A massive drop in European funding could mean as few as a quarter of the 12 carbon capture and storage (CCS) schemes expecting to be awarded money will actually receive any, according to recent developments.
Getting this budding technology into large scale operation is a challenge that will only get off the ground with the help of large scale investment. But in recent times, the news for European and UK firms hoping to chase down some of the available funding has been less than encouraging.
CCS Association chairman Gardiner Hill says that as few as three CCS demonstration projects in Europe could now benefi t from the EU money on off er following news last month that the New Entrant Reserve funding scheme, which administers the money awarded to CCS and innovative renewable energy projects, could drop to as little as €1.3bn (£1bn) from an earlier hoped for maximum pot of £4.8bn. The amount of funding is still subject to uncertainty but is due to be finalised next month.
Drop in carbon price
The shortfall is down to a drop in the carbon price, which funds the projects, because of inclement conditions in the Eurozone.
Carbon is traded on a European wide basis and during the financial crises less of the chemical is emitted and firms therefore need fewer permits, which drives the price down.
Hill, who is also technology director at energy giant BP, says this funding, along with individual national governments’ support and private sector investment, is vital in enabling European CCS projects to be built.
However, other key experts have played down the significance of the drop in funding, saying that the money was in fact not needed to get the projects up and running in the first place, and stressing that other funding and fi nancial incentives were more important.
University of Edinburgh professor of CCS Stuart Hazeldine says that in reality little has changed as a result of the EU revelation.
“CCS is not that different to where it was before [the announcement],” he says. As if to illustrate this point Developer Progressive Energy told NCE that its Teesside Low Carbon scheme, which is in the running for EU money as well as the UK’s own CCS funding project, would be unaffected.
The shortfall would not “make or break” its pre-combustion coal gasification project,says managing director Peter Whitton. The project is being developed by a consortium comprising BOC, International Power, National Grid, Fairfield Energy, Premier Oil and Progressive Energy.
It’s the government’s last chance. The British government has to be serious about this industry
Stuart Hazledine, University of Edinburgh
However, Hazeldine stresses that while the EU money, for which the winners are due to be revealed next month, would have little negative effect, UK capital funding had greater influence over the potential success of large scale CCS.
The experts also warn against further delays to the funding mechanism which also plans to decide next month how to allocate £1bn between one or more eligible schemes starting in 2015.
UK demonstration scheme
The Department for Energy and Climate Change (Decc) launched its fi rst competition in 2007 to award the money to a single demonstration project by 2014.
But this competition was scrapped last year after the one remaining bidder ScottishPower said that its Longannet scheme in Scotland needed a minimum of £1.2bn.
Hazeldine says the government risks seriously eroding any faith industry has in its commitment to CCS if it delays the October announcement.
“It’s the government’s last chance,” says Hazeldine, adding it should aim to award two or three projects the cash. “The British government has to be serious about this industry,” he says.
Whitton adds that the most important element for CCS development in the UK was for Decc to provide a high enough subsidy through feed-in tariffs. Whitton was concerned that recent confusion over the level and type of subsidy could stall CCS projects.
The experts say that it is difficult to imagine a UK demonstration project coming online before 2014 with no full-scale operation expected before 2022 at the earliest.
Hill says developers could improve the chances of CCS getting up and running sooner by working across global projects, such as ones being developed in Australia, China and the US.
“We need a change in strategy,” says Hill, adding that knowledge needs to be shared between these projects.
If CCS is not installed over the next few years, heavy industries such as steel plants, risk becoming unviable as costs for emitting carbon increase, warn the experts.
It remains to be seen whether UK projects and those by their European counterparts will be able to stay in the global CCS game.