First published in Cornerstone, Volume 4, Issue 3
By Andrew Purvis
General Manager Europe, Middle East, and Africa, Global CCS Institute
Senior Advisor Policy and Regulatory EMEA, Global CCS Institute
As a result of the 21Conference of the Parties (COP21) in Paris in 2015, 178 parties to the UN Framework Convention on Climate Change (UNFCCC) adopted a goal to hold the increase in global temperature to “well below” 2°C, “pursue efforts” to limit the temperature increase to 1.5°C above pre-industrial levels, and further achieve a balance between anthropogenic sinks and sources of greenhouse gases in the second half of the century. To achieve these targets, all emissions-mitigating measures and mechanisms will be needed. Efforts to decarbonize will be needed from both the parties to the agreement and the energy and industrial sectors. This will require increased momentum for energy efficiency and a continuing transition from fossil fuels to renewables. It also highlights the critical role of carbon capture and storage (CCS).
CCS is broader than just a contribution to emissions abatement for energy production. The industrial process sector accounts for 25% of global emissions and CCS is the only technology that can achieve deep emissions reductions in industries such as steel, cement, and fertilizer production.Recently completed CCS feasibility studies in Norway, complemented by work carried out in potential CCS capture hubs such as Teesside (northeastern England) and Rotterdam (southern Netherlands), highlight the necessity of CCS for the industrial sector.
Decarbonization requires the application of many different technologies according to circumstance and economics. CCS is vital, in terms of costs and necessity, to achieve emissions targets. Delaying CCS implementation will result in a significant increase in costs. Rather than being an expensive option, independent studies have shown that CCS in power generation applications is already cost competitive with many renewables, when the subsidies provided to renewables are removed.
CCS FOR POWER
CCS is relevant and crucial for a wide range of industries. Application of CCS to electricity production and many industrial processes is key to meet both emissions reduction objectives and the reality of continued fossil fuel use.
Global consumption of fossil fuels continues to increase, driving increases in COemissions. Forecasts of global energy demand growth indicate this reliance will continue for decades to come. The energy sector accounts for around two-thirds of greenhouse gas emissions and, according to the International Energy Agency (IEA) in its 2015 World Energy Outlook, coal, oil, and gas will remain important fuel sources for electricity generation for the foreseeable future.
In power production, renewables will be increasingly important, but with over 2000 new coal-fired power stations as well as many gas-fired plants planned to be operating before 2040, CCS is also vital. Energy demand is growing continuously, with the biggest growth in non-OECD countries in which 59% of the electricity was generated by coal in 2013. Despite the decrease in demand for coal in several large economies, like China which went from a 74% to a 70% share in 2014, world demand and consumption is still increasing.It is therefore unrealistic to expect fossil energy production and consumption to cease overnight. CCS is a technology that will help deliver continued access to affordable energy while reducing emissions in both developing and developed countries. This increases the importance of large-scale deployment of CCS.
SOME RECENT EUROPEAN DEVELOPMENTS
Europe has lost the position as a leader in the deployment of large-scale CCS projects to which it aspired several years ago. However, the importance of CCS technologies at large scale is recognized and robust R&D efforts by a number of European bodies continue, as do efforts to enhance the European policy and regulatory framework governing CCS. Below, we detail some projects, developments, and countries’ efforts that are worth accentuating.
Norway is well known for its petroleum industry, but also for basing most of its own electricity production on hydropower. Thus, while exporting large quantities of oil and gas, Norway has also emerged as a strong supporter of CCS—thereby aligning concern for energy security with consideration of the consequences for climate of economic growth, and the government’s goal of securing an efficient and climate-friendly energy supply.In 1996, Statoil began injecting CO on the Norwegian continental shelf, as part of the natural gas production process at the Sleipner field. Later, the company also started injecting CO at Snøhvit in northern Norway. These two projects have established Norway as a leader in Europe on CCS. The country has reinforced this position with new feasibility studies initiated by the Norwegian Ministry of Petroleum and Energy (MPE) on behalf of the government and the Mongstad CO Technology Centre (the world’s largest test laboratory for capture technologies, in operation since 2012). Also, Statoil has recently submitted plans to Norwegian and UK authorities to develop the Utgard field, which foresee gas and condensate being piped to Sleipner and processed using CCS technologies.
On 4 July, the MPE published a report on the newly conducted Norwegian CCS feasibility studies.The overall goal of the study was to examine the technical feasibility and total cost of at least one full-chain CCS project. Three industrial stakeholders have conducted feasibility studies examining CO capture as part of the study. Different ship transport options were also examined, adding variables such as location, amounts of captured CO , and replicability into the assessment. Studies of CO storage at three different sites on the Norwegian continental shelf also were carried out.
The MPE report concludes it is technically feasible to realize a full-chain CCS project in Norway. Further, the studies demonstrate that all of the alternatives studied have the potential to significantly reduce barriers to deployment and costs for future projects.
There are several positive outcomes from the study, beyond the feasibility of a full-chain CCS project. Norwegian authorities are actively maintaining momentum with their national policies for CCS and have identified and engaged competent private industry stakeholders, emphasizing that CCS is necessary for the delivery of climate targets at the lowest cost possible.
CCS in the UK has not come to an end. Despite cancellation of the UK CCS competition, which was to make available £1 billion capital funding, and additional operational funding to support the design, construction, and operation of the UK’s first commercial-scale CCS projects. While this resulted in the termination of the White Rose and Peterhead projects last year, several activities continue.
The UK government is undertaking an ongoing examination of a reoriented approach to CCS for both power and industrial processes, and the government is considering advice from Lord Oxburgh’s CCS Parliamentary Advisory Group.While awaiting the results of these ongoing processes, three CCS projects under development are worth highlighting: the Caledonia Clean Energy Project, the Don Valley Power Project, and the Teesside Collective Project.
The Caledonia Clean Energy Project has received £4.2 million in joint funding from the UK and Scottish governments. The plan is to construct a new coal-fired power plant equipped with carbon capture technology to capture 3.8 million tons (Mt),or 90% of the total CO emissions per year. The Don Valley Power Project, co-funded through the European Energy Programme for Recovery, has been seeking to develop CCS on a new power station. Up to 1.5 Mt of CO per year would be captured.
A CCS hub and cluster network brings together multiple COemitters and/or multiple storage locations using shared transportation infrastructure. The Teesside Collective is such an infrastructure project developed by a cluster of industries in northeastern England, partially funded by the UK government, that aims to prevent the emission of up to 5 Mt of CO per year in the 2020s. These ongoing projects prove that private stakeholders are willing to move forward, and that both the power and industrial sectors are willing to innovate and engage on CCS development and deployment. The cluster approach will further be an important aspect of driving down costs in the future.
In the Netherlands, the Rotterdam Capture and Storage Demonstration (ROAD) project is widely known as Europe’s most advanced CCS project in progress. The project involves the retrofit of a 250-MWpost-combustion capture and compression unit to a newly constructed 1070-MW coal-fired power plant located within the Rotterdam port in the industrial Zuid-Holland area. The ROAD project plans to capture 1.1 Mt of CO per year and store it in a depleted gas reservoir under the North Sea. Co-financed by the European Commission, the government of the Netherlands, and the Global CCS Institute, the project is in the define stage of development planning and its next step is to make a Final Investment Decision, which is expected by the end of 2016.
A related project is examining developments in the Port of Rotterdam. This is the largest seaport in Europe and, as part of the ambitious Port Vision for 2030, seeks to develop an integrated industrial cluster with Antwerp to become a leading European hub for cargo. Although CCS is not a specific goal under the Port Vision, the Port of Rotterdam will be interlinked to the CCS industry through projects like ROADand CO infrastructure already in use delivering CO from industrial sources in Rotterdam to greenhouses. ROAD is among the first CCS projects in Rotterdam’s port and industrial complex, which plan to use the port as their gateway to storage sites in the North Sea, and there are expectations that more of the industry located in the cluster will implement CCS in their activities over time.
EU DEVELOPMENTS ON POLICY AND REGULATORY ISSUES
In the EU, several efforts are underway after COP21 to maintain the momentum the Paris Agreement gave to global emission reductions efforts. These include both proposals to reform the Emissions Trading Scheme (ETS) and the development of the integrated European Strategic Energy Technology Plan (SET-Plan). Part of the ETS reform has been finalized, through the establishment of a new market reserve, to gradually decrease the number of allowances in the system and therefore increase prices. Remaining elements of the reform include reducing the number of emission allowances permitted to be issued, revising the system of free allocation to focus on sectors at highest risk for carbon leakage, and launching a new Innovation Fund to support low-carbon innovation, including CCS.
The ETS Reform and Reforming the Innovation Fund
One of world’s largest carbon markets, the EU-ETS represents an important element in the implementation of EU climate policy. The scheme works as a cap-and-trade system, in which a cap on emissions is imposed with opportunities to trade emissions allowances. The carbon price, the price per ton of CObeing emitted or traded, associates a financial value with reducing or avoiding emissions. A sufficiently high carbon price would create an incentive to invest in low-carbon technologies like CCS.
In July 2015, the European Commission proposed legislation to revise the EU-ETS, and on 31 May 2016, Ian Duncan, Member of the European Parliament (MEP) and EU-ETS rapporteur, published a draft ETS reform proposal.The goal of the reform is to revise the EU-ETS for the period 2021–2030. For the EU to reach its targets for emissions cuts, the overall emissions cap will need to significantly decrease. The Commission’s proposal recommends that the overall number of emissions allowances decline at an annual rate of 2.2% from 2021 onward, compared to the current 1.74%.
The proposal also aims to revise the system of free allocation to focus on sectors at highest risk of relocating their production outside the EU (so-called “carbon leakage”), as well as urging member-states to implement policies and financial measures to avoid carbon leakage within the legal limits of state aid. The proposal suggests a model for compensation to the industry if the carbon price reaches certain levels, and emphasizes that more harmonized rules for indirect cost compensation are needed.Strong, predictable policy action is needed urgently to stimulate CCS deployment in order to fulfill EU’s climate targets.
As part of the EU-ETS, 300 million allowances were included in a New Entrants’ Reserve (NER300) and monetized to raise money to support the deployment of low-carbon technologies such as renewables and CCS.White Rose, based in the UK, was the only CCS project to be awarded funding through the NER 300 mechanism. The legislative proposal further suggests the establishment of an Innovation Fund (extending NER300), which would be funded through the sale of 400 million allowances. However, the process on ETS revision is not finalized, and is expected to be voted on in February 2017 as part of the EU-ETS reform.
The Market Stability Reserve
Since 2009, the EU-ETS has built up a surplus of emissions allowances, which risks undermining the orderly functioning of the carbon market in the short term. This led to a reduction in the carbon price, and thus a disincentive to invest in technologies to reduce emissions. Long term, this could limit the ability of the ETS to cost effectively meet more demanding emissions reduction targets and the deployment of critical technologies such as CCS would be delayed. As part of a long-term solution, the Commission decided in 2015 to introduce changes to reform the ETS by establishing a market stability reserve that would be operational by January 2019.This would allow the supply of allowances to be flexible based on economic conditions and would be expected to set a more stable and predictable carbon price.
The SET-Plan Process
“Research, innovation, and competitiveness” were collectively identified as one of the five dimensions of the EU Energy Union Strategy, a project of the European Commission to coordinate the transformation of European energy supply. The SET-Plan aims to accelerate the development and deployment of low-carbon technologies, and demonstrating CCS is explicitly included as one of 10 identified actions to transform the energy system, creating growth and new jobs in the EU.
SET-Plan Action 9, which aims to demonstrate CCS in the EU and to developing sustainable solutions for carbon capture and use (CCU), is currently subject to a public consultation process that began in Spring 2016. As a result of the process, stakeholders have agreed on a number of draft targets for CCS and CCU. The next step is for the stakeholders to develop a detailed implementation plan for the delivery of these targets.
Reports of the death of CCS in Europe have been greatly exaggerated, with projects in continued operation in Norway, and projects in development in Norway, the UK, and the Netherlands. Nonetheless more needs to be done if CCS is to make the contribution that it must if secure, affordable, and climate-friendly energy and industrial production are to be delivered. Policy action is needed urgently to facilitate CCS deployment or else the Paris Agreement temperature targets are at risk of not being achieved.
Governments must continue efforts to develop strong and stable policies, and in response industry needs to advance R&D and new projects.