Energy Transition Now Podcast – Episode 40 “Decarbonizing building with CCUS”

David Linden [00:00:00] Hello, everyone. You’re listening to Energy Transition Now. I’m your host, David Linden, the Head of Energy Transition for Westwood Global Energy Group. Today, we will take a look at the role that carbon capture can play in large scale and so-called hard to abate industries. To help us shed some light on this area, I’m really pleased to have Pavan Chilukuri, the Group Head of CCUS at Holcim here with me today. Welcome to Energy Transition Now Pavan.

Pavan Chilukuri [00:00:31] Thank you for having me, david.

David Linden [00:00:34] No problem. No problem at all. How about we get started right from the top, then? Some people might be aware of Holcim and others might struggle a little bit. So maybe just shed some light, start from the top, what does Holcim actually do.

Pavan Chilukuri [00:00:50] Now, let me start with who we are and what we do and what do we do? Why do we do what we do? Holcim is a global leader in innovative and sustainable building materials and solutions. What does that mean? We offer the building sector the much needed products like cement, concrete building solutions, and as well as roofing and insulation solutions. So, for those who want the quant data, we are a 60,000 strong team in around 60 countries around the world and our market cap is around 45 billion CHF today and over 27 billion revenue in 2023. Now, let me let me come to why we do what we do. So we are actually driven by our purpose is to build progress for our people and the planet. As you know, as the world’s population rises and becomes increasingly urban, people want better living standards. The building sector as a backbone of our urbanisation, plays an essential role in helping the society to thrive in this evolving landscape. The society is expecting that this urbanisation growth goes hand in hand in tackling climate change and addressing climate resilience. At Holcim, we are leading the transition to sustainable buildings with our solutions and we want to build circular cities that incorporate nature and are driven by sustainable buildings and smart infrastructure.

David Linden [00:02:26] Okay, great. Thanks very much, Pavan. That shows you how important Holcim is as a company in terms of how we are going to be leading our lives going forward. But if you just maybe think about decarbonisation itself as a topic of how this whole holcim think about the concept of decarbonisation within that.

Pavan Chilukuri [00:02:48] Thank you for asking me that. Sustainability and decarbonisation is a core of everything we do. We are taking a rigorous, science driven approach from climate action to nature to accelerate the shift circular cities. What does that mean? We are one of the first companies in our sector to set net zero targets and have validated have them validated by SBTI. Let’s go in. Let’s go into a little bit more details. Look at where we are today and where we want to go in future and what has been our progress last year and how we made this progress coming to where we are. Our scope one and the scope two emissions are roughly 80 million tons per annum by the end of 2023 last year. And our scope three emissions are roughly 47 mtpa by the same year. So where do we, where did that come from? Approximately 39% of the emissions comes from raw materials of the cement product. Remember, in order to produce cement, you need limestone to produce clinker. And when you heat up limestone to 1400 degrees, that limestone raw material emits CO2 as from the reaction. And the remaining 19% comes from this heating limestone from fuels. Another 19% comes from upstream and downstream scope three  emissions. 18% roughly, comes from our investments and the remaining from purchased electricity and others. If you look at our own targets at this moment, Holcim commits to reducing scope one and scope two greenhouse gas emissions by approximately 95% or turn off cementitious material by 2050. From a 2018 basing base scale. With regards to scope three emissions Holcim commits to reduce greenhouse gas emissions by 90% by 2050 from a 2020 base year. With regards to the CCUS, we’ve committed to having more than five mtpa operational capacity before 2030 and have also committed 2 billion CHF net of public funding investment into CCUS projects by 2030. For us, CCUS and decarbonisation and sustainability are very core part of what we do.

David Linden [00:05:05] Wonderful. Okay. Very interesting. Okay. And the SBTI part in particular shows how seriously you’re taking and that’s how you’re able to throw all those numbers at me because you want to start then a lot of work around that. So we talked a little bit about decarbonisation itself, but you started to delve into CCUS specifically and some of the numbers there. Can you maybe just dive a little bit more into how the CCUS specifically fit into this approach then.

Pavan Chilukuri [00:05:35] As I’ve said, net zero is important to us and CCUS is a game changer in our net zero, in our journey to net zero pathway to 2030 and 2015 is clear to reach our scope one and scope two target, we will have to reduce, I think, a factor, we use alternative fuels, we have to use decarbonised electricity. We have to use alternative decarbonated raw materials and we will have to work on increasing efficiencies in the design and construction of buildings. And we will have to take advantage of decarbonisation capabilities of our concrete products. All of this levers about will help us reduce our scope one and scope two by approximately 56% of emissions. In spite of all this levers we still have another 44% of emissions that will have to be decarbonised using CCUS. We will have to scale up technologies such as CCUS in order for power industry to meet net zero emissions. Now, with regards to the CCUS, Holcim has a broadest range of projects and technologies to make net zero cement a reality at scale. By 2030, as I’ve said, we aim to capture 5 million tons per annum of CO2 using CCUS and we aim to offer 8 million tonnes of fully decarbonised cement each year, thanks to CCUS and the cutting edge new technologies.

David Linden [00:07:03] Very interesting. Just to ask, so I understand that properly, that 44% or so that you were talking about, which can be dealt with from a CCUS perspective, is that simply because there isn’t really much of an alternative that is out there at the moment? And therefore, if you want to be able to achieve your targets. Essentially CCUS is the only answer for your industry.

Pavan Chilukuri [00:07:30] So the technology is evolving and the research is going on into alternative raw materials. But at this moment, the line of sight which we have, we believe that CCUS will still be a core part of our net zero journey.

David Linden [00:07:48] Got you. Perfect. Thank you. Yes, it’s a very difficult thing sometimes when we’ve talked to other businesses as well, where they talk about, you know, where to place your bets and technologies to invest in, to be able to decarbonise. And sometimes there simply isn’t the choice.

Pavan Chilukuri [00:08:05] Especially if you want to achieve net zero at scale and at pace using the technologies at hand. There is no pathway just of OR. It has to be a pathway of AND and AND technologies. What that means is that all pathways and all technologies need to contribute in order for us and our industry to become net zero in a cost effective way.

David Linden [00:08:32] Perfect. Perfect. I guess that comes on to maybe a little bit more around the role that you have, the actions that you are specifically taking and how you probably sounds like you have to work with the broader organisation because you’re, you know, a part of making the whole thing happen. Can you maybe just go into a little bit more examples around as I said, your role? What actions you are taking as an organisation and those sorts of things, please.

Pavan Chilukuri [00:09:00] So before I go into my role, let me just dive into what does CCUS mean in the cement industry, right? So as you know, in order for CCUS to materialise, you not only need to capture the CO2, but you also need to transport it and then store it safely. By transportation, you mean it has to be either piped by sent by train or trucks or by ships. The CO2 has to be stored as onshore and offshore. But CCUS also means capturing and converting that CO2 use and using hydrogen into renewable fuels of non-biological origin, such as aviation fuel or maritime fuel can be converted into e-plastics and e-chemicals. As you can see, there’s no one size fits all. With regards to the CCUS. Hence my job, given Holcim is a global company with a dispersed asset base of cement production sites. My role is to work decarbonisation, CCUS pathways bottom up from each of the cement plants and understand whether CCS makes sense or CCU make sense. And how do we make a business case out of the CCUS at that particular plant and given a global footprint, in which order do we need to deploy CCUS and how many do we deploy CCUS? What is that investment strategy and how can we afford it? And at the same time, how do we take advantage of the public funding clearly that is available in some countries, such as EU, US and Canada. And how do we take advantage of our assets in Northern Africa and use the CBAM support that we have in EU? And of course Holcim is a 100 year old, more than 100 year old company and we have mastered the technology of cement production. But CCUS means that you need to go beyond the cement production site. You have to work with the transport companies, train companies, shipping companies. And you have to work with oil and gas companies for offshore and onshore storage. And you have to work with renewable power companies because the electricity demand of a cement plant increases by almost 100% given the kind of technology, the technologies that we are using. So my role is, of course, to help with all our plants and develop help them develop a robust partnership and value chain and work in close collaboration with the public authorities, private companies, local stakeholders and other value chain partners. As this collaboration is essential to secure the development of technologies that will unlock the business case for CCUS and enable a net zero future for our plants and for our company and for the people and the society.

David Linden [00:12:10] Okay, So there’s a lot of stakeholder management.

Pavan Chilukuri [00:12:13] Absolutely.

David Linden [00:12:15] To make a business case that works and we’ll come on to this in just a minute around sucess factors…

Pavan Chilukuri [00:12:19] …The number of stakeholders are immense. Holcim is a decentralised company with the P&L responsibilities for each of them listed at the country level. So my role is to work with the CEOs of each of our countries where we are scoping CCUS work with the government relations in those countries, work with the corporate stakeholders. And since no company, no external company can help us everywhere in our in our plants. So it’s maintained the relationship with multiple oil and gas companies and multiple shipping companies. So it keeps me on my toes and it’s immensely enriching and immensely satisfying job.

David Linden [00:13:11] I can imagine that. Fantastic. Wow. Okay. So look, in terms of then the actions you’re able to specifically take now that you’ve talked about some of the ways you need to approach it. So how do you put a business case together? You know, as you said, the stakeholder management that’s required to be able to think about this and those sorts of things. Can you maybe just talk about some specific other projects or actions that you’re taking today?

Pavan Chilukuri [00:13:40] Yeah, of course. I did briefly touch about it, right. So by 2030 we aim to have a significant milestone in our CCUS journey. We have committed to invest 2 billion CHF into CCUS projects, net of public funding to capture the 5 million tonnes of CO2 annually and produce 8 million tonnes of fully decarbonised cement each year. To meet to meet these targets, we have identified 17 flagship projects based on mature technologies and robust partnerships and value chains. Each one is well-positioned to become a net zero plant, and six full scale CCUS projects across Europe have been selected for grants from the European Union Innovation Fund and aim to go live before 2030. The six projects are Lägerdorf in Germany, where we hope to capture 1.2 million tonnes of CO2 by 2029 and then repurpose that CO2 into plastics and chemicals feedstock. We have an EU funded project in Obourg where we hope to capture 1.1 million tonnes by 2028, 2029 and store it offshore in North Sea. And EU has also funded a project in, Le Teil in France, where we aim to capture 2.2 million tonnes of CO2 by 2028. The objective of this these are the plant is to convert CO2 into methanol for maritime sector. EU has also funded our project in Poland, Kujawy, where we aim to capture 1.2 million tonnes of CO2 by 2027 2028, where the captured CO2 would be stored in North Sea permanently. And the two more projects in Greece and Croatia. A Greece project is around 1 million tonnes of CO2 by 2029. Our project in Croatia, 0.4 million tonnes of CO2 by 2028. Those two projects are CCS projects. That’s as you can appreciate, in addition to these projects, we have a total of 17 flagship projects and multiple other projects in the evaluation phase, which we haven’t made public yet.

David Linden [00:16:03] Very interesting indeed. Wow. I mean, often people talk about a couple of different projects here or there on the sites they’ve got. But you’ve got a real portfolio to be working with on there. And you know, interestingly, you know, when people talk about projects, they go, well, where are you going to store it or what are you going to do with it? And you’ve mentioned a few interesting different pieces that whether it’s, you know, the store in the North Sea or could use e-methanol. So that’s really just the use cases. I think that’s fascinating. But sometimes people forget about the technology that they need in the first place to capture this. I mean, do you have a, you know, a I would call it in-house technology that you’re using here? Or are you having this sort of also through your different stakeholders, try and select different technologies for different sites? And then how do you go about that? I’m talking about the capture site specifically here.

Pavan Chilukuri [00:16:56] Let’s start with the good news story. Capture technology is a good news story. We have technologies of high maturity, but with a little bit more development, we can deploy those technologies in our plants. But the way we look at our CCUS technology is to match these technologies with our global footprint. Remember, we have a significant number of plants globally, and no one technologies can help us meet our net zero targets, and we will not deploy CCUS in all plants at the same time, right. So we’re going to be facing it starting with Europe, not America and Canada and then slowly rolling out to other parts of the world in 2030s and 2040s. So my team at this moment are looking at 80 plus capture technologies from anywhere from a technology readiness level of one, two technologies readiness level of nine to see and match this technology with our deployment plan and roughly the other salient features of the cement sector that aligns with the few particular types of technologies in the industry. There are two different types of families of technologies which are of course, conversion technologies and integrated processes. We are deploying both of them. But what the salient feature inside the cement sector that lends itself well to a particular type of technology is lack of waste heat. So remember cement, we have optimised our systems really efficiently and at this moment we do not have enough waste heat. So that means that the technologies that we have to apply have to be based on the renewable electricity. So that itself means that we have to select technologies such as PSA and TSA, followed by a cryogenic configuration. We apply our amine technologies which are at this moment more mature and more with more references in countries where there is a natural gas advantage. Or the renewable power disadvantage of disadvantage with regards to the supply or the pricing of renewable power.

David Linden [00:19:20] Clearly you got some very specific nuances you’re trying to deal with for the sector, but also the country, the location and I guess the land available and all those different factors you have to consider. It’s not a here’s a module and we’re just going to scale it everywhere. And that’s everything.

Pavan Chilukuri [00:19:38] It depends, if deploying a full scale CCUS plant or is it a part scale CCUS plant, is it renewable power available at scale and is it affordable? Is natural gas affordable? What are the regulatory incentives in the country? So the choices are going to be different for different countries, and that is the reason why we build up capabilities inside the company to assist the technologies and develop this technologies so that we can deploy them when we need it in our deployment plan. And to help on this area, we recently have taken a final investment decision on a test platform in Martres, France where we are investing close to 9 or €10 million to make available a test facility so that the technology providers can bring their pilot plants into our cement plant and then test those technologies in the live cement to look at the applications.

David Linden [00:20:51] Fascinating. Okay. Yes. We’ve had conversations on this podcast as well with people who, you know, talk about, look, pilots are actually just the key just to make sure we learn enough, we get enough data, we get enough understanding. We also engage the stakeholders. It sounds like you’re doing very much the same sort of thing there. And that sounds like a very important way of being able to encourage people to come forward, essentially to work with you, but also to build to scale the technologies. Fascinating. Fascinating. Okay. Right. There are lots of different directions we can go here. But I think in general, the main thing that I wanted to then talk about is there’s kind of you know, you started to allude to it as we as we talk to here, but it’s around the sort of things are going to make this industry move forward. The key success factors essentially, that you’re seeing. What are the you know, you talked about your your business case. What are the things that you’ll try to line up to make it all work? Maybe it’s the lining up, which is the biggest problem. But what are some of the challenges that you’re seeing? And partly also, you know, you started off in, you know, pretty much all your examples in Europe. Right? There’s a reason, I’m sure, to that and maybe just to weave that into your answer, be helpful as well. You know, what are some of the key success factors, maybe just to start with that you’re seeing as you as you’re doing your work?

Pavan Chilukuri [00:22:05] David, to answer your question, might kill the policy plays a very key role in in the decarbonisation of the cement sector. As you can appreciate there, in order for business case to make sense, especially on a technology like CCUS, there needs to be a carbon price vis a vis the ETS system or a incentives such as 45 Q in US or investment tax credits and ETS system in Canada. So you need to have a carbon price for CCUS to materialise. And for example, Europe offers us an amazing opportunity by leveraging the advanced regulatory environment, we have set the industry’s most ambitious target to make decarbonisation a profitable growth driver in Europe for Holcim and the regulatory supports with regards to phase out of free allowances, coupled with the CBAM and EU Innovation Fund funding support with support on for storage and infrastructure. I think these are the kind of policies that we need for CCUS to materialise. Once we have a policy in place or the inherent carbon price in place. And the next thing is making the feasibility of the value chain is extremely critical. As I mentioned before, it’s not just the capturing the CO2, but in order for us to achieve the decarbonisation objectives of CCUS, you need to be able to transport it and store it safely and also convert that CO2 into e fuels or plastics or whatever the CCU products that you want to make. In order for that to happen, you need you need to have a value chain, you need to have a port available, you need to have pipeline infrastructure available. You need to have a storage site that is ready to take the captured CO2. So the coordination between the value chain partners is extremely important. I think what makes it a bit challenging in CCUS is this value chain elements are being developed as we develop our CCUS projects. So that means that all parties need to coordinate their investment decisions, investment criteria and jump together across the entire value chain. Remember, unless the entire value chain is available. The value chain will not be available. I hope I made that clear. You need all parts of the value chain to be in place before you can achieve the objectives of CCUS.

David Linden [00:25:06] Yes. Yes. You need everything to align. But not one person can go alone, in some respects, that’s what makes it very complicated.

Pavan Chilukuri [00:25:15] We are very clear. Holcim cannot unlock the entire CCUS value chain on its own. We can make the capture, we can make the capture investments, but we rely on partners to make the investments, investments in transport and storage or investments in renewable power for CCU and converting the CO2 and hydrogen into CCU products.

David Linden [00:25:40] Perfect. Okay, so. So from what I hear from you, it’s really about you need a strong supportive policy framework, which also provides, I guess, sort of regulation, but funding in particular as well. And that can be in the form of a carbon price, essentially, most obviously. And then it’s the whole value chain needs to exist. And jump together, as you called it. I like that very much because, you know, you can’t just have one part pulling ahead and not have the rest of it because that’s what causes the issue. You need supply and demand, you need the pipeline. You need all those things to work.

Pavan Chilukuri [00:26:16] And I think in addition to all of this, we also need to have a stable carbon price as well, right? For example, ETS has been €100 earlier this year and now it’s around €60. So yeah, such a huge fluctuating and the ETS would make it difficult little bit, the investment into CCUS. So something needs to be done on that element. And of course the demand for low carbon products is also a good lever to unlocking the business cases. We are working with the governments and partners to ensure that the policies that promote development of on the demand side for zero carbon and low carbon products.

David Linden [00:27:05] Yes. Yes. And that’s an interesting one as well. You’re very reliant almost in many ways on many of the other factors lining up. So we spend a lot of our time also looking at hydrogen and places like e-methanol as an example. And, you know, there are different signs of, well, is this moving forward or not? And, you know, is there a sufficient demand even though there are regulations in place for e-methanol in the near term for me to invest or not? That’s a big question in the hydrogen side of things. But I guess it equally applies here. And it’s about having stability and line of sight, which is going to help everybody then go, right, okay, now is the time that we feel secure enough to invest and move things forward. Because, you know, you mentioned yourself you need to have a business case or these things need to align and work. And these are the key success factors to making it work. But you also want it to be a profitable part of your business, right? It’s not just something you’re going to do because it’s the right thing to do. Of course it is. And that’s why you’re doing it. But it also needs to be done in a profitable, sensible way as well. Is that a fair summary?

Pavan Chilukuri [00:28:09] I think that’s a fair summary. Sustainability has to be sustainable and we believe that good policy support able to make CCUS a good enabler to profitability enabler in Europe. And that is the reason why we are scoping the projects and developing those projects. There is work still needs to be done on the value chain and then a little bit of the support that we need from policy. But we believe that there’s momentum to unlock CCUS before 2030.

David Linden [00:28:46] Perfect. Thank you Pavan. That’s really interesting. And thank you for ending it on a nicely positive note there as well. There’s a lot of work, obviously to do, but some really interesting things that are going on, all the great things that are happening, at Holcim, that you’re working on in terms of making this happen. So thank you very much for your time and sharing your thoughts with us today.

Pavan Chilukuri [00:29:05] Thank you very much. Thank you for having me, David.

David Linden [00:29:08] No problem. And thanks to everyone else for listening as well. Hope you enjoyed it. Please make sure you subscribe. Give us a good rating and share with your friends. And thanks very much and talk to you next time.

 

 

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