Good morning.Recent events in Japan and in the Middle East have wide ranging consequences for the energy industry generally and for the need for CCS specifically. Today we reach a major milestone for the progression of CCS. Across Europe countries are submitting plans for CCS projects taking this technology one step closer to commercial reality.CCS is essential if the EU intends to meet its emissions reductions targets with projections to have 80-120 commercial CCS projects in Europe by 2030 capturing some 400 million tonnes of CO2 every year.Government support for CCS has understandably been impacted by the current economic climate but in countries like the UK we see resolute government support to fund CCS.The EU has made progress because of two key factors. The first is strong collaboration between and within government, industry, academia and other stakeholders. This approach started with the establishment of the Zero Emissions Platform where I Chair the advisory council and more recently with the establishment of the CCS project network.The second is having clear plans with defined timelines and objectives. The end game is all about delivering projects and getting steel in the ground. These positive milestones deliver the important signals and framework industry needs to invest in demonstration projects.But against all this good news, challenges remain.In my remarks today I will start by outlining the current policy and project context, then giving an overview of the way forward and closing by highlighting key issues that need to be addressed. But before I do that let me say a few words about the ZEP.
In the past few years the EU has moved rapidly. From calling for a CCS demonstration programme to defining funding and creating a legal framework.The mission of the ZEP, the European Technology Platform for Zero Emission Fossil Fuel Power Plants, is clear. It is to enable the commercial availability of CCS by 2020 and to kick-start widespread deployment. Now with more than 300 people, spread across 19 countries, the ZEP is a dynamic partnership bringing together policy makers and industry.ZEP has been instrumental in all aspects of the design of the EU CCS demonstration programme. Developing proposals, making recommendations on policy, funding, developing technology and planning for the research and development that will need to take place beyond 2020.What our experience has taught us, and this is supported by the recent Royal Society report on scientific collaboration, is the progress of new technologies is best achieved when all partners work together be they government, industry or academia. ZEP is starting to work closely with other European Technology Platforms, in particular with the Biofuels Platform. A joint taskforce has been established to explore the potential synergies of biomass production and use and CCS. Even as this intra-European cooperation develops we need to look for technology platforms in other regions to link with each other with all the benefits that such international collaboration can provide.
There has been a lot of progress but we need to pick up the pace if we are to get CCS to the early commercial phase by 2020.We need to continue to move swiftly to get the demonstration projects in place and lay the necessary foundations for a commercial scale CCS industry in Europe beyond 2020. The key is the structured process that is being followed in Europe and I’ll talk about the EU CCS implementation plan shortly.
Today there are a number of large-scale CCS demo projects currently under consideration in Europe with support from a variety of sources at both EU level and member state level. Shell is involved in a number of projects including two in the UK as well as being a partner in the TCM Mongstad project in Norway.A key enabler for CCS is funding and the NER 300 scheme is poised to make a sizeable contribution with, as I said at the outset, EU Member States poised to submit formal applications to the European Investment Bank.I’ll say a few words about the NER 300 given the importance of funding and then move on to talk about the European Industrial Initiative on CCS.
The NER 300 is an important mechanism to provide financial support for CCS in Europe. The intention is that grant agreements for two thirds of the 300 million allowances will be in place by the end of this year with the remainder in place by the end of 2013.All projects from the first call have to be operating by Dec 31st 2015. Around 18 projects have applied to the first call of the NER 300 covering a broad range of CCS technologies both pre and post combustion, offshore and onshore, in depleted reservoirs and in aquifers.But this positive funding commitment needs to be set into context. The IEA has calculated that the level of CCS project development between 2010 and 2050 requires an additional investment of over USD 2.5 trillion. In the OECD governments will need to increase funding for CCS demonstration projects to an average annual level of around USD 4 billion from 2010 to 2020. The ZEP is currently completing a report on CCS costs across the entire value chain. The report will cover the costs of capture, transport and storage of CO2. In line with the collaborative approach being taken this report is a joint effort between ZEP and the IEAGHG. The final4-part report is expected to be ready next month.
There are 3 main areas that need to be addressed with urgency.
Firstly, we need to ensure that the early demonstration projects are well connected in terms of sharing knowledge but more that this, we need to ensure that a longer term and integrated perspective dominates our thinking so that we plan ahead for the infrastructure that will be needed.The European Commission published its Energy Infrastructure Package on 17 November 2010 and CO2 pipeline infrastructure is included in the infrastructure communication. The next stage should be for member states to develop CCS master plans which will support the development of CO2 infrastructure.Transparent and non-discriminatory rules and tariffs for third party access will be necessary. This is an action for Member States to urgently address.
Secondly, there continues to be uncertainty in member state regulatory regimes. We simply can not afford a “wait and see” approach given the aggressive timeline to which we are working. Liability issues must be urgently addressed and appropriate regulations need to be put in place to allow cross border transfer of CO2.Also a framework for managing liabilities in the transfer of assets for depleted hydrocarbon fields is needed. We need to ensure member states meet the June 25th deadline for national legislation on geological storage of CO2 across Europe.A further pressing issue is the characterization and selection of geological storage sites. This work needs to be progressed far quicker than is the case at present.
The third priority area concerns monitoring, reporting and verification. This has to be a cornerstone of CCS in order to provide sufficient political and public confidence in the CCS industry.A central bureau could be created in line with provision in the storage directive and dedicated public bodies need to be established who will take on long term liabilities. Action needs to be taken to start preparing this important element of the EU CCS system in Europe.
In addition to the three major issues I have just outlined other challenges must also be overcome but I want to concentrate my closing remarks on one area in particular and that is speed.At EU level, while we recognise constraints may arise from limited resources and respect the fact that all NER 300 bids need to be properly and professionally appraised but the simple truth is that the period between submission of tenders for the NER300 and the awarding of funds is simply too long and ignores the 2015 deadline for the demonstration project start that EUheads of state have called for.In fact, its fair to say that, since December 2008, when the NER 300 text in the EU ETS Directive was approved by the European Parliament there have been many delays to operationalising these funds. To deliver CCS all timelines need to be compressed. Lets remember that CCS delivers exceptional value for money and has huge potential for mitigating CO2 emissions. There is no harm in us delivering ahead of schedule.I want to close with two final remarks.
Firstly, carbon markets will play an important enabling role to support the rapid progress of CCS. And as we move beyond the demonstration phase, you must have a robust CO2 price for CCS to take off. Whereas the ideal of a global climate agreement remains something to be supported, the reality is that we see a patchwork of regulations emerging at local, national and regional level. Links between national initiatives to form a global carbon market will be important. At an international level it was encouraging to see that governments reached agreement in Cancun to incorporate CCS into the CDM but closer to home, we need to ensure that the EU ETS continues its important role. It wasn’t that long ago that the Commission finished with the main design elements of Phase III of the EU Emissions Trading System. There are many good changes being made for 2013, including harmonisation across Member States. But private sector investment has a long time horizon and needs a robust carbon price. We advocate a balanced recalibration of available credits from Phase III and setting a reserve price for Phase IV to create reduced downside risk for the carbon price. Care must be taken with any changes though, given ongoing economic pressures but industry needs the clear direction that such a move would give. And this clarity would provide important, positive signals to support the future of CCS.
And finally, we need to bring the public with us. For all I have covered today in terms of political decisions that must be taken, regulatory planning to develop the infrastructure needed and funding which must be put in place quickly, we need public support.Just as politicians are recognising that CCS is an essential part of a clean energy future, given the future scale of the CCS industry, we need the public to appreciate that this technology is amongst the most important and value for money ways to reduce CO2 emissions. What our experience in Europe has confirmed is that public concern more often than not arises from late and limited engagement with the public. Both government and industry have to ensure simple, clear communication takes place to secure public confidence in CCS.
Updates from Europe – Dr Graeme Sweeney - Global CCS Institute Members' Meeting – Rotterdam, May 2011
EUROPEAN CCS UPDATE GCCSI, Rotterdam 9th May 2011 Dr. Graeme Sweeney Executive Vice President, CO2, Shell Chairman, EU Zero Emissions PlatformCopyright of Royal Dutch Shell Plc 1
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EUROPEAN LEADERSHIP IN CCS EU policy process has been swift 2010 CCS European Industrial Initiative + CCS Roadmap 2009 EU passes legislation on CO2 geological storage EU NER 300 funding provides a realistic and essential investment Technology platforms such as the EU Zero Emissions Platform are delivering ZEP Meeting CO2 Technology Centre MongstadCopyright of Royal Dutch Shell Plc 09 June 2011 3
COLLABORATION DRIVES PROGRESS ‟ THE ROLE OF ZEP 2007 2009 EU calls for CCS demo EU CCS directive programme by 2015 and funding in place 2007 ZEP Vision for EU CCS demonstration programme 2008 EU agrees to 2008 ZEP proposal for co-fund programme CCS demo programme 2009 EU passes legislation 2009 ZEP recommendations on on CO2 geological storage NER funding CCS Project Network launch 2009 ZEP CCS knowledge sharing proposal 2010 CCS European 2010 ZEP Long-Term R&D Industrial Initiative + CCS report Roadmap (within SET plan) 4Copyright of Royal Dutch Shell Plc 09 June 2011 4
CCS CONTEXT: EU POLICY2010 CCS European Industrial Initiative + CCS Roadmap (within Strategic Energy Technology Plan)2009 EU passes legislation on CO2 geological storage ETS Directive - 300m ETS allowances for CCS and innovative renewables CCS Directive - A framework for permanent geological containment of CO2 European Energy Programme for Recovery (EEPR) - €1bn for CCS demonstration projects2008 CCS Communication 2: Supporting Early Demonstration of Sustainable Power Generation from Fossil Fuels - Project Network - Supporting structure for CCS demo projects2007 CCS Communication 1: Sustainable power generation from fossil fuels - Commercial viability by 2020 Spring European Council - Financing of up to 12 demos by 2015 Strategic Energy Technology Plan (SET-Plan) ‟ CCS one of the six strategic energy technologies for 2050Copyright of Royal Dutch Shell Plc 09 June 2011 5
LARGE SCALE PROJECTS UNDER DEVELOPMENT EEPR selected projects Additional candidates Indicative - Non-exhaustiveNER300 Timetable: Feb. 9: Proposals to Member States (MS) HATFIELD, UK May 9: MS applications to ROTTERDAM, NL JÄNSCHWALDE, DE BEŁCHATÓW, PL European Investment Bank (EIB) COMPOSTILLA, ES By Feb. 9 2012: EIB evaluation & ranking PORTO TOLLE, IT 2H 2012: funds awarded 6Copyright of Royal Dutch Shell Plc 09 June 2011 6 6
FUNDING - NER 300 New Entrant Reserve 300 under the EUs Emissions Trading Scheme Set up in 2008 to finance commercial-scale CCS and innovative renewable energy demonstration projects Provides 300 million allowances (depending on carbon price, worth some €4-5 billion) distributed through two rounds Geographically balanced locations: 1 to 3 projects per Member State 50% of relevant costs will be funded, per project max NER 300 not part of EU budget ‟ can be combined with other instruments, including EEPR and Structural and Cohesion Funds Implementation at EU level (COM), but with strong role forCopyright of Royal Dutch Shell Plc 09 June 2011 7 Member States and with support from the European Investment
EUROPEAN INDUSTRIAL INITIATIVE ON CCS 2010 CCS European Industrial Initiative + within Strategy Energy Technology Plans Collaboration between industry, Member States, the European Commission, research organisations and NGOs Objective of the EII CCS is: 1. to enable the cost competitive deployment of CCS after 2020 2. to accelerate the required changes in policy, technology and financing 3. to identify priority actions and to manage synergies between ongoing activities 8Copyright of Royal Dutch Shell Plc
TIMELINE FOR DELIVERING CCS IN EUROPE 2010 2012 2015 2020 2030 Projects call Project selection Implementation 8 projects - 12 projects Demo projects CCS KPIs Projects call Monitor & report KPIs e.g. CO2 stored Develop KPIs Cumulative stored CO2 Develop Lighthouse programme Lighthouse projects R&D Technology today 2nd generation technology 3rd generation technology Post 2015 plan Develop post 2015 plan including infrastructure Implement post 2015 plan Commercial deployment of CCS Public comm. Education & Awareness Coms Educate & Awareness - Demo programme Education & Awareness and Lighthouse / R&D programme Local public buy-in & permitting & Education NER 300 Develop + set enduring Regs & Policy transition policy Phase to Carbon price M.S. Regs & Policy Current EII Implementation EII EII Implementation Plan II Plan ICopyright of Royal Dutch Shell Plc 9
CCS DEMONSTRATION PROJECTS 2010 2012 2015 2020 2030 Projects call Project selection Implementation 8 projects - 12 projectsDemo projects Final investment decisions for up to 12 CCS demonstration projects KPI: minimum 6 projects by 2012 and minimum 10 projects by 2016 EU CCS Project Network to ensure knowledge sharingCopyright of Royal Dutch Shell Plc 10
CCS R&D 2010 2012 2015 2020 2030 Develop Lighthouse programme Lighthouse projects R&D Technology today 2nd generation 3rd generation technology technology Second generation CCS post-2020 & 3rd generation post-2030 R&D actions that lead to commercial results by 2020-2025 Spanning the entire CCS chain: capture, transport, storage Basis for programming R&D actions: long term R&D plan developed by industry, research organisations & NGOs (ZEP) & EERA’s R&D agenda for public research organisations Need for CCS Lighthouse projects Public / Private priority actions for creating momentumCopyright of Royal Dutch Shell Plc 11
FORWARD VISION, POLICY AND PUBLIC COMMS 2010 2012 2015 2020 2030 Post 2015 plan Develop post 2015 plan including infrastructure Implement post 2015 plan Commercial deployment of CCS Public comm. Education & Awareness Coms Educate & Awareness - Demo programme Education & Awareness and Lighthouse / R&D programme Local public buy-in & permitting & Education NER 300 Develop + set enduring Regs & Policy M.S. Regs & Policy transition policy Phase to Carbon price Develop forward view: vision on required actions beyond 2012 and 2015 Support transposition of CCS directive Exchange information on public awareness and support Initiate international cooperation Need to ensure sufficient funding for demos and timely deliveryCopyright of Royal Dutch Shell Plc 12
KEY ISSUES 1. Long term planning of infrastructure needs 2. CCS regulatory framework needs to progress to implementation 3. Monitoring, reporting and verification of storage operationsCopyright of Royal Dutch Shell Plc 6/9/2011 13
LONG TERM PLANNING OF INFRASTRUCTURE Issue: risk that early demonstration projects will be isolated, point-to-point solutions without scope to grow Recommendation Member states should develop National CCS Master Plans and align with ongoing EU-initiatives, such as Europipe First CO2 infrastructures projects, starting around 2015, need to be future-proof to guarantee economy of scale when new CCS projects will Original North Sea Infrastructure Project (CEN come on stream This will require a coordinated planning approach but also the design of a funding mechanism - national, European or both - to support up- scaling of CO2 pipelinesCopyright of Royal Dutch Shell Plc 6/9/2011 14
CCS REGULATORY FRAMEWORK Issue: uncertainty in most Member States on future regulatory regimes and business models for CO2 transport and storage including the roles for (semi) state companies, has led to companies taking a wait-and-see approach, hampering the deployment of CCS. Recommendation The National Master Plans should address preferred regulatory regimes, business model and specific issues such as rights of access to 3rd parties (all likely to be very different for CO2 transport and CO2 storage) Open liability issues need to be addressed urgently in a manner both practical and equitable The London Protocol has recently been amended to permit the cross-border transfer of CO2 but is yet to be ratifiedCopyright of Royal Dutch Shell Plc 6/9/2011 15
MONITORING, REPORTING & VERIFICATION Issue: Expertise to do MRV of CO2 storage operations is just emerging and varies by Member State. Also public safety concerns focus on how the storage of CO2 can be safeguarded in the long term. Recommendation Process to improve MRV and the safeguarding of CO2 storage agreed by the EU and Member States. Solutions could range from: a central EU CCS MRV Bureau agency the creation of dedicated (national) public entities to take on liabilities and monitoring activities after industry handover the establishment of a knowledge sharing network for Member State agencies involved in CO2 storageCopyright of Royal Dutch Shell Plc 6/9/2011 16
ACCELERATING CCS Timelines must be improved In the EU, the role of the Zero Emissions Platform needs to be strengthened Government, industry and academia must work together. There is a need to establish ZEP type technology platforms in other regions Continue reduction of CCS costs (Capture, Transport, Storage) Agree fit-for-purpose CCS standards, for example on MMV More funding for CCS demos Need to ratify the OPSAR amendment Enable deployment of CCS in emerging economies Build on proven CO2-EOR industry where possible CO2 infrastructure development Transposition of CCS into national legislation Copyright of Royal Dutch Shell Plc 09 June 2011 17
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ADDRESS PUBLIC WARENESS AND SUPPORT FOR CCS BRINGING THE PUBLIC WITH US Public perception of CCS is a potential barrier to the implementation as a CC mitigation technology. Active public engagement is key to building public understanding „ Public awareness is generally low, the role of CCS is not understood. „ Concerns amongst local communities about project safety „ Environmental and health concerns „ Rationale for CCS versus other options, e.g. Renewables Demonstration projects have a key role to show safe & responsible operationsCopyright of Royal Dutch Shell Plc