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Encouraging CCS in Europe

In a recent post I discussed the problems that the EU flagship programme to demonstrate CCS (carbon capture and storage) is having. With an allowance surplus building up in the ETS and a resulting low carbon price, the urgent need for commercial deployment of CCS has diminished. Furthermore, with natural gas availability growing and renewable energy becoming a sizable factor in the EU electricity mix, it may be well into the 2020s before large scale deployment of CCS is actually needed.

These developments might instill a false sense of security, in that we imagine there is no need to do anything now with regards large scale CCS commercialization. While it is clear that there is no immediate need for rapid rollout, every low carbon energy scenario still shows CCS as an essential component of energy delivery. In a posting late last year, I argued that global emissions are unlikely to be reduced at all without CCS.

Even with widespread deployment starting as late as 2030, action in this decade is still important. Early demonstration and commercialization of new technologies can be a long process. Take for example Shell’s own experience with Gas to Liquids technology. A very large scale plant is now operating successfully in Qatar, but the advanced catalysts used in the process started development in the 1980s and the small commercial scale demonstration plant in Malaysia was an early 1990s development. A final investment decision for the first full commercial deployment was made in 2006 and even then construction and startup took five years. A 10-20 year timeline for first commercial deployment is not unusual, which is one of the reasons why it takes 25+ years for new energy technologies to become globally material (>1% of the energy mix). I discussed this in a post back in late 2009.

All this still points to the need for some CCS activity in Europe this decade and for project development to proceed next decade for startup around 2030 (at the very latest). It may also be the case that a need for deeper cuts in emissions brings CCS forward.

The question of how to promote CCS activity today, in the midst of difficult economic times and carbon markets that are clearly not calling for it, is discussed in a new report issued today by the European Technology Platform for Zero Emission Fossil Fuel Power Plants (ZEP).The ZEP report, Creating a Secure Environment for Investment in Europe, looks comprehensively at short (through to 2020), medium (the 2020s) and long term (post 2030) measures. In the short term the focus must be on recalibrating the ETS, but the report also calls for a number of the measures similar (but not necessarily identical) to those being implemented in the UK as part of the Electricity Market Reform. CCS Feed-In Tariffs, CCS Purchase Contracts and CCS Capacity Payments are all discussed. These measures could also continue in some form into the 2020s, but securing early clarity on 2030 and 2040 EU carbon targets is seen as the key priority for the medium term. For the longer term, the 2050 emissions target is the key driver, but the introduction of an auction reserve price for ETS allowances post 2030 would provide investment certainty for large scale project decisions made in the 2020s. Such investments would be exposed to the prevailing carbon price in the 2030s and beyond.

The EU has put considerable effort into stimulating CCS, but the goal of early demonstration has proved to be intractable. The ZEP report provides some further thinking on the issue and because of the ZEP constituency, is backed by industry, academia and NGOs.

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