EU CCS Demonstration Project Network - May 2013
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Mike Gibbons, Non-Executive Director, 2Co Energy. Daniel Rennie, Network Manager, Global CCS Institute
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EU CCS Demonstration Project Network - May 2013
- 1. Mike Gibbons - Chair of the Network’s Steering Committee. Daniel Rennie - Network Secretariat The European CCS Demonstration Project Network Global CCS Institute’s Members’ Meeting, 23rd May 2013
- 2. 2 What is the CCS Project Network? The European CCS Demonstration Project Network was established in 2009 by the European Commission to accelerate the deployment of low-carbon, safe, large-scale and commercially viable CCS projects. Current members are five of the most advanced large scale demonstration projects in Europe. Objectives Enabling knowledge-sharing amongst projects. Address key topics that will enable CCS project deployment.
- 3. 3 The portfolio Don Valley, UK Power sector 650 MW, pre- combustion 5 Mtpa CO2 Compostilla, ES Power sector 330MW, oxyfuel 1.6 Mtpa CO2 Porto Tolle, IT Power sector 250MW, post- combustion 1 Mtpa CO2 Jänschwalde, D E Power sector 300MW, post-combustion & oxyfuel 1.7Mtpa CO2 Bełchatów, PL Power sector 260MW, post-combustion 1.8Mtpa CO2 ROAD, NL Power sector 250MW, post- combustion 1.1 Mtpa CO2 Sleipner, NO Gas processing 0.9Mtpa CO2
- 4. 4 What has the Network accomplished in the past 12 months? One operating project of the Network has stopped nearly 1 million tonnes of CO2 from being emitted into the atmosphere. Jänschwalde technical reports have been released. Publication of reports and engaged with stakeholders at a number of events. Numerous workshops, with reports available on: Public Engagement. Regulatory Development. Storage. Transport.
- 5. 5 Network Situation Report: 2012
- 6. 6 The Network in Germany for the dissemination event
- 7. 7 What are our challenges? The real challenge is in the operational deployment of the projects! The following issues are not true of all countries, but are a reflection of the problems faced by the Network members as a whole
- 8. 8 Key issue: Policy uncertainty Regional and national climate and energy policies must provide long-term clarity on the way forward. Incentive mechanisms should be consistent with this pathway.
- 9. 9 Key issue: Legal / regulatory frameworks burdens Ensuring that projects are not unduly burdened with unquantifiable risks and liabilities would greatly aid deployment. For example, within the CCS Directive: Transfer of responsibility. Liability and financial security requirements. Third party access requirement issues
- 10. 10 Key issue: Lack of appropriate investment and deployment mechanisms Strong incentives and backing will need to be urgently introduced to enable the operation of first-mover CCS projects. Much more needs to be done. These must take into account the risk and large upfront costs experienced by project developers. If CCS is going to be developed quickly and at scale, suitably sized infrastructure for future clusters needs to be put in place.
- 11. 11 Key risk: Public acceptance The successful implementation of European CCS demonstration projects will be key in establishing a positive perception of CCS as an important part of an effective and efficient CO2 emission reduction portfolio.
- 12. 12 Conclusions The Network is an important international mechanism for providing peer support to projects, but fundamental political action and support is needed. The main challenge for the projects is progressing to the point of making a successful final investment decision. CCS in Europe is at a critical point. The projects require urgent political support to ensure Europe delivers on its goals of deploying CCS successfully, creating jobs and curbing GHG emissions.
- 13. 13 Find out more and keep up to date www.ccsnetwork.eu/ twitter.com/ccsnetworkeu facebook.com/ccsnetwork Contact danie.rennie@globalccsinstitute.com
Editor's Notes
- However, to provide a general overview, and bring out the major findings, the Network will shortly be releasing The European CCS Demonstration Project Network: Situation Report 2012 .It is intended that this report provide a holistic, useful and detailed examination of the member projects and the lessons that have been learnt – drawing on the outcomes of the knowledge sharing events, presentations, and the six-monthly surveys conducted by the project.
- CCS has large capital costs and development times – often more than 10 years for early movers – with investors requiring long-term certainty that they can invest in CCS. The EU and National climate and energy policies must therefore give sufficient clarity on the long term way forward and implementation should be consistent with this pathway.As previously mentioned, two of the Network’s projects will not be proceeding – Jänschwaldeand Belchatow.Both were well developed and very credible projects, situated within two countries that have a great reliance on fossil fuel generated electricity and industries – ideally placed to benefit from the environmental benefits; economic benefits; and energysecurity benefits that CCS provides. Both have been cancelled largely due to a lack of investment and policy commitment and certainty.These clearly contrast to the Sleipner project – which has been operating commercially since 1996.Policies change for a number of reasons over time, but when considering CCS it should be repeatedly stressed that a CCS will not only benefit the energy sector – but a large number of industrial sectors such as steel, iron, paper, cement, chemical production - which have few other clean development routes – and will all rely on the steps being taken by today’s CCS demonstration projects.
- Legal framework. The CCS Directive provides a solid framework for CCS, but also creates severe uncertainties, liabilities and risks for project operators. For example, the provisions for the transferof responsibility for a storage siteenables Member States to infinitely postpone the handover, the costs related to the Financial Mechanism can be unlimited, and other Directive provisions can impose huge unnecessary financial burdens on projects. While it is possible to overcome these issues, and all of the projects are taking steps to do so, for early movers these represent additional barriers for making the business case - when there are limited revenue streams or incentives for undertaking CCS at all.(Optional specifics if required)Transfer of responsibility – details such as what ‘evidence’ is acceptable, who will assess the evidence, and what happens if the competent authority ‘unfairly’ doesn’t accept responsibility.Liability and financial security –requirements, such as what constitutes proof of being ‘valid and effective’ at time of injection; what are the obligations; what are acceptable calculation methods; what instruments are acceptable and viable; the impact of third party access requirements.
- Current deployment mechanisms are insufficient. The ETS will not provide sufficient near time income, and the NER300 funding scheme has not delivered for CCS. Although the CCS Network fully supports this type of financing in theory, not a single CCS demonstration project selected in the first round – and available funding under the second round will be even lower. With the recent CCS Communication, a number of mechanisms are being proposed – but ultimately very strong incentives and backing must be immediately introduced to enable first-mover CCS projects. Early mover projects are oftentaking on many of the costs, time and effort required to develop suitably scaled infrastructure (particularly transport and storage) – which will be vital in the larger and longer term deployment of CCS, but have few incentives for doing so other than increased risk and upfront investment costs.Immediate and medium term steps must take into account the risk and large upfront costs experienced by early project developers – also recognizing the need for large, suitably sized infrastructure that anticipates the demands set put in all IEA, Commission and national roadmaps - before the technology-neutral ETS alone can be solely utilised.(Optional specifics)Some of the suggested changes that are required include:Re-allocation of the EEPR funds. Two of the awarded projects under the EEPR funds are officially terminated. These funds are dedicated for CCS demonstration projects and should be re-allocated to the other demonstration projects. Extensive review of the CCS Directive. As already described above, the Directive provides a solid framework for CCS, but also creates severe uncertainties, liabilities and risks for project operators. If the issues caused by the CCS Directive, such as the handover of responsibilities, can be solved on the short term this could substantially reduce the risks for investors.Feed-in tariffs for CCS power plants. Feed-in tariffs are effective in providing predictable revenues. Such contracts could be set for 20 years, funded either by taxpayers via the public treasury (through EUA revenues) or by energy consumers via a levy on tariffs. (N.B. in the demonstration phase, feed-in tariffs need to be project-specific, evolving into a general feed-in tariff as the market matures). Feebate. A feebate can roughly be described as a tax or user charge imposed by government that charges users of socially undesirable items and applies the revenue collected to payments for users of socially desirable items. Applied to CCS, authorities could accordingly charge utilities or industry with significant CO2 emissions and redistribute the revenue to generators with CCS to compensate them for their higher capital and operating costs.
- A critical barrier for public acceptance of CCS technology is that until now it has not been deployed at large-scale on power generation. The persistent (but false) perception of CCS as unproven technology (e.g. expensive, unsafe, unnecessary, lock-in of fossil fuels) is blocking a wide stakeholder support for CCS. Therefore the successful implementation of a first EU CCS demonstration project will be key to establish a positive perception of CCS as an important part of an effective and efficient CO2 emission reduction portfolio. A further delay of EU CCS demonstration projects may lead to stronger public opposition. In addition to deployment positioning CCS as a key ‘clean’ technology in addressing climate change, the economic benefits of CCS should be emphasized, including the local value propositions. All of the above points are being drafted in a forthcoming Network response to the EC’s recent CCS Communication.