PCIs for CO2 transport – a pipe dream or necessity?

PCIs for CO2 transport – a pipe dream or necessity?

PCIs for CO2 transport – a pipe dream or necessity?

On 29 October the EU leaders approved the allocation of €647 million to key energy infrastructure projects under the Connecting Europe Facility (CEF) programme.  More than half of the funding will go to gas infrastructure, while CO2 transport projects are missing from the list. Early financial assistance to CO2 transport infrastructure would ensure that indigenous energy resources continue to be used - to increase long term energy security of the EU in a sustainable manner.

CEF 2014-2020 is an initiative proposed by the European Commission in October 2011 to fund so-called ‘projects of common interest’ (PCIs), involving at least two member States, in transport, energy and telecom sectors. On the energy front, CEF provides financial aid to strategic infrastructure investment that reduces isolation of ‘energy islands’ - the Baltics, Central Eastern and South Eastern Europe – ensures security of supply and contributes to sustainable development.

Under this year’s list of PCIs €255 million will be set aside for electricity interconnections and €392 million for gas pipelines. Of the 34 grants given, 28 will finance studies and impact assessments and six will go to actual construction works. The decision, shows high focus on the EU’s dependence on Russian gas in the wake of the Ukraine crisis. The CO2 transport networks are listed in the CEF regulation only under the objective of sustainable development. However, CCS technology, when deployed at scale and EU-wide, would also be capable of greatly enhancing the energy security, in particular for fossil-fuel dependent countries.

The EU’s original approach to CCS demonstration has been unsuccessful in realising any demonstration project to date. Apart from an initial push of funding delivered to demonstration projects under the European Energy Programme for Recovery (EEPR), the approach relied completely on the strength of the EU Emission Trading System. It assumed that direct grants linked to CO2 price from new entrants reserve (NER300) would make the technology available for deployment, while a robust CO2 price would give emitters a long term incentive for investments. This approach has failed, showing that well-timed public funding, in parallel to carbon price, is needed for all elements of CCS chain.

This is the reason why industry and governments should now work together to include a feasibility study for a CO2 transportation project in the next PCI list.  Delivery of a successful would could be a first step before inclusion of a construction project on trans-national CO2 pipelines in the upcoming CEF calls for proposals up to 2020.  PCI funding would provide support to transport industry for investment in pipeline capacity ahead of market development. While emitters can be incentivised to apply the CCS technology through a suite of policies, such as carbon price, emission performance standards, feed-in tariffs, no mechanism exist to drive investment in storage and subsequently, transport capacity.  Transport industry needs confidence that that CO2 abatement market will be realised in the future. Public-private funding for under CEF would provide much needed upfront push to pipelines investment. It will also show trans-national policy direction through commitment coming from the Member States involved in the first project.

Transnational CO2 transport network will allow appraisal and access and to low cost storage capacity. In the 2013 CCS Technology Roadmap, the IEA called for early development of CO2 transport infrastructure through actions that take future demand and volumes of CO2 into account. The North Sea offers the biggest opportunity in this respect. Surrounded by major industrial regions with steady supply of CO2, the North Sea is the biggest CO2 storage resource with enough capacity for hundreds of years of emissions.  Its oil and gas industries have decades of offshore engineering experience translatable into CO2 storage expertise.

Last but not least, putting a PCI project designs on the table could boost the prospects of the very first CCS demonstration projects that are now in advanced stages of planning in Europe. A Rotterdam -Antwerp link could help develop a CO2 hub in Rotterdam and cluster in Antwerp. Pipeline linking of Antwerp and Rotterdam cluster to the Whiter Rose 5/42 storage site in the Southern North Sea could demonstrate economies of scale, and facilitate further development of hubs in both the UK and the Netherlands. Potential PCI stakeholders such as National Grid and the operator of ROAD project have already benefited from the EEPR grants and NER 300 funding – the PCI funding could allow them to build upon the value created in the early stages of their projects.