BMI View: We have been tracking the deployment of Carbon and Capture Store (CCS) projects globally over the past two years and our views are ful ly playing out, with t he withdrawal of the last project left in the running for the first NER300 funding round confirming the persistent difficulties facing the sector. With CCS proving a high cost abatement option, we anticipate that a lack of funding and a deficit in political support will continue to tak e a significant toll on the de velopment and deployment of CCS, casting shades over the second NER300 funding round to be held in 2013.
Lack Of Domestic Political And Financial Backing…
CCS, a family of technologies and techniques that enable the capture of CO 2 from fuel combustion or from industrial processes, has been described over the past few years as a unique and vital element in the global transition to a sustainable low-carbon economy - in both power generation and industry. Yet, while all technologies along the CCS chain have been in operation across various industries for decades, they have only been put together o n an industrial scale (> 1Mt CO2 captured and stored per year) at a small number of installations. The technology is, therefore, technically immature in terms of integrating capture, transport and storage as part of full?scale projects and, in spite of its expected merits, it is currently nothing more tha n a high cost abatement option.
This considered, s trong political and financial backing is a conditio sine qua non for th e commercial development of CCS . Yet, given the current macroeconomic outlook and ongoing shifts in the gas, coal and carbon markets, risks for the technology a ppear to the downside , especially in Europe ( see our online service, April 30 2012, 'CCS: Woefully Off The Pace ).
We have highlighted in a number of occasion s that several European projects were at risk , owing to the ongoing eurozone debt crisis, persistent difficulties in reforming the EU Emissions Trading System (ETS) , access to cheaper coal imports from the United States as well as potential for the development of shale gas. Recent developments have fully vindicated this view, with the withdrawal of the last project left in the running for the first NER300 funding round making the persistent difficul ties facing the sector manifest a nd highlighting a dramatic reversal for a technology that was once seen as a leading element in the EU ' s plans to reduce carbon emissions.
|Too Pricy To Play A Role?|
|CO2 Emissions By Energy Industries In 2007 (Mn Tonnes)|
… Leave CCS Plans In Tatters
Steel giant AccelorMittal ' s decision to withdraw its funding application for a proposed CCS project at the Florange steel mill in north-east France represents the last straw for the EU plans to deliver a series of commercial-scale projects across the continent . The plant was indeed the only remaining viable candidate to secure money from a special EUR 1.5bn fund (the so-called NER300 fund ) created by the European Union as a way to help finance as many as a dozen pilot plants deploying technology to capture and b ury carbon emissions. " T echnical difficulties " were mentioned as the official reason in the case of ArcelorMittal ' s plants, as the plant had received financial bac king from the French government.
That said, we note that lack of reassurance about the degree of financial backing from member states was key in precipitating the disqualification of a number of projects, most notably the UK ones in November 2012 ( See our online service, November 14 2012, 'CCS View In Play: Outlook Remains Uncertain' ).
|Project category||Member State||Project|
|Source: European Commission|
|Pre-combustion||UK||Don Valley Power Project|
|Post-combustion||PL||Belchatow CCS Project|
|Industrial application||Green Hydrogen||Green Hydrogen|
|Pre-combustion||UK||The Teeside CCS Project|
|Oxyfuel||UK||Oxy CCS Demo|
|Pre-combustion UK C.GEN North Killingholme Power Station||UK||C.GEN North Killingholme Power Station|
|Post-combustion||IT||Zero Emission Porto Tolle|
At the moment of writing, it is still unclear whether the EU will decide to reallocate the EUR 300m n earmarked for the Florange plant to other renewable energy projects or roll the money over into the second round of NER300 funding awards next year. Yet, we note that with the first round setting a precedent, the future of CCS in Europe appears more precarious than ever.