be useful in financing more pilot projects and testing whether the technology can be scaled up quickly and efficiently.
But the ability of the BECCS projects to truly scale and represent a serious solution to the climate crisis will depend as much on the science around the sustainability of the feedstock as on the challenges of carbon storage and economics of operating the power station. Trove will be closely monitoring these developments as part of its ongoing analysis of the global carbon credit market.