In October, the government announced new goals to achieve between 20 and 30 million tonnes of captured and stored carbon dioxide a year – the equivalent of taking four and six million cars off the road each year from 2030.
Some see carbon capture as a crucial component of the UK’s net zero target. But right now, it is a relatively small market, with most estimates putting it at around $3bn globally in 2023.
Carbon capture, utilisation and storage (CCUS) is a three-stage process. It involves capturing carbon dioxide produced by industrial activity or power generation, and then either compressing it into a liquid state and transporting it for further use, or storing it permanently at least 1km underground via geological injections into porous rocks.
The process is specialised and complicated – and it is significant to help meet global climate targets. Startups are playing an important role in making the UK’s target a reality.
“CCUS plays a critical role in decarbonising hard-to-abate sectors such as the cement industry, steel production and chemicals,” Sebastian Peck, founding partner at decarbonisation-focused investor Kompas VC, tells UKTN. “It is also clear that without this technology, achieving net zero by 2050 will not be possible.
“There is not an established CCUS industry, so startups play a vital role in developing and scaling the technology.”
Peck says regulatory tailwinds and market demand for low-carbon products are pushing the adoption of the technology, so the market for economically viable technologies is enormous.
From an investor perspective, Peck says startups can deliver outsized returns for VC investors if they can overcome all of the technical hurdles – but notes these should not be underestimated. Direct air capture, for example, is very energy intensive, which in turn results in high operational costs.
“More established companies [in this field] will only deploy the technology at scale if there is a viable business case or they receive subsidies,” adds Peck.
“It is therefore vital that startups understand how their work aligns with policy targets and which funding opportunities and industry partnerships are available to them to bring the technology to market and scale it.”
Government collaboration
David Kim is CEO and founder of CyanoCapture, an Oxford-based startup that specialises in low-energy carbon capture.
Kim believes it is crucial that the government collaborates with startups on CCUS because the current method has major energetic and economic penalties if performed at the gigaton scale – which, he says, is rarely discussed.
“Alternative technologies that can decentralise the process and absolve the need for geological injection may be useful,” Kim tells UKTN.
“Startups can bring new creative solutions which are first of their kind that can address some of these key barriers to scaling carbon capture. However, in the UK, we are culturally more risk-averse and sceptical of unproven technologies than some of our overseas counterparts. Government interventions and incentive schemes can bridge this gap.”
Aniruddha Sharma, chair and CEO of carbon capture startup Carbon Clean, agrees that government collaboration is essential.
He says delivering CCUS at the necessary scale will require the government to actively collaborate with the full range of relevant stakeholder groups – not only impacted industries and their employees, but also educational institutions, the supply chain, trade unions, campaign groups and many more.
“CCUS remains the only viable solution to some of our most critical industries and sectors, so leadership from government is pivotal to ensure that scalability is achieved in a relatively tight time frame,” Sharma tells UKTN.
“The kind of innovative strategies and investments required to achieve this tend to originate in startups.”
The nascent market has led to a variety of technological and sector-based approaches from startups.
London-based Mission Zero Technologies, which recently secured £21.8m in an investment round backed by a Bill Gates fund, has built electrochemical direct air capture technology.
Another startup, Nuada, has developed a process to capture carbon emissions from cement manufacturers. Similarly, Nottingham-based Concrete4Change captures and mineralises CO2 to develop sustainable concrete.
Carbon capture hurdles
As with most sectors, regulatory challenges are a drag on growth. Kim notes, for example, that approval from the Department for Environment, Food & Rural Affairs (DEFRA) to deploy safe genetically modified organisms (GMOs) in closed systems would help CyanoCapture’s operation.
Sharma says unused opportunities are also slowing the growth of carbon capture businesses in the UK.
“There are little or no incentives for projects outside the cluster programme and additional policies could enable smaller, dispersed industrial sites to deploy CCUS and achieve the scale of deployment required,” adds Sharma.
“Policy change is also required to make our CCUS market more competitive. A more predictable emissions trading systems (ETS) price, for example, would boost the launch of new CCUS projects.”
However, Sharma welcomes the chancellor’s recent announcement of a £120m increase to the Green Industries Growth Accelerator (Giga), noting how it will encourage innovation and accelerate progress and is “exactly the strong signal the industry needs.”
Looking ahead, Peck suggests startups will be at the centre of developing the technology to help meet the UK’s carbon capture ambitions.
“CCUS will not rely on a single technology, but several different approaches ranging from direct air capture to industrial installations for point-source capture,” he says.
“Today, there is no established industry for CCUS, so startups are the main engine of innovation.”
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