WEC ITALY – ROLE OF CCS IN DECARBONIZATIONPerspective on the UK Cost Reduction Task Force16 May 2013Nathalie LemarcisDirec...
217/05/2013DISCLAIMERThe contents of this document are given for purely indicative purposes and have no contractual value....
317/05/2013THE CCS COST REDUCTION TASK FORCE ......UK Government initiative:● Established in March 2012 by DECC as “an in...
417/05/2013TASK FORCE METHODOLOGY ...... Identification of three key areas of potential cost reduction:● Planning & Infra...
517/05/2013THE IMPORTANCE OF COST REDUCTION ...... The role of CCS in the UK generation mix iscrucial to the low carbon s...
617/05/2013KEY CONCLUSIONS FROM THE INITIAL REPORT ......Need for a supportive regulatory landscape:Commercialisation pro...
717/05/2013PLANNING AND INFRASTRUCTURE DEVELOPMENT ...... Achieving optimal scale in CO2 storage● Storage reservoir devel...
817/05/2013GENERATION AND CAPTURE TECHNOLOGY DEVELOPMENT ...... Early plants unlikely to be optimal – optimising would im...
917/05/2013ACHIEVING AFFORDABLE FINANCING ...... Appropriate risk allocation across the full chain – never easy in a new ...
1017/05/2013POTENTIAL DELIVERABLE COST REDUCTIONS ......Cost reductions only achievable if a number of projects are built
1117/05/2013POTENTIAL DELIVERABLE COST REDUCTIONS ......
1217/05/2013CONCLUSIONS ....... An LCOE with CCS at or below £100/MWh is achievable by the 2020s This is confirmation th...
1317/05/2013ADDITIONAL INFORMATION ....... Information relating to the CCS Cost Reduction Task Force is available on theD...
1417/05/2013SOCIETE GENERALE AND CCS ....... Leading Financial institution in the CCS sector:Financial Advisor to one of...
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Nathalie Le Marcis, Société Générale - L'approccio UK alla CCS:"The potential for Reducing the Costs of CCS in the UK"

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Slides presentate in occasione del convegno "Le strategie europee di de-carbonizzazione - Quale ruolo per la Cattura e Stoccaggio della CO2?" organizzato il 16/05/2013 da WEC Italia e AIDIC in collaborazione con Energia Media

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Nathalie Le Marcis, Société Générale - L'approccio UK alla CCS:"The potential for Reducing the Costs of CCS in the UK"

  1. 1. WEC ITALY – ROLE OF CCS IN DECARBONIZATIONPerspective on the UK Cost Reduction Task Force16 May 2013Nathalie LemarcisDirector - Power Advisory & Project Financenathalie.lemarcis@sgcib.com
  2. 2. 217/05/2013DISCLAIMERThe contents of this document are given for purely indicative purposes and have no contractual value.Any views, opinions or conclusions contained in this document are indicative only, are not based on independent research and do not represent anycommitment from Société Générale. This document does not constitute an offer, a solicitation, an invitation to make an offer, advice or a recommendationfrom Société Générale to purchase or sell a product or to enter into a transaction or provide investment services. The market information displayed in thisdocument is based on data at a given moment and may change from time to time and Société Générale will not notify the recipient of any such amendmentor change. The accuracy, completeness or relevance of the information which has been drawn from external sources is not guaranteed although it is drawnfrom sources reasonably believed to be reliable. No responsibility or liability (express or implied) is accepted for any errors, omissions or misstatements bySociété Générale except in the case of fraud or any other liability which cannot lawfully be excluded.The commercial merits or suitability or expected profitability or benefit of any investment services described in this document to the recipients particularsituation should be independently determined by the recipient. Any such determination should involve an assessment of the legal, tax, accounting,regulatory, financial, credit and other related aspects of any such transaction, based on such information and advice from the recipients own advisers andsuch other experts as the recipient deems relevant. Société Générale shall not be liable for any failure by the recipient to obtain such information and advice.This document is to be treated in the strictest confidence and is not to be disclosed directly or indirectly to any third party. It is not to be reproduced in wholeor in part, nor used for any purpose except as expressly authorised by Société Générale.This document is issued in the U.K. by the London Branch of Société Générale. Société Générale is a French credit institution (bank) authorised by theAutorité de Contrôle Prudentiel (the French Prudential Control Authority). Société Générale is subject to limited regulation by the Financial Services Authorityin the U.K. Details of the extent of our regulation by the Financial Services Authority are available from us on request.
  3. 3. 317/05/2013THE CCS COST REDUCTION TASK FORCE ......UK Government initiative:● Established in March 2012 by DECC as “an industry-led joint task forceestablished by Government to assist with the challenge of making CCScommercially available for operation by the early 2020s.”● Chaired by Geoff Chapman (CCSA), project managed by the Crown Estate● Analytical and other support from Poyry● Broadly representative of the stakeholders in CCS - 23 members drawnfrom industry, trade associations, developers, finance and academia“The objective of the Task Force is to publish a report to adviseGovernment and industry on reducing the cost of CCS so thatprojects are financeable and competitive with other low carbontechnologies in the early 2020s.”
  4. 4. 417/05/2013TASK FORCE METHODOLOGY ...... Identification of three key areas of potential cost reduction:● Planning & Infrastructure (Mike Saunders / Alastair Rennie)● Commercial & Financial ( Allan Baker/Nathalie Lemarcis)● Generation & Capture (Leigh Hackett / Tom Stringer) Consultation:● Work stream work shops● Questionnaire – cost reduction opportunities & impact● One-to-one interviews with stake holders Modelling & Analysis – led by Poyry:● Review of existing analysis in the public domain● Challenge of assumptions● AnalysisThe report:● is a representation of the Task Force members view of the opportunities for costreduction in CCS● is not a list of government or other stakeholder actions or a detailed model /representation of CCS project costs
  5. 5. 517/05/2013THE IMPORTANCE OF COST REDUCTION ...... The role of CCS in the UK generation mix iscrucial to the low carbon strategy of the UK● Decarbonisation of generation needs CCS● CCS facilitates Nuclear and intermittent renewable development CCS Commercialisation and the supportmechanisms now in place can kick start thedevelopment of commercial CCS● Commercialisation grant● Feed-in Tariff /Contracts for Difference● Emissions Performance Standard UK poised take a leading role (again !) Cost reduction is the essential step from FOAKto Nth-of-a-kind● CCS has to be cost competitive to deliver potential● Desired outcome should be operational plants and a clear costreduction trajectory● “No regrets strategy” – planning for successSource: Department of Energy and Climate Change
  6. 6. 617/05/2013KEY CONCLUSIONS FROM THE INITIAL REPORT ......Need for a supportive regulatory landscape:Commercialisation program provides anopportunity to resolve many of theseissues and create a template for futureindustry developmentWithin this environment tangible cost savings can come from:● Planning & infrastructure developments● Generation & capture technology development● Evolution of commercial and financing arrangementsDeliverability is not the responsibility of government aloneDevelopment of CCS requires constructive full engagement of all stakeholders
  7. 7. 717/05/2013PLANNING AND INFRASTRUCTURE DEVELOPMENT ...... Achieving optimal scale in CO2 storage● Storage reservoir development represents a significant part of CO2 storage cost● Expensive process so benefit from focussing on “high volume” opportunities● Substantial risk (cost) reduction from storage clustersEssentially a volume business – higher volume = lower per unit cost Optimisation of transport infrastructure● Cost of increasing a pipe size is not proportional to the volume transported – lower per unittransport cost● Trunk lines and local feeder hubs provide volume benefits over early point to point projects● Distance matters – shorter less complex routes have obvious cost benefitsPlanning and investing for future projects in the first projects could lead tosignificant reductions in per unit of CO2 stored in follow on-projects
  8. 8. 817/05/2013GENERATION AND CAPTURE TECHNOLOGY DEVELOPMENT ...... Early plants unlikely to be optimal – optimising would improve per unit:● Capital equipment costs● Capture operating costs, including energy penalties (parasitic load) Benefit of experience● Reduced redundancy in design and execution● Process optimisation● Better integration● Piggy-backing on commercial, regulatory, planning and other existing knowledge
  9. 9. 917/05/2013ACHIEVING AFFORDABLE FINANCING ...... Appropriate risk allocation across the full chain – never easy in a new industry !● Complex mix of disciplines and “cross border” risks and liabilities● Appropriate allocation on FOAK is unlikely to be the optimal allocation for the Nth-of-a-kind :improvement with experience Role of Government, developers, insurance industry and finance being defined● Real time risk allocation discussion under way – Commercialisation Competition● We don’t know what we don’t know – pragmatic approach from all stakeholders Continued engagement with finance and insurance industry crucial● Genuine interest now – momentum needs to be retainedHigh cost of capital in early projects offers scope for material cost reductions if areplicable template emerges from the Commercialisation competition
  10. 10. 1017/05/2013POTENTIAL DELIVERABLE COST REDUCTIONS ......Cost reductions only achievable if a number of projects are built
  11. 11. 1117/05/2013POTENTIAL DELIVERABLE COST REDUCTIONS ......
  12. 12. 1217/05/2013CONCLUSIONS ....... An LCOE with CCS at or below £100/MWh is achievable by the 2020s This is confirmation that CCS is comparable with traditional renewables – evenmore so when it’s ability to back up intermittency is taken into account Clear that the industry needs to capitalise on the Commercialisationcompetition but to realise the full potential a credible long term commitment isrequired by all stakeholders Cost savings will only come from multiple operating full chain projects with awell conceived transport and storage solutionChallenge is to look beyond the Commercialisation phaseand plan for success
  13. 13. 1317/05/2013ADDITIONAL INFORMATION ....... Information relating to the CCS Cost Reduction Task Force is available on theDECC web site The Final Report of the Task Force will be delivered to the Minister in Spring 2013 A number of “Candidate Actions” have been identified by the Task Force and thesewill be taken forward
  14. 14. 1417/05/2013SOCIETE GENERALE AND CCS ....... Leading Financial institution in the CCS sector:Financial Advisor to one of the short-listed commercialisation projectsFinancial Advisor to Abu Dhabi “full chain” CCS (Masdar) projectFinancial Advisor to Powerfuel IGCC, UKFinancing Feasibility study for Hydrogen Energy CaliforniaEEPR guarantee facility for the 2Co Don Valley CCS projectMember of the UK Government CCS ForumCCS Cost Reduction Task Force Member

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