High Investment Costs and Untested Technology Are Challenges for the Carbon Capture Industry

Carbon capture, utilization, and storage (CCUS) is gaining significant attention, both positive and negative, across the globe as carbon dioxide emissions have reached a record high in 2022. CCUS refers to the technologies that attempt to process these emissions and decarbonize power generation or industrial processes by capturing emitted carbon (at the emission point) and then transporting and storing it underground.

Key Highlights
-- CCUS’ deployment has been behind expectations and insufficient to achieve net-zero emissions, primarily driven by high investment costs, expensive transport/storage infrastructure, and subpar capture rates.
-- Investment, government funding, and policy incentives must ramp up in order to increase its effectiveness.
-- The credit risk of CCUS projects is heightened as the technology remains in early stages of deployment. Methods such as supplier underwriting of performance risk could serve as mitigants.
-- Renewable power generation such as solar and wind will continue to represent the majority of the clean power market, with CCUS serving as a supplement. As such, we do not see any significant credit impact to our rated portfolio of renewable projects.

“We generally view long-term contracts with creditworthy offtakers enabling stable revenue streams as credit positive,” said Candice Gao, Senior Analyst, Project Finance, at DBRS Morningstar. “However, given the technology is relatively new and untested without an established track record or proven reliability, we find the technology risk is currently high and, if not mitigated through means such as technology supplier underwriting, potentially credit negative.”