On 5 April, Celsio submitted its biannual cost and uncertainty analysis under the terms of its government funding agreement. This analysis sets out significant cost overruns and delays.

Good dialogue

– “We raised our concerns last November and asked Celsio to consider putting the project on hold. Celsio has now concluded that it would be sensible to do so,” says Roy Vardheim, Gassnova CEO.

Hafslund Oslo Celsio is responsible for the implementation of the carbon capture project. In light of the fact that the Norwegian government is contributing a significant proportion of the project’s financing, Celsio signed a funding agreement with the government to regulate their relationship. Gassnova is responsible for monitoring Celsio’s project management and overseeing the terms of the grant agreement on behalf of the government, including its cost and risk management.

– “We have maintained an open channel with Celsio that has been characterised by good dialogue throughout a series of monitoring activities during the winter. These have included a third party audit and a maturity study under the auspices of DNV,” says Vardheim.

Different roles

When the maximum budget in a government funding agreement is exceeded, the government is not obliged to contribute further financing but the parties are jointly obliged to seek out a mutually agreeable solution on behalf of the project. The parties will enter into dialogue on the road ahead for the project.

According to a press release from Celsio, the project will enter a 12-month cost reduction period. The company and its owners still wish to see the project through to completion, but they will be investing time in finding solutions that reduce the associated costs.

No impact on the completion of Longship

The changes to Celsio’s project will not have any impact on the completion of Longship as a whole chain for the capture, transportation and storage of CO₂. The Heidelberg Materials and Northern Lights projects have both passed the halfway point in their construction process and will be in a position to capture and store CO₂ from 2025.

Press contact:

Camilla Bergsli

cb@gassnova.no
+47 99 69 11 85

Great interest in our CCS newsletter

There is great interest in CCS-related news, and we currently have around 3,000 recipients of our weekly newsletter. We will continue to deliver professional news and share insights from the Longship project, but will change the look of the newsletter and when we send it out.

If you do not receive the newsletter today, you can sign up here.

16 years of CCS newsletter

Gassnova has delivered weekly CCS newsletters since 2007. At the beginning, it was sent out in collaboration with Cicero, and had 350 recipients. In addition, a separate CLIMIT newsletter was developed and delivered by mail with information of projects. Since 2007, the focus has been on delivering relevant professional information on carbon capture and storage. Gassnova has also shared matters related to the Norwegian CCS project Longship, and results from CLIMIT projects and Technology Center Mongstad (TCM).

One of the first newsletters that were sent out:

Changes distribution interval, design and number of articles

From 25 April, the newsletter will be sent out once a month instead of once a week. It will contain news from Gassnova, TCM and CLIMIT to a greater extent, but still include a smaller number of selected external news. The newsletter will only be in an English version and will be sent out from Mailchimp (with Gassnova SF/nyhetsbrev@gassnova.no as sender). The graphic presentation of the newsletter will also be new:

 

In the note, the term industrial carbon removal has been used to refer to the capture of CO₂ from ambient air (Direct Air Carbon Capture and Storage, DACCS) and the capture of biogenic emissions (bio-CCS or BECCS), where the CO₂ is stored permanently in geological reservoirs.

Have looked at different support models

The Norwegian Environment Agency writes that they have looked at various models for support for carbon removal. “Reverse tax” (as introduced in the USA, Denmark and Sweden) appears to be the most relevant. It is also written that the instrument should be designed so that the costs for society do not become higher than necessary.

 

Proposal to mirror the CO₂ tax

It is pointed out in the memo that the potential projects for bio-CCS and DACSS that the Norwegian Environment Agency has mapped are very different. This applies both in terms of technology maturity, size and costs. Many of the emission sources are relatively small, and high administrative costs will be a barrier. This, as well as the need for emission reductions before 2030, suggests that a “reverse” tax will probably be a suitable instrument. The state can, for example, mirror the CO₂ tax with a reverse tax of NOK 2,000 per tonne (2,020 kroner) which the players are paid for each tonne removed over a period of 10 years. If you want to give stronger incentives to DAC projects, you can have a higher level for DAC.

This is an extract from the note “Industrial carbon removal – potential, costs and possible measures” which The Norwegian Environment Agency published 13.03.23. Read the whole note here (in Norwegian).

Three conditions behind the IEA’s optimism for the development of CCS

• projects are now concentrated around industrial hubs with shared infrastructure for transport and storage
• more robust public financing schemes are available creating greater predictability for operators 
• and tougher and more binding climate policies have been adopted. The IEA is cautious about claiming this will guarantee the success of the well over 100 projects that are currently being planned. Even if all the projects currently being planned are realised (something the IEA itself does not believe will happen), the combined capacity of these projects in 2030 will only constitute about 10% of what the IEA believes is necessary to be on track to reach net-zero by 2050.  

The CCS Environmental Analysis is prepared by Gassnova’s analysis team.

Will reduce the cost of green hydrogen down to less than €2 per kg H2 in 2030

European priorities will be adjusted with this new venture, focussing less on hydrogen-powered private vehicles and more on green hydrogen and use in the processing industry. The goal of this is to reduce the cost of green hydrogen down to less than €2 per kg H₂ in 2030. Under more normal energy prices than those we are seeing in the EU today, hydrogen from natural gas would cost about €2 per kg. With current gas and energy prices, the situation is drastically different and means the cost of hydrogen has become much higher, irrespective of the production method. Uncertainty relating to future gas prices and the desire to phase-out the use of fossil fuel-based energy are factors forming the basis of the EU’s focus on green hydrogen.

Head of the IEA surprised by this focus

The head of the IEA, for his part, was somewhat surprised by this focus, because he believed that the market was not mature enough to warrant such a large focus, and was surprised that the EU would devote so many resources to something that would mostly benefit other nations (such as China). In this context, he refers to other examples of the same thing happening for Europe. 

Failure to live up to promised climate support

The final battle in the negotiations was over the wording on phasing out coal, with some emerging economies such as China and India wanting to tone it down. Developed nations in particular expressed disappointment with this outcome. Many have pointed to the correlation between coal as the way for developing nations to affordably meet their energy needs, and the failure of developed nations to live up to their promised climate support for developing nations embodied in the Paris Agreement. The issue around the $100 billion annual climate finance was also thought to be an underlying cause of tensions during the final negotiations.

A change in focus for upcoming climate negotiations?

Carnegie, an international think tank for global peace, points out that the situation which has unfolded might lead to a change in focus for upcoming climate negotiations – more concerned with climate justice and less with concrete actions. Carnegie also points out that the situation which has emerged will increase the pressure for everyone to achieve their own climate goals. At the same time, it will increase pressure on the EU and other developed nations to fulfil their obligations on climate finance. If it does not, writes Carnegie, the EU may succumb to economic breakdown of supply chains and migratory pressures resulting from climate disruptions. If the EU wants to be a constructive leader on the climate going forward, it has been pointed out that it will be crucial to focus on climate justice, rebuilding the trust of climate vulnerable nations and reducing international tensions in the run up to COP27. 

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The Environmental Analysis is prepared by Gassnova’s analysis team.

COP26: Where do we go from here and what might this mean for the EU’s climate efforts? 

Many have expressed disappointment with the results of COP26, among them UN Secretary-General Guterres. He believes that it is time to go ‘into emergency mode’ over the climate crisis.

Failure to live up to promised climate support

The final battle in the negotiations was over the wording on phasing out coal, with some emerging economies such as China and India wanting to tone it down. Developed nations in particular expressed disappointment with this outcome. Many have pointed to the correlation between coal as the way for developing nations to affordably meet their energy needs, and the failure of developed nations to live up to their promised climate support for developing nations embodied in the Paris Agreement. The issue around the $100 billion annual climate finance was also thought to be an underlying cause of tensions during the final negotiations.

A change in focus for upcoming climate negotiations?

Carnegie, an international think tank for global peace, points out that the situation which has unfolded might lead to a change in focus for upcoming climate negotiations – more concerned with climate justice and less with concrete actions. Carnegie also points out that the situation which has emerged will increase the pressure for everyone to achieve their own climate goals. At the same time, it will increase pressure on the EU and other developed nations to fulfil their obligations on climate finance. If it does not, writes Carnegie, the EU may succumb to economic breakdown of supply chains and migratory pressures resulting from climate disruptions. If the EU wants to be a constructive leader on the climate going forward, it has been pointed out that it will be crucial to focus on climate justice, rebuilding the trust of climate vulnerable nations and reducing international tensions in the run up to COP27. 

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The EU Innovation Fund: €1 billion invested across seven projects – including four CCS projects 

After almost eighteen months of competition and 311 submissions with €1 billion up for grabs, seven projects emerged victorious in November. This was the first of several announcements from the Innovation Fund up to 2030 – expected to add up to €25 billion collectively.

Should contribute to significant reductions in emissions up to 2050

The supported projects must be particularly innovative and act as major contributions to significant reductions in emissions up to 2050. The Fund aims to support a wide range of technologies, industries and geographical locations in the EU. The projects selected this time around had profiles in industries regarded as ‘hard-to-abate’, and where the project itself will result in significant reductions in emissions. 

4/7 projects incorporate CCS as a part of their solutions

6 out of 7 projects feature a large element of renewable energy or a transition from fossil to renewable energy. 4 out of 7 incorporate CCS as a part of their solution. 5 out of 7 were based in Northern and Western Europe, with none in Central and Eastern Europe. 3 of the projects include elements on the production/use of hydrogen, such as the Swedish HYBRIT project using green hydrogen for steel production. One project involves capturing biogenic CO₂ (CCU) from waste for use in chemicals and biofuels. Announcement no. 2 from the Fund is ongoing, with a €1.5 billion pot. 

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IEA cautiously optimistic about the development of CCS  

In November, the IEA’s Head of CCUS provided some general reflections as to why CCS has largely failed to be seen as an important climate initiative in the past, and what will be important for it going forward. The IEA outlines three important conditions behind their optimism for the future development of CCS.

Three conditions behind the IEA’s optimism for the development of CCS

• projects are now concentrated around industrial hubs with shared infrastructure for transport and storage
• more robust public financing schemes are available creating greater predictability for operators 
• and tougher and more binding climate policies have been adopted. The IEA is cautious about claiming this will guarantee the success of the well over 100 projects that are currently being planned. Even if all the projects currently being planned are realised (something the IEA itself does not believe will happen), the combined capacity of these projects in 2030 will only constitute about 10% of what the IEA believes is necessary to be on track to reach net-zero by 2050.
  

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Imperial College: The value of CCS will fall with increasing competition from renewable energy 

An analysis carried out by Imperial College and published in a scientific paper in November concludes that the societal value of CCS will fall in the future due to increasing competition from renewable energy.

Historic reductions in the cost of renewable energy are greater than predicted

Essential to understanding the results of the analysis is the emphasis it places on the historic cost reductions in renewable energy (wind/solar + battery) being greater than predicted in most of the analysis models (‘integrated assessment model’) that are used internationally. That the IEA and others have systematically underestimated the reduction in cost of renewable energy in trend projection analyses matches with a range of experiences in the sector.

However, the conclusions drawn in the article are easy to understand

The value of CCS is more stable when it is employed in areas that are less exposed to competition from renewable energy – such as from process-related emissions (i.e. cement works) and carbon negative solutions (BECCS and DACCS). ‘Value’ here means the marginal reduction of societal costs provided by a climate initiative compared with not adopting the initiative. The value of CCS is less stable when CCS is used in combination with fossil fuel-based energy as it is in direct competition with renewable energy – such as gas power with CCS and blue hydrogen production. In these areas, the value of CCS is reduced by between 61% and 96% compared with what the authors believe to be more normal assumptions about the cost development of renewable energy. 

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The EU’s hydrogen strategy is materialising; €2 billion for the EU Clean Hydrogen Partnership 

At the end of November, the President of the European Commission announced a new initiative to foster research and innovation in hydrogen through a public-private partnership with both parties providing €1 billion each.

Will reduce the cost of green hydrogen down to less than €2 per kg H2 in 2030

European priorities will be adjusted with this new venture, focussing less on hydrogen-powered private vehicles and more on green hydrogen and use in the processing industry. The goal of this is to reduce the cost of green hydrogen down to less than €2 per kg H₂ in 2030. Under more normal energy prices than those we are seeing in the EU today, hydrogen from natural gas would cost about €2 per kg. With current gas and energy prices, the situation is drastically different and means the cost of hydrogen has become much higher, irrespective of the production method. Uncertainty relating to future gas prices and the desire to phase-out the use of fossil fuel-based energy are factors forming the basis of the EU’s focus on green hydrogen.

Head of the IEA surprised by this focus

The head of the IEA, for his part, was somewhat surprised by this focus, because he believed that the market was not mature enough to warrant such a large focus, and was surprised that the EU would devote so many resources to something that would mostly benefit other nations (such as China). In this context, he refers to other examples of the same thing happening for Europe. 

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Carbon Dioxide Removal (CDR); From distraction to prerequisite for achieving climate goals 

Those who have been following the international debate over CCS in the last few years will probably have noticed the clear-cut fronts between the different camps for CCS, CCU and CDR.

From being expensive and dangerous, to being warmly welcomed

As usual, the viewpoint of the individual, including their basic assumptions, is crucial for the conclusions they arrive at. Over the years, industrial CDR (such as Bio CCS and DACCS) has been warned against as a costly or dangerous ‘distraction’, to becoming increasingly welcomed and is now frequently mentioned as a requirement for achieving climate goals. This is similar to the change in opinion over time around CCS. Before 2020, while the EU’s climate goal was an 80-95% reduction in greenhouse gasses by 2050 compared to 1990, there were many industrial organisations that strongly believed that CCS would not be needed before 2050. But since an ever increasing share of the global economy is now subject to a goal of net-zero emissions (now: 80%), the public discourse has changed dramatically in a short space of time – on CCS, CCU and CDR. That said, it cannot be guaranteed that any industrial CDR will be fit for purpose. The laws of physics, limited natural resources and the need to be profitable will continue to limit what can be realistically achieved. 

The strategy under development could include a goal of 5Mt CO₂ stored each year through industrial CDR

One important development worthy of mention is the EU strategy currently in preparation which could include a goal of 5Mt CO₂ stored each year through industrial CDR. During COP26 in November, the USA announced an initiative to remove 1 Gt CO₂ from the atmosphere (CDR) at a cost of less than $100/tonne by 2050. And in November the Swedish Energy Agency delivered its recommendation to the Swedish government of a support system to remove up to 2 million tonnes of CO₂ per year fro the atmosphere through Bio CCS by 2030.
In November, the IEA released its updated assessment on the status of DACCS and also recently published an article with recommendations as to how member nations could realise the potential BECCS represents. In their ‘Net Zero 2050’ scenario, the IEA says of DACCS that close to 90 Mt CO₂ per year will need to be extracted by 2030. According to the IEA, one of the steps that public authorities can take to promote a market for CDR is to buy CO₂ reductions directly from businesses offering it.

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The Environmental Analysis is prepared by Gassnova’s analysis team.

 

The film about Longship was produced by the Maverix production company, and was shot in summer 2021 at the Viking Ship Museum in Bygdøy. The film was released in Norwegian, English, German and French. It was also shown at Expo 2020 Dubai in the Norway Pavilion.

 

HeidelbergCement’s Swedish firm Cementa has spent many years working to develop technology and solutions that will allow it to become the world’s first climate-neutral cement works. This has been subject to necessary state support, infrastructure development, etc.

Builds on the Longship project

In June this year, Cementa presented is initiative setting out the ambition to capture and store 1.8 million tons of CO₂ per annum from 2030. This initiative will build on the work already carried out by Project Longship. Additionally, the company is working in partnership with Vattenfall to develop a solution to electrify cement production – CemZero.

International attention

Cementa’s venture has received widespread attention internationally. However, during the summer the cement works saw its application to extract further lime from its current mines rejected by Sweden’s Land and Environment Court of Appeal. The grounds for rejection relate to the lack of scientific evidence relating to groundwater conditions in proximity to the mines. Cementa has until next summer to resolve these difficulties.

This is part of the CCS Environmental Analysis for Augusty 2021, prepared by Gassnova’s analysis team. Read the whole analysis here.

Hydrogen production may account for up to 1/3 of the country’s energy consumption

The ambition to achieve 5 GW of production capacity by 2030 (up to 42 TWh/p.a.) remains in place. At present, hydrogen production in the UK is estimated to stand at around 27 TWh/p.a.. After 2030, it is estimated that growth will increase significantly to 250-460 TWh, and may then represent up to 1/3 of the country’s overall energy consumption.

British hydrogen strategy more tangible

The strategy does not set out a distribution between blue and green hydrogen, but it does stipulate a ‘twin track approach’ in which the best aspects of each technology are to be utilised. This means that the choice between ‘green’ and ‘blue’ should balance long-term potential against the necessity of phasing technology in at an early stage – in order to optimise value to the taxpayer over the long-term. A production strategy for hydrogen is due to be published in early 2022. The British hydrogen strategy is more tangible when compared to Europe. It is also approximately equal in terms of ambition when measured by volume (EU: +40 GW green H₂ by 2030, Germany total 90-110 TWh H₂ by 2030).

Consultation on different business models

Alongside the strategy, there is also a consultation on various mechanisms (business models) for how the government envisions remunerating industry for the additional costs associated with the establishment for hydrogen value chains. It is assumed that this support will be channelled through producers rather than in the consumer sector. The consultation describes various models for how support of this kind might be organised.
A number of support schemes have been established with a focus on investments throughout the value chain, including storage of hydrogen and CCS.

‘Net Zero Hydrogen Fund’ highlighted

In this context, the ‘Net Zero Hydrogen Fund’, which is worth a total of £240 million, particularly emphasises support for investment in hydrogen production facilities. It is assumed that the first contracts for the supply of low-carbon hydrogen will be operational by early 2023. The use of hydrogen is specifically targeted at industries that cannot easily electrify or where the use of CCS will be particularly costly.
Four areas are highlighted: industry, transportation, power generation, and local heating. It is expected that the hydrogen strategy will deliver reductions in emissions totalling 41 Mt CO₂e over ten years from 2023 to 2032, and that it will create a hydrogen economy worth £900 million by 2030.

This is part of the CCS Environmental Analysis for Augusty 2021, prepared by Gassnova’s analysis team. Read the whole analysis here.