Carbon Commentary newsletter

July 6th 2025

This newsletter has been in abeyance for a year. I hope to bring it back every two weeks to discuss the background to what I think are the most significant and under-reported news stories of the previous fortnight. As before, your comments will be much appreciated.

1, CO2, methanol and hydrogen supply chains. Japanese carrier Mitsui OSK Lines (MOL) and Mitsubishi shipbuilding gained approval for a new design of vessel that will carry either liquid CO2 or synthetic methanol. This unprecedented combination allows a round trip carrying captured CO2 from fossil fuel combustion in Japan to provide the carbon for synthetic methanol production at low electricity cost sites around the world. The methanol will then be brought back to Japan for use as a fuel, probably mostly for shipping. MOL has already invested in HIF Global which is building synthetic methanol plants in various countries with a total capacity of about 4 million tonnes a year. In another world first, LH2 Shipping got $23.5m from the Norwegian government to build the first liquid hydrogen carrier. As with the methanol, the hydrogen will be made in low electricity cost locations and then shipped to places where the fuel is needed.

2, China battery storage auction. A state-owned energy company held an auction for Lithium Iron Phosphate (LFP) battery supply in China. It asked for bids for a total of 25 GWh, the equivalent of over twice the UK’s total installed battery capacity today. Bids came in at around $50 per kWh compared to the $65 in a smaller auction in March. Battery costs are continuing to fall sharply.

3, Climeworks fund raising. Direct Air Capture (DAC) specialist Climeworks raised another $162m to take total funding to more than a billion dollars. This follows reports about how remarkably little CO2 the company has actually managed to stuff underground at its trial plant in Iceland. So why is more money still forthcoming? Climeworks says seen major recent improvements, including that it has ‘doubled energy efficiency’. On its own, this change would cut at least $50 a tonne off CO2 capture and storage costs. But in the context of the $1,000 per tonne total costs mentioned in the last edition of this newsletter, that reduction doesn’t seem hugely significant.

4, Grid-forming batteries. The Spanish blackout demonstrated one of the disadvantages of a renewables dominated electricity system. Once a solar or wind farm disconnects itself from a grid because either voltage or AC frequency have moved outside limits, they cannot then be reconnected until the grid has stabilised. They are also unable to offer ‘inertia’, the stabilisation of electricity supply provided by the rotation of turbines at conventional power stations. The move to 100% renewables will require the extensive use of electronics fitted at renewables sites and battery farms that will replicate the ‘grid-forming’ capabilities of existing power stations. Small numbers of pilot grid-forming inverters have been built around the world, including recently in Scotland. Recently, a much larger installation was completed in China at a 400 MWh lithium and sodium ion battery project. But we’ll need this technology in very large amounts: this week a Wood Mackenzie study suggested that 37% of all new wind, solar and battery installations globally will need to incorporate grid forming from 2025 onwards. The report also estimated a cost premium of 15% over today’s standard ‘grid-following’ batteries. Since the cost of batteries is falling rapidly (see note 2), this shouldn’t represent a major obstacle. I’ll go out on a limb and say that, fully implemented, grid-forming electronics would have kept the Spanish system online.

5, PET recycling. Fully circular recycling of PET, representing about 10% of world plastic consumption, remains challenging. Today PET soft drink bottles can be melted and made into new, lower quality items such as bags or carpets. A better way forward is to use a chemical process to break down the polymers in PET back into the constituent monomers. Then the monomers can be remade into clear plastic that can be indefinitely recycled back into soft drink bottles and other uses. The French company Carbios has developed enzymes that can break down PET for full circularity but the costs of the process are high. A study from the US National Renewable Energy Laboratory (NREL) and the University of Portsmouth in the UK showed that by using a different – and fully recyclable – chemical to control acidity, costs for enzymatic recycling processes similar to those pioneered by Carbios could be reduced to below the level of virgin PET.

6, Dual fuel shipping. The shipping industry is conscious of the pressure to reduce its footprint but has swung away from low carbon methanol as the alternative fuel for next ships towards LNG (which nevertheless may actually be as bad for the climate as conventional shipping fuel). In the first half of 2025, DNV analysis shows that 87 ships were ordered that will burn LNG as the alternative fuel while only 40 will be equipped to use methanol. Ammonia fuelled new ships have declined even more with only 3 ordered in the first half of the year compared to 27 vessels during 2024. About half of all ships ordered from January to June 2025 will have the capacity to burn a fuel other than oil.

7, Green steel in Europe. Arcelor Mittal drew back from its plan to move to green steel through the use of hydrogen-fuelled furnaces (DRI) in Germany and elsewhere. This was another blow to those of us who believe in the vital role of H2 in future steelmaking. However two of its European competitors restated their belief in the transition. Tata Steel confirmed its intention to shift to DRI at its Dutch site at IJmuiden and Salzgitter said its plans also remained on track. But both the two companies stated their strong wish for clearer government support.

8 Low carbon clothing. Altri, a Portugese cellulose manufacturer, bought a majority stake in AeoniQ, a Swiss start-up. AeoniQ makes fully biodegradable (or indeed recyclable) cellulose textiles made from trees that can be engineered to mimic polyester and cotton without using any plastic. The product has been used in small collections from Hugo Boss and other clothing brands. Altri said it would build the first industrial scale plant in Portugal. The production quantities are small - only 1,750 tonnes a year for the initial plant – but the market for cellulose fabrics, often called Lyocell today, is now over half a million tonnes a year and growing rapidly. Lyocell is more expensive than cotton or polyester and we’ll see whether the Altri product can reduce the price differential.

9, EV sales. José Pontes wrote in Clean Technica that EVs captured 25% of the world market for new cars in May. Sales were about two thirds pure electric and about one third plug-in hybrid. Volumes were up 22% over last year. The share of EVs in China seems to have been over 50% in May, substantially bolstering the global percentage. José Pontes also lists the 20 best-selling individual cars. There are two Teslas near the top of this list and, at number 20, the VW iD4. All the rest are Chinese brands, with BYD occupying 10 places in the list. At present, the main European, American and Korean automakers are struggling to compete globally with Chinese manufacturers and, in particular, are losing ground in China itself, by far the world’s largest market for EVs.

10, UK capital investment for electricity grid. Ofgem, the UK utilities regulator, agreed a batch of electricity grid upgrade projects and gave a further estimate of total investment needs before 2030. It says that around 3,500 km of new high voltage transmission lines will be needed as well as upgrades on existing links of 4,400 km. (The UK currently has about 8,700 km of high voltage lines). The budgeted cost is around £80bn (€95/$100bn). My estimates are that the UK will make investments of around £130 bn in new wind and solar by 2030, meaning that new and upgraded transmission infrastructure will add about 60% to the capital costs of the move to a near 100% decarbonised electricity grid by that date.