European CCS industry continues to face delays as challenges stack up

• CCS costs in region of Eur130-150/mt
• Regulatory uncertainty and high costs pose barriers
• UK CCS cluster program de-risking projects

Policy and regulatory uncertainty continues to cause headaches for carbon capture, use and storage project developers across Europe, as time runs out to get projects up and running ahead of 2030 government climate and energy targets.

A significant gap remains between CO2 compliance market prices and CCS costs, which delegates at the CCS Strategy Europe conference in London over June 19-20 put at Eur130-150/mt ($139-$160/mt), with transport and storage accounting for up to 80% of this. That compares with EU Emissions Trading System allowance prices (nearest December) of Eur67.92/mt ($72.58/mt) on June 25, according to Platts price assessments from S&P Global Commodity Insights. Project developers are waiting on governments to finalize regulatory frameworks that will govern CCUS operations.

Another obstacle is financially de-risking projects.

“The financing is still a challenging task for us,” Wintershall Dea Vice President Carbon Management and Hydrogen Margarethe Kleczar said.

Kleczar said the challenge was greater in continental Europe, whereas the UK’s Track 1 and 2 CCUS cluster sequencing program was helping to de-risk investments, aligning emitters and CO2 transport and storage operators. However, projects under development in the UK were not without their challenges, delegates said. Matt Browell-Hook, energy transition director at Spirit Energy — which is developing Morecambe Net Zero in northwest England — said the consortium had to deal with seven or eight different regulators, only one of which had set out the regulatory process for CCS.

“We need to get an awful lot more bits of paper in place,” he said, noting the importance of the Track 1 projects taking investment decisions later in 2024 to give the industry confidence.

UK CCS clusters
Ahead of the UK general election July 4, trade group Hydrogen UK has called for accelerated government action on CCUS project development and subsidies. The UK government’s Department for Net Zero and Energy Transition announced successful Track 1 projects in March 2023, also awarding Track 2 status to the Acorn and Viking projects later that year. The government plans to move to a competitive allocation process from 2027, and to open the HyNet cluster in the northwest to more companies from 2030.

Some CO2 storage developments are dependent on CO2 supplies from multiple emitters, and developers fear for project economics if not all of the capture projects get backing from governments.
Spirit Energy’s Browell-Hook said a strong price signal from the UK Emissions Trading Scheme would help underpin CCS project developments in the country.

Platts assessed the UK ETS price at GBP47.54/mt ($60.16/mt) on June 25.

Subsidies would be needed initially to get the nascent sector up and running, but Browell-Hook stressed that the industry would need “a bit of support for a bit of time, not a lot of support for a long time.”

“Ultimately we want to be in a merchant position,” he said.

Sumitomo subsidiary Summit Energy Evolution CEO Paul Lafferty said the Track 1 process was good, but “way too slow” to be used for future support allocation. A merchant market for storage could develop, if there is a carbon border adjustment mechanism in place and an ETS price that’s high enough, Lafferty said. However, end-users will still require subsidy, he added.

No other choice
Despite these headwinds, some projects are already underway in Europe, and with substantially lower storage prices than the Eur130-150/mt range. The Porthos CO2 transport and storage project in the Netherlands started construction in April, with fees fixed at Eur38/mt for the 15-year contracts signed.
The project will store around 2.5 million mt/year of CO2 from 2026, with total capacity around 37 million mt CO2. However, Porthos stakeholders and communications manager Mark Driessen said costs had more than tripled since the conception of the project, and doubled since it fixed its tariffs with emitters. Porthos is a joint venture between EBN, Gasunie and the Port of Rotterdam Authority. Having state-backed shareholders has helped, as have the Dutch SDE++ sustainable energy and climate transition auctions, which will bridge the gap between the EU ETS price and the CCS price.
“We are not in this for financial gains,” he said. “There’s no other choice.” He noted that emitter project costs had also risen, with higher costs for materials and labor.

Other developments are also underway in Europe.

Energean subsidiary EnEarth is targeting a final investment decision on its 3 million mt/year Prinos CCS project in northern Greece in late 2024 or early 2025, the company’s head of carbon storage Nikolas Rigas said. The project will use a depleted oil and gas field to permanently store captured CO2, serving potential customers in Croatia, Italy and Bulgaria, as well as Greece. And Snam director for CCS and carbon removal development Paolo Testini said the company’s joint venture Ravenna CCS facility with Eni was four times oversubscribed for its initial 4 million mt/year commercial phase. Meanwhile, Perenco’s planned 1.5 million mt/year Poseidon project in the UK’s Southern North Sea will start offshore injection tests in early December. The project is targeting an increase in capacity to 40 million mt/year, with an FID in 2028.