How bright is the future for CCS demo in Europe?

TCM project
The TCM project, which opened this month, is the world’s most advanced centre for testing and development of carbon capture technologies. The sharing of this expertise will play an important role in supporting new European CCS projects

Europe’s ambitious CCS plans have suffered setbacks over the past 12″18 months, with a number of high-profile projects falling by the wayside, primarily because of financing concerns and the lack of a coherent legislative framework. So where does this leave its all-important CCS demo roll-out?

Dr Heather Johnstone, Chief Editor

Carbon capture and storage (CCS) stands out as one of the most important technological solutions if Europe is to achieve its goals for energy and climate change. It can play an important role in reducing emissions for coal and gas power plants as well as heavy industry, while renewable energy solutions are further developed ” so said the EU Commissioner for Energy, Guenther Oettinger, early last year.

Fast forward 18 months, and the deployment programme of large-scale integrated CCS projects has slowed to a snail’s pace, with some expressing concern that is has stalled completely. To date, there are no large-scale CCS demonstration plants associated with a power station in operation in Europe.

Although research into CCS ” the capture of carbon dioxide from power stations and other major industrial users of coal and gas, compressing it, transporting it and storing it safely underground ” began back in the 1990s, it has only been in the past 5″10 years that CCS has been recognised as an important tool for cutting greenhouse gas emissions and helping to mitigate the risk of climate change.

According to analysis from the International Energy Agency (IEA), CCS has the potential to contribute around one fifth of required emissions reductions in 2050. But in order for this potential to be realised, approximately 100 CCS projects needs to be implemented globally by 2020, and over 3000 by 2050. This clearly is a major challenge facing both industry and politicians.Most developed countries now have CCS as an integral part of their energy policy, and with gas and coal’s continued dominance in Europe’s power generation mix, countries in this region are no exception.

Back in March 2007, European Union (EU) heads of government agreed that up to 12 commercial-scale integrated CCS demonstration projects should be in place across Europe by 2015. The following January, the European Commission (EC) proposed binding legislation to implement three key targets for the energy sector by 2020, one being the reduction of greenhouse gas emissions by 20 per cent, compared to 1990 levels. The subsequent ‘Climate and Energy Package’ became law in June 2009.

A key part of this legislation is the establishment of a legal framework to promote the development and safe use of CCS through a network of demonstration plants to test its viability by 2015, with the aim of achieving commercial uptake by 2020.

To support this effort, the EU introduced a unique funding mechanism. Known as the NER300 Programme, it remains the world’s largest funding programme for CCS demonstration projects ” it also supports innovative renewable energy technologies.

The NER 300 programme will raise funds by selling around 300 million allowances (rights to emit one tonne of CO2) from the EU emissions trading scheme (ETS) on the carbon market. The money raised will be used to subsidise CCS demonstration installations. The call for proposals for the NER300 programme opened in November 2010, and project ‘sponsors’ (usually the companies putting together the proposals) had a deadline of 9 February 2011 to submit their ideas to governments.

Each Member State then had to evaluate domestic proposals and choose the ones to put forward for consideration by the EU. The selected proposals were then handed over to the European Investment Bank (EIB) by 9 May 2011.

The EIB was given around a year to decide which projects received funding. Among the criteria it looked for is financial viability ” an assessment confirming that future project income will cover all outgoing costs. The EIB will pass on information on the set of eligible projects to the EC, who will in turn inform the respective Member States. The EC will ‘rank’ each of the projects, with those ranking highest being the ones with the lowest cost per tonne of carbon stored. In the case of CCS, the ranking of the projects will have to be adjusted to take into consideration the need to demonstrate the different technologies specified.

Large-scale ccs demo projects in the running

Originally, 13 CCS projects were submitted to the EC for the first round of the NER300 funding programme for assessment by the EIB. The EC intends to provide clarity on the outcomes of the first round of the NER300 programme in the second half of 2012. Only two-thirds of the auctioned carbon allowances will be allocated in this first round of proposals. The EC aims to hold a second round sometime after the end of 2012, with a funding decision by end-2013 or early 2014

Below are summaries of nine projects related to power generation that have been submitted for the first round of NER300 funding.

Vattenfall Jàƒ¤nschwalde project
The Vattenfall Jàƒ¤nschwalde project was shelved at the end of last year, due to a lack of progress in resolving regulatory issues around CCS in Germany
Source: Vattenfall

(i) Beà…‚chatàƒ³w CCS (post-combustion), Poland

At the 4440 MW lignite fired Beà…‚chatàƒ³w power station, which is the largest thermal power plant in Europe, PGE Elektrownia Beà…‚chatàƒ³w SA proposes to integrate CCS into a new build 858 MW power unit. An amine-based post-combustion carbon capture facility will be applied to a 260 MW slipstream of the new unit. Approximately 1.8 million tonnes per annum of CO2 is expected to be captured at the plant and transported to onshore deep saline formations for storage.

(ii) C.GEN North Killingholme power project, UK

C.Gen is developing a new-build integrated gasification combined-cycle (IGCC) power plant with a net capacity of 430 MW, to be potentially coupled with hydrogen production. Fuels used at the plant would include unconventional hard coal, petcoke and biomass (woodchips). It is estimated that around 2.5 million tonnes per annum of CO2 could be captured at the using pre-combustion capture technology. C.Gen is anticipating that the project will rely on the common user pipeline infrastructure being developed by National Grid for the transport of CO2 to deep saline formations and/or enhanced oil recovery.

(iii) Don Valley power project, UK

2Co Energy is proposing to utilise pre-combustion carbon capture technology at a new-build IGCC power plant generating 650 MW net. Approximately 4.8 million tonnes per annum of CO2 is estimated to be captured. The CO2 will be transported via a 175 km pipeline for offshore storage, either to the Talisman Energy Limited’s central North Sea oil fields for enhanced oil recovery or to deep saline formations in the southern North Sea.

(iv) Eston Grange CCS Plant, UK

A new-build 850 MW IGCC power plant using bituminous coal as a feedstock is being proposed by Progressive Energy. It is expected to capture around five million tonnes per annum of CO2 from a 400 MW slipstream through pre-combustion capture technology. The transport of the CO2 will be via pipeline for storage in offshore deep saline formations. The project is scheduled to reach commercial operation in 2016.

(v) Getica CCS demonstration project, Romania

Getica CCS Project Company (comprising Turceni Energy Complex, and Transgaz, Romgaz) plans to implement a full chain operational CCS system capturing 1.5 million tonnes per annum of CO2 from an existing 330 MW unit of the Turceni power plant. The CO2 will be transported using (where possible) existing onshore natural gas pipelines and stored underground in onshore deep saline formations within a 50 km radius of the power plant.

(vi) Peel Energy CCS project, UK

A new-build coal and biomass-based power station generating 1724 MW is being proposed by Ayrshire Power (Peel Energy, RWE npower). When operating at full scale, approximately two million tonnes per annum of CO2 will be captured by three separation units. CO2 is anticipated to be transported offshore for storage in depleted oil and gas reservoirs.

Ayrshire Power is in advanced stages of applying for consent from the Scottish Government to construct the facility. Preliminary studies for the project were conducted in the fourth quarter of 2009, with feasibility studies started in March 2010. The project is expected to be operational in 2016.

Status of NER300 funding

Thursday, 9 February 2012 marked a significant date in the calendars of all the project sponsors, as that was the date by which the EIB had to finish its assessment of all the projects and submit its findings to the Commission. It had been hoped by many interested observers that the EC would release the list of approved projects to the public, but it decided not to do so, saying that some of the information might still be considered commercially sensitive.

The original aim of the NER300 programme was to fund the eight highest-ranked CCS projects from a mix of project categories ” power generation with various capture technologies, a mix of industrial applications and storage options.

The NER300 programme had originally been projected to raise somewhere between €4.5″5 billion ($5.8″6.4 billion) through the allowance sale. However, the EC will not know the amount of money it has to disburse before October. But according to Dr Derek Taylor, blogging on the Global CCS Institute website, with a continued weak ETS carbon price ” currently it is trading at around €9/tonne of CO2 ” it is probable that the EIB will not collect as much money as it was expecting. Dr Taylor suggests it could possibly be as low as €1.6 billion unless the carbon price dramatically increases in the next few months. Last month the Wall Street Journal reported that a number of allowances may be removed from the ETS as a measure to bolster the carbon price. However, no decision has yet been taken on this.

In the NER300 programme, EU Member States also have an essential role to play as they are expected to match whatever money is generated by the ETS allowance sale. With less coming in from the allowance sale, the Member States may find they have to support a higher percentage of the project costs than planned. This will clearly not be popular, as many governments both within and outside the Eurozone continue to ‘tighten their belts’ to reduce their deficits.

Already, two high-profile demonstration projects have fallen by the wayside ” of the 13 projects originally put forward to the EIB, only 11 remain following the withdrawal of Longannet in the UK and Jàƒ¤nschwalde in Germany.

The cancellation of the Longannet project was announced in October 2011, following a decision by the UK government not to fund the construction of the project. The Vattenfall Jàƒ¤nschwalde project in Germany was shelved at the end of last year due to a lack of progress in resolving regulatory issues around CCS in Germany, particularly with respect to the permanent sequestration of carbon underground. So where does this leave the deployment of large-scale CCS in Europe?

How to resolve the large-scale CCS conundrum

Earlier this month, leading figures from the IEA voiced their concern over the poor adoption rates of CCS technology by utilities. Backed by its Tracking Clean Energy Progress report, the IEA highlighted that up to 40 fossil fuel fired power stations fitted with commercial-scale CCS technology needed to be in place by 2020, but currently that figure stands at zero.

CCPilot100+ plant
The CCPilot100+ plant at Ferrybridge power station bridges the gap between pilot-scale trials that are under way and the commercial-scale demonstration projects
Source: SSE

However, the consensus in the power industry is that the problem does not lie with the CCS technologies and their feasibility per se ” there are a number of ongoing pliot-scale projects in Europe assessing the capture technologies, which are demonstrating very promising results. For example, the new CCPilot100+ plant at Ferrybridge power station in the UK, a collaboration between SSE, Doosan Power Systems and Vattenfall, which is the largest carbon capture pilot plant in the UK. Rather, the main issues facing the deployment of commercial-scale CCS demo projects are primarily on the policy front.

According to Leigh Hackett, vice-president, Sales & Marketing, CCS, Alstom Power: “On a policy front, we still lack commitments on CO2 targets. Following the COP meetings at Copenhagen and then Durban, we’ve still not seen an effective enforcement of the needed actions to combat climate change, i.e. legally binding CO2 targets for all nations. We also still lack coherent energy policies at national and regional levels in Europe. The policy uncertainty makes the investors nervous. Equipping coal and gas fired plant with CCS makes them more expensive to run and the economic incentives for this extra investment will have to come from reforms to the electricity market that are designed to support CCS through providing greater certainty on margins for low-carbon electricity generators.

“Most of such reforms, including current carbon price, are way too low. Until investors get better clarity, they are unlikely to take the risk.”

Even Helen Donoghue, from the Energy Strategy Unit of the EC’s Energy Directorate, agreed that the price of carbon was too low at present to encourage low-carbon technologies.

Barry Jones, general manager Policy at the Global CCS Institute, adds: “If CCS is to fulfil its role, a very large-scale demonstration effort is needed in order to prove the technology at full scale. This scenario, using a range of technologies and in different operating environments, is a necessary precursor to the commercial deployment because it would help drive cost reductions that are normally achieved as development proceeds. The barriers to this demonstration effort are largely around policy settings, including adequate financial incentives and community acceptance ” and these are the areas where the concerted effort needs to be put.”

It is apparent that governments have a critical role to play in early-stage CCS demonstration, and must work with other stakeholders (utilities, OEMs, investors, etc) to achieve the desired roll-out in Europe. “It’s going to take a combined effort from government and industry to make CCS a reality,” confirms Hackett.

“Politicians need to address regional energy policies and work to enable development of all promising forms of low-carbon technology including CCS. Global alignment is difficult, and Europe cannot wait for that.

“Investor friendly legislation and regulation can go a long way in restoring investor confidence. The focus should be on providing positive market-based incentives like feed-in tariffs (FiTs) or renewables obligations on a ‘level playing field’ with renewables until we have achieved a de-carbonised energy sector. Negative incentives such as carbon pricing, EPS taxes, etc, should be used in a balanced way to ensure that the stragglers are encouraged to make use of the positive incentives available, or face closure.

“Utilities need to engage with politicians and make clear what is needed to ensure that they will receive the necessary incentives to invest. While OEMs need to stay the course, and work with utilities and governments to develop and improve technologies. They need to push the demonstrator agenda.”

Is there room for any optimisim?

Undoubtedly, the roll-out of large-scale CCS demostration projects in Europe is facing a tough battle, and the EU’s desire to have at least 12 demonstration plants operational by 2015 will not be met ” two may make it if there are no more hiccups. Hackett sums up the situation nicely by suggesting “cautious optimism”.

“Thinking around CCS is starting to show greater maturity. Discussions about market support such as the UK’s Electricity Market Reform have at last grasped the idea that CCS will not happen by ETS price alone, but FiT market support will be necessary for all the same reasons as for renewables.”

Jones agrees: “The opening of the TCM project carbon capture technologies at Mongstad in Norway [this month] is a very important development. The TCM project is the world’s most advanced centre for testing and development of carbon capture technologies.

“The sharing of this expertise will play an important role in supporting new European projects. Of course, this depends on the right combination of policies being in place, as well as the commitment of governments and the private sector.”

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