EU CCS demonstration projects: challenges and blockers on the way to FID

About the report

At its meeting of 14 September 2011, ZEP’s Advisory Council agreed to review its strategy in the light of recent developments in the CCS landscape in Europe. This included the perception that fewer demonstration projects may materialise than anticipated – potentially jeopardising the EU CCS demonstration programme. As input to this process, ZEP therefore surveyed project developers in order to identify any challenges and blockers on the way to the Final Investment Decision (FID).

Key conclusions

Key conclusions of the survey

• 50% of the projects assume that they will be on-stream by 2017 (Q6).
• Key concerns are the low EUA price, uncertainty of future political decisions, and validation of
  storage permits (Q12, Q13).
• Key decision-making for FID is at the Company Board level, but it depends heavily on the resolution
  of issues at the Member State level (Q14, Q18).
• Projects typically require more than 50% funding for the additional costs of CO2 capture,
  transport and storage (Q2).
• Confidence level seems high, but technically, only two projects will have obtained their storage
  permits and therefore be ready to take FID by the end of 2012 (Q8).

Actions required to support EU CCS demonstration projects

• Strengthen the EUA price as it not only underpins the long-term business case for CCS, but also partly the short-term, as even demonstration projects will need to recover their investment over the medium to long term.
• As this will take some years to deliver, establish additional economic measures at the Member State/EU level to enable demonstration projects to take FID. National governments are already moving in this direction, underlining the urgency of the situation. ZEP’s report, “CO2 capture and Storage (CCS) – Creating a secure environment for investment in Europe,” provides concrete recommendations for additional, non-ETS measures needed for CCS demonstration projects to take FID – plus any complementary adjustments to the ETS required.
• Industry has already demonstrated its willingness to take on a major portion of the costs and risks of investing in CCS. However, as the NER 300 may now deliver as little as €2.5 billion for CCS and innovative renewable energy technologies, additional financial support from Member States is also vital.
• Provide storage site operators with greater clarity on the precise modalities for site handover
  and financial security at the Member State level, and accelerate the validation of storage permits.

Timing is crucial: CCS is on the critical path to deliver the EU Energy Roadmap 2050, with no margin for delay: demonstration projects must take FID imminently to secure public funding, and commercial projects must be available from 2020 to ensure wide deployment from 2030.