Case studies on CO2 transport infrastructure: Optimization of pipeline network, effect of ownership, and political incentives

AbstractUsing the CO2 Capture and Storage (CCS) chain valuation framework described by Jakobsen et al. we evaluated some of the non technical aspects of the chain that are related to technology deployment, specifically economies of scale in transport pipelines, different scenarios of infrastructure ownership and government involvement for funding oversized pipelines to promote economic efficiency. We find that benefits from economies of scale increase significantly with distance, raising the benefits of cooperation from sharing a larger pipeline. The difference in the NPV of costs between three small pipelines and a large one is 984 MNOK at a pipeline distance of 100 km and 6189 MNOK at a distance of 700 km, with the large pipeline always being more economic. With infrastructure ownership, if transport and sink sectors are independent from the source, different profit strategies need to be used with changing CO2 prices. This creates need for complicated and dynamic contracting and raises transaction costs, resulting in potential benefits to vertical integration. Government investment in pipeline infrastructure to build an oversized pipeline as a way to increase economic efficiency and overcome transaction costs corresponds with a lower discount rate and lowers project breakeven costs slightly, from € 31.4 to € 30.7