AI Power Demand Could Supercharge CRC's Power-to-CCS

Core Insights - California's electrification efforts are aligning with the AI compute boom, presenting a significant opportunity for California Resources Corporation (CRC) through its Carbon TerraVault platform and carbon capture and storage (CCS) initiatives [1][10] Electrification and AI Demand - There is a notable shift in global AI spending towards inference, increasing the demand for reliable power sources near urban areas [2] - California's grid capacity is projected to nearly double by 2035, driven by new utility connections and procurement programs, which enhances opportunities for "power-to-CCS" solutions [2] Carbon Capture Initiatives - CRC is positioned to combine dependable, lower-carbon power with nearby storage sites, particularly around PG&E Corporation's expanding interconnect network for data centers [3] - A memorandum of understanding (MOU) with Capital Power aims to evaluate CCS at the La Paloma combined-cycle plant, with potential to capture up to 3 million metric tons of CO2 annually [4] Regulatory Progress - CRC has secured California's first EPA Class VI permits for its CCS projects, reducing execution risk and supporting timelines for carbon injection goals set for 2026 [6][10] Joint Venture and Investment Structure - The partnership with Brookfield plans to inject approximately 5 million metric tons of CO2 annually by the end of 2027, supported by a total investment of $2.5 billion [8] - This joint venture structure allows CRC to cover its equity needs for initial projects, providing flexibility for shareholder returns and future growth in low-carbon power [9] Economic Considerations - The most favorable economics for CCS projects arise from medium to high concentration CO2 streams, which have lower capture costs and are easier to finance [11] - CRC's strategy will prioritize early Power-to-CCS projects focusing on higher-concentration sources, with plans to expand as technology improves [12] Emissions Certification - CRC has achieved MiQ "Grade A" methane certifications for its operations, enhancing its credibility in emissions reduction when negotiating with CCS customers [13] - Ongoing efforts to expand certifications statewide will further strengthen CRC's decarbonization brand [14] Future Milestones - Key upcoming milestones include the closing of the Berry merger, the first carbon capture and storage injection at Elk Hills in early 2026, and decisions on additional EPA Class VI permits [15] - Final investment decisions related to the Power-to-CCS corridor and adjacent data-center projects will be critical for quantifying future earnings [16]