CCS PROJECTS IN UK, POLAND LEAD NER 300 LIST

Tamar Hallerman
GHG Monitor
07/13/12

A new-build 650 MW integrated gasification combined cycle coal plant with pre-combustion capture in east-central Britain and a post-combustion retrofit on one of Europe’s largest polluting lignite coal plants in central Poland are the two front-running carbon capture and storage projects that are likely to receive funding under the European Commission’s New Entrants Reserve (NER 300) competition, the Commission announced this week. In a working document released this week, the EC for the first time shared its interim list of CCS and renewable energy demonstration projects that are most likely to receive funding under the competition to date. The EC said it expects to make roughly €1.3 billion to €1.5 billion ($1.59 billion to $1.83 billion) from the sale of the first 200 million credits set aside for the program under the European Union’s Emissions Trading Scheme by October. The EC said those earnings will likely translate to funding for three CCS demonstration projects and up to 16 renewable energy demonstration projects across the European Union’s 27 member states.

While it is still unclear exactly how much money will be earned from the CO2 auctions—and subsequently how many CCS projects will be able to be funded and at what amount—the EC listed the most promising CCS projects to date, ranked order of desirability. The Commission said that the top projects are: 

1. Don Valley Power Project, United Kingdom—operated by 2Co Energy Ltd; new-build 650 MW IGCC plant in eastern England; offshore storage in North Sea, part enhanced oil recovery in hydrocarbon reservoir and part geologic storage in deep saline aquifer;
2. Belchatow Project, Poland—operated by PGE Elektrownia Belchatow S.A.; post-combustion capture retrofit on a portion of a 858 MW capture-ready unit at lignite coal plant in central Poland; onshore storage in deep saline reservoir at a yet to be determined location;
3. Green Hydrogen Project, Netherlands—operated by Air Liquide; industrial capture project at capture-ready hydrogen production facility in Rotterdam; offshore EOR in the North Sea;
4. Teesside CCS Project, United Kingdom—operated by Progressive Energy Ltd; new-build 850 MW IGCC plant in northeast England; offshore storage in North Sea for EOR or in a deep saline aquifer;
5. Drax Project, United Kingdom—operated by Alstom and Drax Power Limited; new build 426 MW super-critical plant with oxy-combustion capture technology in northern England; storage in offshore saline formation;
6. C.GEN North Killingholme Power Station, United Kingdom—operated by C.GEN; new-build 430 MW IGCC plant in eastern England, possible biomiss co-firing and hydrogen production component; offshore storage in North Sea, possibly part EOR and part geologic storage in deep saline aquifer;
7. Zero Emission Porto Tolle, Italy—operated by Enel; post-combustion retrofit on 660 MW Porto Tolle plant in eastern Italy; offshore storage in deep saline aquifer in Adriatic Sea; and
8. ULCOS-BF Arcelor Mittal CCS Project, France—operated by ArcelorMittal; industrial capture project at steel plant in northern France; onshore storage in deep saline reservoir at a to-be-determined site.

The list shows the CCS projects that remain in the competition following a technical and financial due diligence test completed by the European Investment Bank in February. One of the most important factors for the ratings, according to the EC, was the amount of CO2 that is set to be stored for each project. Geographic locations within the EU and capture type were also taken into consideration. Originally, 13 CCS projects applied for NER funding, but several projects have folded since the selection process began last year.

Projects Expected to Receive Slightly More than $400 Million

Depending on the level of money earned in ETS auctions from the sale of the initial 200 million credits, the EC estimated that individual CCS projects could net anywhere from roughly €292 million to €337 million ($357 million to $411 million) apiece. While those are by no means small amounts of funding, many of the first generation capture projects are expensive and could cost billions of dollars to fund, making an award of several hundred million euros a mere drop in the bucket for some. Notably, some cost estimates for the front-running Don Valley project are as high as £5 billion ($7.7 billion). Meanwhile, earlier this spring, PGE Group, the utility pursuing the Belchatow project in Poland, said that it will likely not move forward on the project without “significant” additional government assurance for the project. However, it is unclear how much government money PGE will require in order to move forward.

EC Acknowledges Limited Funding Opportunities

The list offers the clearest snapshot of the state of the NER competition since it became clear that the price of CO2 offsets of the European markets will be much lower than initially expected. When NER was initially launched, EC officials said they expected funding along the lines of €5 billon to €6 billion for the first tranche of CCS and renwables projects. In the document, the EC acknowledged that money will be limited for projects and that matching funding from EU member states will be critical to help get projects off the ground. “Whilst the variety and financial and technical quality of the project proposals in the competition has been found to be very positive and promising, available funds impose limits on the number of projects that may be awarded,” the document says.

For now, EC said that the EIB will continue to sell off the remaining CO2 offsets on the ETS market through October. “Upon completion of the monetization of the first 200 million allowances, the Commission will draw up the final list of candidates for award decisions, de-select projects as required to match the total available funds and ask [EU] member states to formally confirm support for at most three projects on the final list, as well as any national co-funding where applicable,” the document outlines. Final award decisions can be expected by the end of the year, the EC said.