CCS Environmental Analysis, November
On a monthly basis, Gassnova prepares an analysis of important CCS international market trends, and what drives innovation in our focus areas. Here is the analysis for November.
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.
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.
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.
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.
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.
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.
The Environmental Analysis is prepared by Gassnova's analysis team.