ANALYSIS: N. AMERICA LIKELY TO DOMINATE EUROPE IN EARLY CCS PROJECT DEVELOPMENT

Tamar Hallerman
GHG Monitor
06/01/12

North America is outpacing the rest of the world—including Europe—in the development of large-scale carbon capture and storage projects, according to a new report. Companies in the United States and Canada will likely bring the first handful of commercial-scale CCS projects online in the coming years ahead of other countries in the world, a new analysis from Bloomberg New Energy Finance says. The London-based analysis group assessed 24 large-scale projects that are set to capture at least 1 million tons of CO2 annually and span the full value chain of CCS. The group said that of the eight projects that are expected to come online by 2017, five are in North America, with the remaining three located in Europe.

The analysis is part of Bloomberg’s semi-annual rankings of the world’s most advanced large-scale CCS projects. By evaluating announced project timelines and industry norms for each stage of development, the report estimates that the first four projects likely to come into operation within the next five years will be in North America. It projects that Air Products & Chemicals’ industrial capture project on Texas’ Gulf Coast will be the first to be fully operational in early 2013. Air Products plans on capturing 1 million tons of CO2 per year from two steam methane reformers at Valero Energy Corp.’s Port Arthur refinery and sell the CO2 to Denbury Resources for enhanced oil recovery operations in the area. Bloomberg estimates that the other leading projects include SaskPower’s $1.24 billion post-combustion Boundary Dam CCS project, Mississippi Power’s Kemper County project and Shell Canada’s Quest project in Alberta. E.ON’s ROAD Project in Rotterdam, Netherlands is the leading European project on the list and comes in at No. 5 in Bloomberg’s rankings.

More Nurturing CCS Environment in North America

Head author Kieron Stopforth credited North America’s large number of advanced CCS projects to a more nurturing economic environment and energy infrastructure in an interview with GHG Monitor. “We’re seeing a sort of Atlantic divide emerge in CCS,” he said. Stopforth said there is more public funding allocated to CCS projects in the U.S. and Canada than in the rest of the world. He added that North America also has more options for enhanced oil recovery operations—including an established network of pipeline infrastructure already in place—that can help sweeten the economics for CCS projects, as well as lower CO2 storage costs on average given that onshore storage is cheaper and more publically accepted. Most CCS projects slated for the EU are planning on storing their CO2 offshore in the North Sea. The United Kingdom limited entries to its CCS demonstration contest only to those than plan to store emissions offshore. The Dutch government in 2010 voted to ban onshore storage due largely to public opposition.

Also pushing back Europe’s development, according to Stopforth, is the European Commission’s New Entrants Reserve competition (NER 300). Most of the potential CCS projects in Europe, with the exception of E.ON’s ROAD, have delayed plans to build until they hear about whether they will get funding from the competition, he said, and almost all are dependent on receiving EU funding to move forward. But that support has been slower to come by given the crash in price of CO2 emissions credits on the EU’s Emissions Trading Scheme. Stopforth said the NER 300 competition has “massively pushed backed projects by imposing the two year timeline of the funding decision process. That effectively put a stop to all projects in Europe apart from the ROAD project,” Stopforth said. 

Stopforth said he expects North American dominance in the field to continue in the years to come. “I think we will see some projects coming from Europe, but the higher cost of transport and storage and the lower levels of available funding are going to make it fundamentally more difficult to do CCS there,” he said. Stopforth added that he expects to see more industrial capture project come online as opposed to power generation-based projects due to the lower price tag. “For the first time since we’ve started doing this study we have a refinery or a hydrogen production facility leading out the rest …I think we’ll see more of those projects in the future,” he said.

Projects Still Hit Below Targets

Stopforth said that while the fact that there will likely be eight CCS projects in operation within the next five years is an “encouraging development,” the overall speed of CCS commercialization is not as far advanced as many global targets. The International Energy Agency previously called for 38 large-scale CCS projects to be in operation in the power sector and 82 in the industrial sector by 2020 to stay at or below internationally-established climate change goals. “The overall picture is still slightly pessimistic because you have some projects that are succeeding, but it just isn’t at the level that groups like the Carbon Sequestration Leadership Forum or the International Energy Agency have recommended. We’re predicting eight projects by 2017, but that doesn’t get you to where governments and industry groups are saying we need to be for climate reasons,” he said.