French Withdrawal, Lack of Support for British Projects Kill CCS’ Chances Under NER 300, Davies Says
Tamar Hallerman
GHG Monitor
12/7/12
Hopes that Europe would become a global leader in the demonstration and deployment of carbon capture and storage technology have effectively been “dashed,” a key U.K. politician said late this week. A series of announcements over the last week from the U.K. Department of Energy and Climate Change (DECC) and the world’s largest steelmaker, ArcelorMittal, have confirmed that no CCS demonstration projects will be funded under the first round of the European Commission’s New Entrants Reserve (NER 300) competition, Chris Davies, a U.K. representative in the European Parliament and one of Europe’s leading CCS proponents, confirmed in a statement Dec. 6. “Not one single new CCS scheme is set to proceed” under the EC competition, Davies said, confirming that projects backed by governments in the Netherlands, Romania and Poland also have not secured financial support from the EC. Davies said he was “bitterly disappointed” by the revelation. “Today’s news marks a major failure by Europe to step up to the mark. We talk big about the need for action yet fail to deliver,” he added. Davies’ announcement came ahead of an official announcement from the EC, which is expected to come after a Dec. 13 meeting of the EU’s Climate Change Committee, sources said.
News that ArcelorMittal pulled the plug on its industrial CCS project, which would have installed capture technology on a “green” steelmaking pilot plant in northeast France, came as a shock to many in the European CCS community. Some reports in recent weeks had speculated that the French industrial project was the only CCS venture still being considered for the first round of the NER 300 competition, which also plans on doling out some or all of the €1.5 billion ($2 billion) it earned from the sale of 200 million carbon credits for ‘innovative renewables’ projects. An EC official confirmed to GHG Monitor that the Commission recently received a letter from ArcelorMittal informing the body that it was withdrawing the project due to unspecified “technical difficulties.” The steelmaker said earlier this week that it would not move forward with the pilot project, instead shuttering two blast furnaces at the facility that would have been used for the CCS component. ArcelorMittal did not immediately respond to a request for comment late this week. Davies predicted that all of the first round NER funding will now likely be diverted to the renewable energy projects. The EC official would not comment further on the status of CCS within the first round of the NER 300 competition.
U.K. Confirms its Failure to Secure EC Funding
Rumors had been circulating for weeks that the U.K.’s three CCS projects lost out on NER 300 funding when a DECC spokesman officially confirmed the news to the media earlier this week. “The indications are that the U.K. is unlikely to receive CCS funding through this round,” the spokesman said. “Discussions will continue until the Commission makes a formal announcement.” That announcement came days after DECC’s head introduced major legislation in Parliament aimed at boosting the long-term operational support provided to the developers of CCS projects.
Politicians and industry advocates have blamed the U.K. government for failing to provide the level of financial support required by the EC in order to be awarded a piece of the NER 300 funding. Earlier this fall, DECC said it would back three of the remaining CCS projects under the competition, but abandoned support for the EC’s favorite project, a 650 MW integrated gasification combined cycle project planned for eastern England. The Department also offered only conditional support to the projects based on whether they received funding under its own domestic CCS competition, which fell along a later timeframe than NER. Davies last month called the U.K.’s failure to secure funding a “tragedy,” while Tom Greatrex, the Shadow Energy and Climate Change Secretary for the opposition Labour Party in U.K. Parliament, said Britain’s lead in developing CCS technology in Europe could be squandered due to “government incompetence and indecision.”
European leaders had initially planned on establishing up to 12 demonstration projects under the NER 300 competition by 2015, funding up to eight in the first round alone. However, that estimate was based on the assumption that carbon prices would remain high at around €30 per ton. But the recession and subsequent crash of the EU’s carbon market enabled the EC to sell off carbon allowances at an average price of only about €8 a piece, leading the body to earn only a small fraction of the money it initially anticipated for CCS and renewables projects. The EC said it will gradually start auctioning off the remaining 100 million carbon offsets on the market for the second round of the competition beginning next year. CCS projects will be able to reapply for European funding at that point.
Check back to GHG Monitor next week for more information on the announcement and analysis on how it could affect the potential for CCS in Europe.
