Q&A Highlights from “Decarbonizing the Refinery”

Following are highlights from Q&A of the recent “Decarbonizing the Refinery” webinar with World Resources Institute. The presentation and recording are available in this post.

What’s your perspective on policies that might be needed to support green hydrogen and synthetic fuels, both of which are discussed in the paper? And do you have a view about the current political environment in which to get those done?

“Unfortunately the Build Back Better (BBB) legislation, which includes provisions that would strengthen the tax credit for carbon capture and storage (CCS) (Section 45Q), is a bit on ice at the moment. This is unfortunate. BBB would have increased the saline storage capture rate from $50 to $85 and also turned the credit to a fully refundable, direct pay credit, increasing the commenced construction date and decreasing the capture of thresholds from 100,000 to 12,500 tons for industrial facilities. These are all important things to mention with 45Q. BBB also had a clean hydrogen production tax credit (PTC). This would be a very valuable mechanism for enhancing the amount of hydrogen produced cleanly in the U.S.

 

The PTC had a max value of $3 of kilogram per hydrogen, depending on how much CO2 is admitted in its production, awarded, going down with the amount of emissions increasing in its production. For alternative fuels, BBB also had tax prints for certain biofuels like sustainable aviation fuel or biodiesel. But on top of all that, I think other policies we can look forward to and we should be focusing on are things like hydrogen hubs and clean industry hubs. These can help develop economies of scale.

 

And on top of that, there are several other options. We need a lot of RD&D for carbon capture with fluid catalytic crackers, as well as to push some of these other, I wouldn’t say nascent, but a bit less deployed technologies a bit more over the edge and finding out how to engineer them to work together. So, if RD&D right now is a big focus with the current administration. We have DOE’s hydrogen earth shot, which is focusing on deploying that, getting hydrogen really on the ground and moving. We also have financial and technical assistant policies. So if we need more experience on the ground, we need more experts advising how to get these things done. We can go, I think, on and on, but those are the top line things I think about.”

 

What’s the future of 1G ethanol in your estimation?

“I’m afraid I’m not particularly well acquainted with ethanol. That was an area that I did not focus on in the paper. So I’m afraid I might provide unsatisfying answer there. To ethanol, I will say that it most likely has a place in low carbon fuels specifically if carbon capture policies strengthen even further. It’s the easiest system to use carbon capture with the cheapest on a per ton capture basis. So I expect that it will stay in the mix.”

How does use or not of enhanced oil recovery (EOR) affect the economics of CCUS?

“It definitely depends on where the CO2 is being captured. It depends specifically on the capture rate of the flue stack. So there are some like ethanol plants where it is very inexpensive to capture a ton of CO2. So the extra revenue from taking that CO2 to EOR is not as critical as it would be for say another facility like a cement plant using CCUS, which has a lower capture rate per ton of CO2. That being said, this project didn’t really focus on EOR. And we are certainly about phasing EOR out for almost all uses for CCUS. WRI is very skeptical on taking that CO2 to EOR sites, but the variable of transport and storage for CCUS is often a relatively small part of the whole cost equation. Most of the capture costs comes from the capture side, not always the transport side or storage side. So EOR revenue, again, it just kind of depends on the sector, but here we did not look at it really in any meaningful way.”

There’s lots of great information and a nice overview of lots of options in the presentation. Any thoughts on the relative priority of these options based on feasibility, practicality, affordability, and CO2 reduction potential. If you had to prioritize based on those factors, what would you pick?

“I think something that I stress throughout the entire presentation is we really need to get moving now and the best way to do so is with blue hydrogen. And again, I’ve stressed it, I think maybe three times early, but I want to say again, we fully advocate for green and non-fossil hydrogen taking over the clean hydrogen economy, but refineries have this amazing opportunity to lay that foundation for the clean H2 economy with blue, and they can already do it. The technology is done today. This is the best first step. It’s relatively inexpensive. It’ll probably get cheaper, especially with policy. It’s feasible. It’s just the best available option. So if I was to talk to a refiner, which I think there are quite a few in this room, I would say, turn your immediate attention to your steam methane reformers or your autothermal reformer and focus on blue hydrogen, focus on building up storage and transport networks for that stored CO2. That’s the best immediate term option.”

What’s been the reaction to the paper from other environmental NGOs?

“Thankfully the reception to this paper has not attracted the vitriol that I was fearing when I wrote it. I’m very happy to say that. And I don’t want to mischaracterize any single organization’s stances on blue hydrogen. I will say that WRI’s pure organizations seem to generally be on the same page in that it has its use primarily in the short term as a transition to build up the clean hydrogen economy as we get more renewable capacity, as the electrolysis becomes less expensive.”

With respect to shaping policy in the future to encourage these technologies, are you seeing more incentives? Are you seeing more low carbon fuel type policies to help encourage these technologies? Or, a combination of both?

“From my perspective as someone who is involved in some Hill analysis, but not deep deep the backroom conversations, it appears to be more incentive based. I think as we saw plans like the clean electricity plan did not make it into the BBB, these things that are a bit more focused on top-down regulation are less popular. These are things that personally I would approve of, but in terms of their viability on the Hill [within Congress], they don’t seem to be gaining as much traction. And absolutely clean fuel standards are important part of this equation.”