GLOBAL CCS INSTITUTE COUNTS ‘SIGNIFICANT’ DROP IN PROJECTS SINCE 2012

Tamar Hallerman
GHG Monitor
10/11/13

The number of large-scale carbon capture and storage projects under development worldwide has dropped “significant[ly]” over the last year, and governments must act urgently if they would like to build momentum, the Global CCS Institute said in its annual status report of the industry, released late this week. The Institute’s 2013 “Global Status of CCS” report says there are currently 65 large-scale projects under various stages of development worldwide, 10 projects fewer than this time last year. The report states that five projects have been cancelled, seven put on hold and one downscaled since October 2012. In that time, the Institute says it has also identified three large-scale CCS projects—all of which pair natural gas processing or chemical production with enhanced oil recovery—in Brazil, Saudi Arabia and China. “Overall, numbers are expected to continue to decrease globally as outcomes of funding programs are determined. Moreover, it is not guaranteed that the level of government funding support offered to projects will be sufficient for some of them to move ahead,” the report says.

The Institute counted 12 large-scale projects that are currently online and cumulatively capturing and storing 25 million tonnes of CO2 annually, four more projects than last year, a statistic the group says is “encouraging.” But the Australian group said there is a strikingly small number of CCS demonstration projects in earlier stages of development, raising what it says are concerns related to project replenishment. “Notwithstanding the steady progress in CCS projects entering operation and construction, momentum is too slow to support the widespread commercial deployment needed to underpin climate change risk mitigation scenarios. A very substantial increase in new projects entering construction is required,” the assessment says. The report specifically highlights the “significant decrease” in the number of power generation projects with CCS under development worldwide, which slid from 42 in 2012 to 30 this year.

North America Remains Leader, China on Rise

The assessment concludes that North America continues to be the world’s hotbed of CCS activity, with eight of the world’s 12 operational large-scale integrated projects located in the U.S. and Canada. The report also highlights China’s efforts in recent years to invest in carbon capture, and says that the country is “well positioned to influence the future success of CCS.” It counts 12 large-scale projects under development there, most of which are utilizing enhanced oil recovery and are being driven by large state–owned petroleum companies, which tend to own the full chain of resource components needed for CCS—from source to sink—which the Institute says reduces a lot of the complications associated with project development. “The increased level of government support for CCS in China is likely to sustain the current level of CCS activity in the Asia Pacific region,” the report says, highlighting the fact that CCS was included as a major priority under the government’s most recent Five-Year Plan.

Losing Momentum?

The Institute attributes much of the decrease in projects over the last year to the lack of a strong business case for CCS worldwide, which leads to “persistent” financial barriers for project developers looking to attract private funding. “The slower than anticipated progress of CCS projects into construction during the past three years reflects the difficulty for project proponents to address the financial and commercial challenges inherent in CCS integration,” the assessment says. “This is expected to continue in the coming year.” The report indicates that previous funding made available for CCS demonstrations is drying up and that current market opportunities can only help incentivize a “limited number’ of first-mover projects. “Continued uncertainty about the timing, nature, extent and durability of such policies is stalling the development of CCS,” the report says.

In order to address the issue, the Institute called for governments to provide enough incentives, policy support and regulatory certainty to put CCS on the same footing as other clean energy technologies. “Ongoing uncertainty about the timing, nature, extent and durability of emissions reduction policies, as well as a lack of sufficient incentives and funding support for more CCS projects, are limiting investment in the technology and stalling its development and deployment,” Institute CEO Brad Page said in a statement. “This must be addressed.” If governments are unable to establish a strong price on carbon, the Institute said policymakers should focus on implementing technology-neutral policies that specifically address major barriers to CCS deployment, including long-term liability concerns, the cross-border movement of CO2 and public acceptance issues. “Due to the long development lead times of large–scale CCS projects, and the size and complexity of the financing required, it is critical that the strategy retained remains consistent over a corresponding period of time,” the report says.

Decisionmakers should also enact policies that create a business case for CCS, the report says. It recommends direct financial support through grants, preferential loans, investment tax credits and public-private partnerships. It says that feed-in tariffs, performance-based subsidies, contracts for difference and power purchase agreements could also provide longer-term operational support for projects. The report does indicate a silver lining in the increased willingness of contractors and technology developers to provide performance guarantees in commercial–scale projects.