CCUS Business Models
We can help select the proper business model appropriate for business stage

Business models refer to the logic of the company - how it operates, creates and captures value through entire value chain (capture, transport utilization and storage) for its stakeholders. Business models for the emerging technologies vary depending on the technology maturation and market development. Early, during market creation phase policy framework and government financial support are critical to de-risk the technology and incentivize the first movers and investors. 

In general CCUS has four distinct business models

  1. Vertically Integrated Company - 

  2. Joint Ventures

  3. CCUS Operator

  4. CCUS Transporter

1. Vertically Integrated Company

Operations are vertically integrated in this self-build model, where industrial or power companies use their technical and commercial capabilities to support and link each element of the CCUS chain. 

The model is suitable for stand-alone projects, especially, early in the market creation phase.

How It Works

  • Single, vertically integrated company that operates; Capture, transportation & storage

  • This models is a barrier to entry for many; as only few large companies have resources to operate along vertical value chain

  • Alleviates the risks associated with venture integration efforts among different sectors

  • Integration eliminates transaction costs at various interfaces

Revenue Model

  • Revenue from CO2 utilization (Example CO2-EOR)

  • Direct subsidy from government for  CO2 storage (EX 45Q in USA)

  • Revenue from selling extra carbon emission credits in the carbon market.

 

Examples of vertically integrated CCUS projects include the

  1. Uthmaniyah CO2 EOR Demonstration project,

  2. China’s Yanchang Integrated CCS Demonstration Project

  3. Sinopec’s Shengli Power Plant CCS project.

2. Joint Venture CCUS Company

A JV (Joint Venture) model is based on a partnership between the industrial/power company and external CO2 users or storage consultants. In this model, the industrial company may be liable for costs and operation of CO2 capture, but transport and storage would be managed jointly, resulting in a more equitable distribution of risks and revenues.

The model is suitable for stand-alone projects, especially, early in the market creation phase.

How It Works

  • Cooperation amongst different sectors is key for the success of the project.

  • Since it involves 2 to 3 companies, interface/venture management is a challenge 

  • CO2 is captured from an industrial or power plant owned by a third party, where CO2 is then transported to a storage/utilization site, also owned by a third company.

  • Typical 40% (industrial/power company), 30% (transport company), and 30% (CO2 user). 

  • Integration eliminates transaction costs at various interfaces

Revenue Model

  • Cooperation amongst different sectors is key for the success of the project.

  • Direct subsidy from government for  CO2 storage (EX 45Q in USA)

  • Revenue accrues from the sale of CO2 rather than from utilization, where the CO2 user can decide on the proportion of CO2 to be purchased for utilization, with the rest of CO2 used for storage

 

Examples Examples of CCUS projects adopting a JV business model include

  1. the Quest CCS project,

  2. Norway’s Snohvit CO2 Storage project,

  3. Brazil’s Petrobras Lula Oil Field CCS Project,

  4. Algeria’s In Salah CO2 Storage project.

3. CCUS Operator Company 

An industrial/power company cooperates with a 3rd party featuring high technical and engineering capabilities to handle the CO2 after it has been captured. The third party will then, for an agreed fee, appraise different utilization/storage options and take responsibility for transporting the CO2. The parties to this model include the industrial/power company, CCS operator, and CO2 user.

The model is suitable for stand-alone projects moving towards hub, especially, during market growth phase

How It Works

  • The CCS operator bears costs of capture, transport and storage equipment and their associated operation and maintenance (O&M) costs,

  • The CO2 user covers CO2 purchasing costs and costs of utilization equipment and their operation.

  • If the company is a power plant, it may generate no profit in this model if it is legally required to produce low-carbon electricity.

  • If the company is an industrial plant, it will generate a profit either in the form of a premium on produced low-carbon goods and/or a government subsidy (unless there is a legal requirement to produce low-carbon products), 

  • Integration eliminates transaction costs at various interfaces

Revenue Model

  • The CCS operator generates revenue from direct subsidy from the government for storing CO2 (45Q in US)

  • It also generates revenue from selling carbon credits and CO2. The CO2 user may save on their costs of production by purchasing CO2 at a discounted price

 

Examples Examples of CCUS projects adopting a this model includes

  1. Coffeyville Gasification plant,

  2. the Great Plains Synfuel Plant,

  3. Canada’s Weyburn-Midale project,

  4. US Enid Fertilizer CO2-EOR project. 

4. CCUS Transporter Company 

In this model, a third party is only responsible for the transportation part of the CCUS chain. 

The model is best suitable for CCUS regional hub; with several emitters, transporters and sinks, especially, during mature market phase

How It Works

  • The industrial/power company is responsible for capturing CO2, including covering capture equipment and O&M costs,

  • The transport company covers costs of transport equipment and their O&M

  • Finally, the CO2 user covers CO2 purchasing costs and costs associated with utilization or storage equipment and their O&M. 

  • Here, the CO2 transport company and the industrial company bear relatively lower risks compared to an operator model as revenue is guaranteed through a long-term purchasing contract, while the CO2 user guarantees revenue as long as it maintains larger profit margins on their products

Revenue Model

  • Industrial/power company generates revenue from CO2 sales & trading carbon credits.

  • Transporting company charges a fixed fee for CO2 transport, that is pre-agreed 

  • CO2 user generates revenue from a storage subsidy and/or a discounted price on purchased CO2. 

Examples Examples of CCUS projects adopting a this model includes

  1. Val Verde Natural Gas Plant

  2. and the Shute Greek project.