Opinion: Climate Tech Investment Strategy Essentials For Decarbonizing Natural Gas

Sustainable Development Goals and the Potential of Natural Gas in Decarbonization

by Freddie Sarhan, CEO of Sapphire Technologies

Natural gas has enormous potential to expedite reduction in global emissions, ensure energy security through the energy transition, and minimize the total cost of reaching Net Zero goals by 2050. According to Ernst & Young, oil and gas accounts for 55% of global energy consumption. While the shift from coal-fired to natural gas-fired power plants led to a 32% decrease in total emissions from the US energy sector from 2005-2019, according to the International Energy Agency (IEA), the natural gas industry must substantially decarbonize to mitigate the direst effects of climate change in this century.

The Importance of Sustainable Development Goals (SDGs)

Indeed, according to a May 2023 report from the International Energy Agency (IEA), to reach IEA’s Net Zero by 2050 scenario would require a 50% reduction in oil and natural gas emissions, which the IEA estimates will cost $600bn/year or roughly 10% of overall global energy transition investment required to meet 2050 goals.

CCUS Technology for Decarbonization

While this may seem like an immense sum, efficient investment in critical technologies could prove less costly than alternatives. One such group of technologies is CCUS, which refers to the capture of carbon from single point sources or the atmosphere, and associated technologies required to transport, store, and utilize that CO2. According to the IEA, “CCUS is the only solution to address CO2 emissions from natural gas processing.”

Reducing Costs with CCUS and Energy Recovery Systems

Whether or not this is true, if CCUS technology continues to decrease in price, it has the potential to reduce the cost of decarbonizing the energy sector. Recent data shows the cost of decarbonizing the US electric sector could be reduced by $300 billion if natural gas-fired power plants came equipped with carbon capture technology. The IEA estimates that without investing in carbon storage, it will cost the US 40% more to achieve the same CO2 emissions reductions.

Similarly, technologies exist that could immediately reduce the cost of decarbonizing natural gas transportation. For example, Sapphire Technologies develops and manufactures energy recovery systems that harness the power of gas expansion to produce reliable and clean electricity. Sapphire’s FreeSpin® In-line Turboexpander (FIT) systems are designed to convert energy wasted in pressure reduction processes into electric power without interrupting operations, and can be used in pipelines, wells, liquefiers, power plants, and energy storage systems.

Each FreeSpin system generates up to 2.6 GWh of clean energy each year, enough to light 700 homes in New York City and offset 2,000 tons CO2e, the equivalent of 4,360 barrels of oil consumed. This enables midstream operators to offset electrical costs and reduce carbon emissions by utilizing 100% green electricity to power their operations.

Generating New Revenue Streams

In addition to minimizing the cost of decarbonizing the energy sector, technology like CCUS and energy recovery systems also have the potential to generate new revenue streams for energy companies. For example, in the case of carbon capture, CO2 has applications for industrial purposes, for the production of synthetic fuels, and can facilitate the production of clean hydrogen from natural gas.

A leading investor in CCUS technology, ExxonMobil, which according to their own data account for 40% of all carbon capture activity globally, announced in 2021 that investment in CCUS will be a significant part of their $15bn investment in low-carbon technologies. Chevron similarly announced investment in carbon capture and removal startups Carbon Clean and Svante in 2022. Both Exxon and Chevron cite their investment in CCUS technologies as being a crucial component to supporting their overall hydrogen and biofuel strategies.

Energy recovery systems, like FIT, can also help energy companies generate new revenue streams and offset the cost of decarbonizing their infrastructure. For example, Sapphire Technologies announced a partnership with leading US energy infrastructure company, Tallgrass, a leading critical infrastructure company, to collaborate on the largest installation of turboexpander technology in the world. Tallgrass will sell green electricity produced by FIT systems installed throughout their pipelines.

Government Incentives and Support

That said, with the possible exception of the application of CO2 for enhanced oil recovery, revenue streams for technology like CCUS and energy recovery systems are still immature. That is why it is important that government incentives also support investment in this critical technology for decarbonizing natural gas. The EU recently announced a €3 billion package for investment in CCUS innovation and development and the creation of an EU-wide carbon storage infrastructure.

In the US, the Inflation Reduction Act (IRA) increased tax credits available for each ton of carbon capture by 70%. Related credits may also prove advantageous to existing natural gas operators looking to incorporate clean technology into existing infrastructure or further invest in their clean energy platforms. For example, the Energy Infrastructure Reinvestment (EIR) program will guarantee loans to projects that retool, repower, repurpose, or replace energy infrastructure that has ceased operations, or enable operating energy infrastructure to avoid, reduce, utilize, or sequester air pollutants or anthropogenic emissions of greenhouse gases according to the Department of Energy (DOE).

The Clean Fuel Production Tax Credit (PTC), Clean Fuel Investment Tax Credit (ITC), and Hydrogen Production Tax Credit could all theoretically be applied to projects that leverage CCUS to help produce green hydrogen or biofuels.

The Importance of Scaling CCUS

According to a McKinsey analysis, CCUS uptake needs to grow 120 times by 2050 for countries to achieve their net-zero commitments. While this seems like a daunting task, the impact of existing investment should

SDGs, Targets, and Indicators

1. SDG 7: Affordable and Clean Energy

   • Target 7.2: Increase substantially the share of renewable energy in the global energy mix
   • Target 7.3: Double the global rate of improvement in energy efficiency
   • Target 7.a: Enhance international cooperation to facilitate access to clean energy research and technology

2. SDG 9: Industry, Innovation, and Infrastructure

   • Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable
   • Target 9.5: Enhance scientific research, upgrade the technological capabilities of industrial sectors, and promote innovation
   • Target 9.a: Facilitate sustainable and resilient infrastructure development in developing countries through enhanced financial, technological, and technical support

3. SDG 13: Climate Action

   • Target 13.1: Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters
   • Target 13.2: Integrate climate change measures into national policies, strategies, and planning
   • Target 13.3: Improve education, awareness-raising, and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning

Table: SDGs, Targets, and Indicators

Analysis:

The issues highlighted in the article are connected to multiple Sustainable Development Goals (SDGs), including SDG 7 (Affordable and Clean Energy), SDG 9 (Industry, Innovation, and Infrastructure), and SDG 13 (Climate Action).

SDG 7: Affordable and Clean Energy

The article discusses the potential of natural gas to expedite the reduction in global emissions and ensure energy security. This aligns with SDG 7, which aims to ensure access to affordable, reliable, sustainable, and modern energy for all.

SDG 9: Industry, Innovation, and Infrastructure

The article highlights the importance of technological advancements and innovation in decarbonizing the energy sector. This relates to SDG 9, which focuses on promoting inclusive and sustainable industrialization, fostering innovation, and upgrading infrastructure.

SDG 13: Climate Action

The article emphasizes the need to decarbonize the natural gas industry to mitigate the effects of climate change. This aligns with SDG 13, which aims to take urgent action to combat climate change and its impacts.

Specific targets and indicators mentioned in the article include:

Target 7.2: Increase substantially the share of renewable energy in the global energy mix

The article discusses the potential of renewable energy sources, such as natural gas, to reduce emissions and contribute to a more sustainable energy mix.

Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable

The article highlights the role of technological advancements, such as carbon capture, utilization, and storage (CCUS) technology, in making the natural gas industry more sustainable.

Target 9.5: Enhance scientific research, upgrade the technological capabilities of industrial sectors, and promote innovation

The article emphasizes the importance of scientific research and technological advancements, such as energy recovery systems, in reducing the cost of decarbonizing the energy sector.

Target 13.1: Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters

The article discusses the need to decarbonize the energy sector to mitigate the direst effects of climate change in this century.

Target 13.2: Integrate climate change measures into national policies, strategies, and planning

The article mentions the EU’s announcement of a €3 billion package for investment in CCUS innovation and development and the creation of an EU-wide carbon storage infrastructure.

Target 13.3: Improve education, awareness-raising, and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning

The article highlights the need for government incentives and support to encourage investment in critical technologies for decarbonizing natural gas.

Behold! This splendid article springs forth from the wellspring of knowledge, shaped by a wondrous proprietary AI technology that delved into a vast ocean of data, illuminating the path towards the Sustainable Development Goals. Remember that all rights are reserved by SDG Investors LLC, empowering us to champion progress together.

Source: carbonherald.com

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