Moving forward with CO2 Capture and Storage (CCS)

About the report

In September 2006, the European Technology Platform for Zero Emission Fossil Fuel Power Plants (ZEP) – known as the Zero Emissions Platform – launched its Strategic Deployment Document (SDD) and Strategic Research Agenda (SRA) for CO₂ Capture and Storage (CCS). The goal: to provide a clear strategy for accelerating its deployment as a critical technology for combatting climate change.

ZEP has now moved from Phase I objectives – creating a vision and strategy – to Phase II: accelerating implementation and deployment of CCS. This incorporates three main goals:

1. Achieve the objectives of the EU CCS demonstration programme and enable CCS as a key technology for combatting climate change
2. Maximise the learnings of CCS demonstration projects and accelerate R&S into next-generation CCS technology
3. Make CCS commercially available by 2020 to enable rapid and wide deployment.

However, while the EU CCS demonstration programme is making good progress, its success is far from assured. Indeed, urgent action is still required – not only to ensure that demonstration projects are up and running by 2015, but that CCS is deployed rapidly post-2020.

This document therefore outlines critical short and long-term challenges that need to be addressed by the European Commission, Member State governments, and CCS stakeholder community alike.

Executive summary

CO₂ Capture and Storage (CCS) is recognised as a critical technology for combating climate change – within a portfolio of technologies, including greater energy efficiency and renewable energy.

Indeed, the International Energy Agency (IEA) confirms that it is not possible to achieve EU or global CO₂ reduction targets without CCS, providing 20% of the cuts required in the EU by 2030 and 20% of the global cuts required by 2050.

The European Union (EU) has responded swiftly, establishing a legal framework for CO2 storage and EU funding for up to 12 CCS demonstration projects – supported by the launch of the European CCS Demonstration Project Network and European Industrial Initiative on CCS.

However, urgent action is still required, not only to ensure demonstration projects are operational
by 2015 – as mandated by the European Council – but rapid deployment post-2020.

Achieving the objective of the EU CCS demonstration programme

A fully integrated project can take 6.5-10 years before it becomes operational, but final investment decision can only be made once construction and operation permits have been awarded across the entire CCS value chain. National regulatory frameworks must therefore be implemented as a matter of urgency – including the transposition of the Directive on Geological Storage of CO₂ (“CCS Directive”).

Establish national regulatory frameworks as a matter of urgency

In order for CCS to become commercially viable, industry needs both a strong regulatory framework and a manageable risk exposure. A flexible and pragmatic approach is therefore essential. However, while financial security and liability requirements should remain an incentive to develop the best and safest storage sites, current provisions in the European Commission’s Guidance Documents to the CCS Directive impose unbearable uncertainties and risks on the storage operator and are likely to represent a showstopper for CCS in the EU.

ZEP recommends that the Directive presents options – not mandatory actions – that an operator can use to demonstrate safe storage, with a focus on demonstrating non-leakage and only then trying to quantify plume volume etc, Monitoring, reporting and verification (MRV) guidelines should be site-specific. A site-specific, criteria-based – rather than time-based – approach should also be used to determine when operators hand over their liabilities to the Competent Authority.

Finally, regulation should limit the risk to operators of storage failures that result from events outside
their control – significantly reducing costs and risks, and facilitating commercial financing. Operators’ liability for purchasing emission unit allowances (EUAs) is also likely to block deployment unless governments limit the CO₂ price risk.

By sharing or capping liability, Member States may take on the residual liability, with the premium paid
by the operator assessed on a case-by-case basis. Finally, an effective European CO₂ market will only
develop if standards and specifications are aligned EU-wide such that free flow of CO₂ to the best
storage opportunities can take place. The EU should therefore support the removal of all barriers to achieving this.

Close the funding gap for EU CCS demonstration projects

While current EU funding streams from the EU Energy Programme for Recovery and “NER 300”
Fund (see page 10) provides a good foundation for closing the funding gap for CCS demonstration projects, together, they will only cover up to 50% of the incremental costs of CCS.

While industry will contribute significantly to closing the remaining gap, additional government support – whether through state aid or EU structural and cohesion funds – is essential and must be in place by the end of 2011 at the latest. As importantly, the second tranche of the “NER 300” should be allocated such that the entire portfolio of CCS technology options is demonstrated.

This means prioritising projects with characteristics that are not represented in already funded
CCS demonstration projects, e.g. retrofits, gas-fired power plants, biomass co-firing, CO2 transport by ship and the complete range of storage options

Prioritise CCS R&D to maximise the learnings of EU demonstration projects

Learnings from EU CCS demonstration projects will be significantly improved by complementary R&D activities, which should be prioritised in the EU’s Seventh Framework Programme (FP7).

Maximise knowledge sharing among EU and international CCS projects

ZEP advocates an ambitious level of knowledge sharing between CCS demonstration projects – both within the EU and internationally – as key to the success of the European CCS Demonstration Project Network.

Facilitating the wide-scale deployment of CCS

100 commercial-scale CCS projects must be operational worldwide by 202010 to ensure global warming stays below 2°C, as agreed in the Copenhagen Accord. This rises sharply to 3,400 worldwide by 2050, including 320 in Europe.

Yet even the minimal target of 14 in Europe by 2020 is unlikely to be met by current levels of deployment.
Early action on a range of issues is therefore vital, maintaining the significant momentum created by the EU CCS demonstration programme.

Apply CCS across all carbon-intensive industrial sectors

The application of CCS to heavy industry and fuel transformation could abate ~15%11 of all
global man-made CO₂ emissions by 2050. Indeed, in steel and cement production, it is the only means of achieving deep emission cuts.

Large-scale public funding should therefore be made available for demonstration projects in industrial sectors, in addition to those in power generation. Indeed, if different CO₂ sources – power, industry and fuel transformation – are located nearby, they can share CO₂ transport and storage infrastructure, saving both time and money. Industrial applications and the development of trans-sector CCS clusters should therefore be included in all National CCS Master Plans.

Move closer towards a carbon-negative energy system

Co-firing power plants with biomass offers great abatement potential and will increase public support for CCS. However, biomass fuels of the necessary quality are costly and clarification or adjustment of the EU Emissions Trading Scheme (ETS) Directive is required to ensure proper credits for CO₂ abated from biomass. Policy measures are also needed to ensure sustainable land management, biomass production and supply.

Establish a long-term infrastructure plan
for CCS in Europe

A business model for CO₂ transport and storage must be established to ensure EU CCS demonstration projects do not result in isolated, point-to-point solutions, without scope to grow. The EU’s forthcoming Energy Infrastructure Package must therefore explicitly address the development of new CO₂ pipeline infrastructure in addition to existing gas and electricity transportation networks.

EU policy should also support the development of National CCS Master Plans in which key clusters are identified and a long-term CO₂ pipeline infrastructure plan established. This will necessitate complementary studies and could require financial incentives/support for “over-sizing” infrastructure.

Finally, the preferred regulatory regime and business model for CO₂ pipeline infrastructure should be clarified, including transparent and non-discriminatory rules and tariffs for third-party access.
CO₂ storage is the most critical element of a CCS project and more technical and comprehensive characterisation of potential sites is also urgently needed, EU-wide.

Create a secure environment for long-term investment in Europe

The most effective incentive for the EU-wide deployment of CCS is the price of Emission Unit Allowances under the EU ETS. However, this must be significantly higher and more predictable than at present to make CCS cost-competitive by 2020.

While ZEP does not recommend any specific non-ETS incentive schemes, they should be revenue-neutral for treasuries, predictable for investors and effective for project developers. Nor should they tilt the level playing field between low-carbon generation technologies or abruptly distort the functioning of the electricity market. Given the long lead-times for CCS projects, they should be adopted sooner rather than later, using a harmonised EU approach.

Recognise CCS in international financing mechanisms

Out of the 100 commercial-scale CCS projects required worldwide by 2020, 50 are in developing countries. ZEP therefore advocates the large-scale international public financing of demonstration projects and the recognition of CO2 storage credits via flexibility mechanisms recognised in their own
cap-and-trade schemes, e.g. the Clean Development Mechanism (CDM) under the Kyoto Protocol.

Accelerate R&D into next-generation CCS technologies

In addition to the EU CCS demonstration programme, further R&D into next-generation technologies must be initiated immediately to enable rapid and wide deployment post-2020. Experts within ZEP have therefore identified key areas for improvement, together with the main strands for R&D to 2030 and beyond.

To ensure maximum effectiveness, this should be coordinated at a national and EU level, and include key learnings from the EU demonstration programme. Coordination is also needed at national and European level for concrete R&D activities with a clear European added value to realise the commercial availability of new technologies/concepts by 2020-2025. This should be addressed via larger pilot installations, known as “lighthouse projects”.

Realise the full potential of CCS

CCS also allows the production of large volumes of CO₂-free Hydrogen which can then be used
for electricity or as a fuel. With fuel cell electric vehicles (FCEVs) now comprehensively tested in a customer environment, the focus has shifted from demonstration to planning commercial deployment so that they may benefit from the economies of scale.

This was clearly signalled by the Memorandum of Understanding issued by leading car manufacturers in September 2009, in which they stated their goal to commercialise FCEVs by 2015, with hundreds of thousands of vehicles being rolled out worldwide shortly thereafter – if sufficient Hydrogen infrastructure is in place. This will also facilitate the introduction of stationary fuel cells for residential and small commercial applications, which will play a key role in distributed Combined Heat and Power (CHP) generation.

Where appropriate, opportunities for geothermal heat production with CCS should be investigated to provide cheap district heating for the local population, while increasing CO₂ storage capacity. While the use of CO₂ in industrial processes and products is currently limited (0.5% of CO₂ emissions worldwide), research should also continue to explore new applications.

Maximise international cooperation

To maximise synergies and accelerate deployment, international cooperation is crucial, not only among CCS projects, but international and regional bodies. International standards to qualify CO₂ streams for CCS are also important for developing an integrated, global CCS industry.

Establish an overarching 2050 energy decarbonisation scenario

ZEP looks forward to the launch of the European Commission’s roadmap towards a low-carbon energy system by 2050, as the base reference document indicating the lowest cost pathway to decarbonise EU power. This should be realistic enough to ensure current reliability is maintained without compromising energy security, and precise costing is essential. There is also a need for a regionalised bottom-up approach and forward analysis in order to identify nearer-term and verifiable milestones, which could form the structure of a true decarbonisation roadmap, within the 2050 overarching scenario.

Building support for CCS: the critical role of effective communications

A disconnect exists between governments engaged in vital CCS demonstration programmes and
a public that is almost unaware of CCS and why it is urgently needed. Belief in climate change is also on the decline. Support for a CCS project is more likely to occur when the following factors are in place: trust in industrial actors; regional/national government support; local (economic) benefits; low population density; sufficient public engagement; and credible NGO/third-party support. It is therefore essential that communications start as early as possible in the process.

• Place CCS within the context of climate change and the challenge posed by the continued use of fossil fuels and industrial processes for decades to come. The potential for carbon-negative approaches, such as biomass co-firing in power plants, should also be communicated.
• Demonstrate why only a portfolio of solutions can achieve the massive CO2 reductions required, with CCS a bridging technology towards a low-carbon society.
• Address the unique benefits of CCS and key concerns over CO2 storage, highlighting the decades of relevant experience that already exists within the industry and the use of natural mechanisms that have already “stored” CO2, oil and gas underground for millions of years.
• Engage in an open dialogue that includes all CCS stakeholders (industry, government, environmental NGOs, local communities, science and academia).
• Coordinate and leverage the diverse CCS stakeholder community to provide appropriate and credible input, using the right messenger for the right issue and audience.
• Achieve the highest possible levels of transparency, factuality and responsiveness
• Make CCS a reality through opportunities to “touch, feel and see” it in operation.