3rd meeting of the WG

Minutes of the 3rd Sustainable Fossil Fuels Working Party for the 2008 Berlin Forum,

(25 April 2008)

1. OVERVIEW

The third meeting of the Sustainable Fossil Fuels Working Party of the Berlin Forum took place at the Commission premises on 25 April from 10:00 to 13:00. 30 stakeholders attended the meeting (see Annex I for details). Below is a summary of the key points from the proceedings and conclusions of the meeting.

2. APPROVAL OF THE AGENDA AND OF THE MINUTES OF THE SECOND SFFWG MEETING

The Agenda and the minutes of the 2nd meeting were adopted without changes.

3. ASSESSING EUROPEAN CAPACITY FOR GEOLOGICAL STORAGE OF CO2

GEUS (Mr Thomas VANGKILDE-PEDERSEN) presented the work of the EU GeoCapacity project, which is part of the FP6 framework and brings together 26 partners from 20 different countries (wide variety of academic, industry, government, research partners).

The project aims at: (1) providing an assessment of European capacity for geological storage of CO2; (2) further development of innovative methods for site selection criteria capacity assessment and economic modelling; (3) initiating further international collaborative activities. The project consists of six work packages: (1) inventories and GIS; (2) storage capacity; (3) economic uses of CO2; (4) standards and site selection criteria; (5) economic valuations; (6) international cooperation; (7) management and reporting.

The project will provide an update of the inventory of major CO2 emission point sources, building on the CASTOR project. The project will also provide the data required for the Europe wide definition of available CO2 storage capacities and an assessment of regional and local potential for geological storage of CO2 in deep saline aquifers, hydrocarbon fields (including EOR/EGR) and coal fields (including ECBM).

In addition, the project is developing technical site selection criteria and a ranking methodology, contributing to guidelines for assessment of geological storage capacity, as well as providing analysis of source – transport – sink scenarios and economic valuations.

GEUS has adopted three basic ranking and selection criteria for sites suitable for geological storage of CO2: depth and storage capacity, sufficient injectivity and finally the integrity of the seal. GEUS further explained that it is important to distinguish between theoretical, effective and practical storage capacity. As the theoretical capacity includes large uneconomic and unrealistic volumes (regional estimates without storage efficiency), GeoProject prefers to focus on both effective capacity (with technical/geological cut off limits applied to theoretical capacity) and practical capacity (with economic and regulatory barriers applied to effective capacity and with matching sources and sinks). As it would be unrealistic to assume that all capacity could be used for CO2 storage, GeoCapacity used a 2% storage efficiency factor onthe basis of the theoretical capacity. However, in the bottom-up approach starting with well-identified trap structures a 40% efficency was used (for the case of Denmark).

Finally, the project seeks to increase collaboration with China and other CLSF countries (e.g. India and Russia) and establish communication links to initiate technology transfer.

Discussion:

COMM asked GEUS to clarify the difference in storage efficiency factors between regional storage estimates (having a smaller factor) and estimates of individual aquifers (having a higher factor).

GEUS explained that it is important to distinguish between the types of estimate.The high (geological) uncertainty with regional estimates – as opposed to individual aquifers - requires smaller efficiency factors.

EURACOAL asked why the database did not include all the EU 27. In addition, EURACOAL asked when partners/public could expect reliable results about storage capacity in Europe.

GEUS explained that initially the project was planned to include the whole of Europe, but apparently not all the countries were interested to participate. In addition, GEUS mentioned that the database already provides estimates of storage capacity, with the storage capacity factors being fine-tuned over the coming few months.

COMM asked when countries were approached to join the GeoCapacity project and whether it would be possible for newcomers to be integrated in the existing project.

GEUS informed that countries were approached one year before the start of the project in January 2006, i.e. in the course of 2004/5. Unfortunately it would be difficult to integrate new countries because of lack of time and lack of budget (unless they would undertake the necessary activities on their own charge). The project is currently in its final phase and no budget is available to integrate newcomers.

ALSTOM was pleased to see a link between the project and CLSF and added that CLSF has established a joint CLSF/IEA taskforce on storage to obtain better estimates of storage coefficients. ALSTOM called to further strengthen the relationship between this taskforce and GeoCapacity.

IRELAND inquired about possible follow-up actions under FP7 to continue the project.

GEUS was not aware of any of calls under FP7, but emphasised the need to a follow up of its activities.

COMM (RTD) commented that it could be possible to make new applications in 2009 (under capacity building).

COMM (ENV) expressed its interest in more concrete project results and asked whether these would be presented in practical storage capacity or effective storage capacity.

GEUS informed that the GeoCapacity website provides a draft report (currently only for project partners); a survey on site-related criteria will become available upon completion of the project. In addition, most results will be presented in effective storage capacity, although 1 or 2 case studies per country would also include practical storage capacity.

COMM highlighted the value of the project database as a policy tool and asked if data would be made available to wider public (since the project is part of FP6).

GEUS responded that although the results could be used in a wider sense, the database would remain a proprietary tool of the project partners.

E3G asked whether the project will provide summary results of all EU MS (as such information could be very helpful in the current legislative debate on the CCS Directive).

GEUS explained that it provides basic country data in the form of country-bycountry estimates (although not as detailed/precise as in the database).

TOTAL asked how the project activities will be followed up after completion of the project.

GEUS referred to follow-up possibilities under FP7, as well as developing a closer cooperation with CLSF/IEA and the possibility of new countries joining the project in the near future.

4. LINKING CO2 SOURCES AND SINKS: SCENARIOS FOR THE EU

TNO (Mr Ton WILDENBORG) presented the results of the CCS-SCEN Project - a recent service contract for DG ENV that supported the Impact Assessment of the draft CCS Directive - building on the results of the CASTOR project and on preliminary results from the GeoCapacity project.

TNO analysed three CCS scenarios: (1) EU policy option 1 with 20% emission reduction and ETS – MS scenario (national solution); (2) EU policy option 2 with mandatory CCS from 2020 and capture ready from 2015 – both MS scenario and EU scenario; (3) CASTOR objective with 10% emission reduction by CCS in 2050 (~30% emission reduction in power plants)-EU scenario.

The CASTOR tool is an economic analysis tool for CCS with the following main output: emission, injection gaps, investment costs of capture, transport and storage, transport infrastructure etc. in tables and diagrams. Under its workflow programme clustering sources and sinks are identified and matched (using backbone pipeline infrastructure and satellite pipelines). CASTOR has the following conclusions: (1) 30% (~500 Mt of CO2) reduction of emissions at power plants in Europe in 2050, compared to the reference year 2011, could be within reach; (2) uncertainty exists with regard to aquifer storage potential and availability of oil and gas fields; (3)

Storage costs range from 1 to 4 Euro/ton of CO2 avoided and transport costs range from 2 to 14 Euro/ton of CO2 avoided.

The CCS-SCEN objective is to evaluate possible future CCS networks in Europe using as reference the PRIMES scenarios and with special reference to: (1) size of stored CO2 mass and any remaining storage capacity gap; (2) deployment of various sink classes; (3) spatial scale of transport network. Under the PRIMES scenarios, CO2 storage is implemented until all existing coal-fired power generation is phased out (after 2030), with costs not discounted, no increase in power demand (already included in PRIMES) and price in € (2005). The additional EU scenario includes: storage potential for EU 27 and Norway, with 10% of reported aquifer storage potential available; additional storage potential of oil fields for the UK; increased storage security by replacing aquifers with gas fields.

In the UK, Ireland and Italy part of the CO2 is stored in offshore storage sites, resulting in a significant offshore backbone pipeline and accompanying satellite pipelines. Reducing the storage shortfall and increasing the storage security in the European scenario leads to larger-sized transport infrastructure. Compared to the MS scenarios, more offshore backbone and pipeline length is required, especially for Germany, which in the European scenario is supposed to inject its total amount of CO2 offshore in potential Norwegian storage sites. Both the longer transport distances,  e.g.  to the North Sea storage sites, and the more extensive infrastructure needed for aquifer storage have lead to a distinct increase in pipeline length.

The CCS-SCEN project has the following conclusions: (1) 20% emission reduction in 2050 seems to be feasible assuming that all storage potential is available at 2011 and all newly generated sources are equipped with CCS technology; (2) target per Member State is more difficult to reach due to insufficient storage potential available within national territory; (3) in the study the availability of storage potential in time was not taken into account. Most hydrocarbon reservoirs are still in production, large gas reservoirs larger than 1 Gt in size, have long life times. It ispossible that the amount of CO2 captured will exceed the window of availability for storage potential; (4) much uncertainty still remains with regard to storage potential, injectivity and integrity of the reservoirs in particular within aquifer storage potential.

Discussion:

COMM asked if 20% emission reduction target mentioned by TNO is to be achieved by CCS only.

TNO replied that 20% reduction under CCS-SCEN should be achieved by a portfolio of measures; not just CCS, but also renewables and energy efficiency.

COMM (ENV) further adds that the 20% reduction should be achieved using the optimum energy mix at lowest possible costs. PRIMES shows the amount of CO2 captured by CCS, as well as two policy options to achieve 20% reduction (CCS left to the market vs. mandatory CCS).

COMM commented on the differences in transport costs under the national MS scenario and the EU scenario and asked why they were higher under national scenario.

TNO explained that its analysis offers options and does not make any predictions, i.e. it shows two extreme solutions (national and EU). Moreover, storage security is at heart of the analysis, not economic optimisation.

TNO noted that under a conservative approach (with 10% aquifer capacity) still 45,000 km of pipeline infrastructure would be needed (relatively low compared to 110,000 km of existing gas infrastructure).

COMM (JRC) noticed some discrepancies between sinks available in the GEUS presentation and the TNO presentation, i.e. some sinks displayed in one presentation but missing from other. In addition, COMM asked how the project would be followed up; would the CCS-SCEN tools continued to be used or possibly lead to the development of a new tool.

TNO replied that indeed an update of the sink overview would be needed.

GEUS further explained that GeoCapacity should be considered as a planning tool, whereas the CASTOR/CCS-SCEN more as a strategic tool.

COMM (RTD) asked whether the GeoCapacity project would use one-to-one sinksource matching or multi-source matching.

GEUS responded that the scenarios would include multi-source sink-source matching.

VGB referred to the policy and business implications of the analytical exercises. It expressed its concern about the difficulties of keeping GeoCapacity alive and to guarantee its quality (as it would probably not be included in FP7). VGB asked about the access by companies to the GeoCapacity data base would be allowed, while preparing their CCS projects. Furthermore, VGB emphasised the urgency of moving forward with the development of CO2 infrastructure. EU policy also needs to provide certainty with regard to the ETS system. Finally, VGB stressed the need to communicate with the wider public and increase public awareness of CCS.

IRELAND asked whether TNO will publish the final report.

TNO responded that a draft report was delivered to COMM DG ENV.

COMM (ENV) added that the draft report is currently being revised and will soon be available for the public.

5. UK CCS DEMONSTRATION COMPETITION

The UK Department for Business, Enterprise and Regulatory Reform (BERR; Ms Kate PORTER) presented the UK CCS Demonstration Competition. BERR highlighted the importance of CCS for the UK and international energy and climate change objectives. Therefore the government decided that the next step in developing CCS would be to test the full CCS chain at commercial-scale. The UK industry has developed a range of potential CCS projects. After commissioning an engineering study to investigate cost and feasibility of these projects in December 2006, the UK announced that it would hold a competition to select a CCS project to support – the competition was launched in November 2007. The UK is willing to provide, if needed, up to 100% of capital and operating costs of CCS elements of the project. The rational for using a competition was that significant investment by UK government will help ensure value for money and stimulate innovation. In addition, the UK is aware of several potential projects and believes that competition for funds should deliver the best value project. The objective of the UK CCS demonstration project is to: (1) deliver successful demonstration of full chain of CCS technologies on a power plant at commercial scale; (2) demonstrate technology that is relevant and transferable to key global markets. Other potential benefits include: (a) a reinforcement of international leadership on climate change; (b) helping to develop an effective regulatory framework; (c) reduce costs and risks of CCS; (d) build skills and supply chains; (e) make a contribution to the UK’s domestic CO2 abatement target (about 1Mt/y by 2014).

The UK CCS competition will fund one post-combustion coal-fired project of commercial-scale (at least 300MW), with a full CCS chain for offshore storage and operational by 2014 (with possibility of support for phased-in approach to capture. The pre-qualifying phase, where candidates are being assessed on technical capability and financial robustness (not their project), ended 31 March 2008 and the competitive phase will be entered in May 2008 (3-5 bidders invited with series of staged discussions and likely a couple of iterations before submitting final bid).

A preferred bidder is to be named by May/June 2009. The UK recognises the need for state aid for CCS projects as explained in the Commission CCS Communication (Environmental Guidelines ((87(3) (b) and 87(3) (c)) seem the most likely route) and is currently engaged in informal discussions with the Commission to ensure smooth approval process. With regard to the regulatory framework for the demonstration project, most CCS issues are covered under existing UK regulations. The UK will be consulting on EU directive and detailed licensing arrangements shortly. Several deployment issues still need to be resolved (incentives, infrastructure, skills and capacity). The UK stressed the need for other MS to table similar support schemes as soon as possible.

Discussion:

POLAND asked whether UK is considering offering state aid to CCS demonstration project, possibly under the Renewable Obligation.

BERR responded that certificates could be a possibility if the demo project proved this solution sound (15 years for demo project with combination of up-front payments and elements of follow-up payments).

EURELECTRIC asked why BERR has excluded both pre-combustion and oxyfuel technologies from the competition.

BERR explained that oxyfuel is in fact being considered as a post-combustion technology and therefore included. Pre-combustion, on the other hand, has been excluded as the UK believes post-combustion to be a more promising technology with wider applicability worldwide, but also within the UK.

COMM (JRC) asked for more details on why the UK has decided to pursue offshore storage options only.

BERR referred to the uncertainty of onshore storage options being available/ready in time due to the complex and strict land issue regulation in the UK.

COMM (ENV) asked how many projects are registered in the current UK competition. In addition, COMM asked for clarification of the storage gap mentioned in the presentation.

BERR replied that it was unable to disclose the number or names of bidders in the competition – although RWE and EON have recently made public announcements. In addition, BERR explained that the gap refers to a regulatory gap (not a storage capacity gap).

COMM encouraged MS to follow UK line and support CCS demonstration projects, particularly those countries relying heavily on coal.

6. NEW EUROGAS PUBLICATION ON THE ROLE OF NATURAL GAS IN THE SUSTAINABLE ENERGY MARKETS

EUROGAS (Mr Jean-Marie DEVOS) briefly presented its new publication “The Role of Natural Gas in a Sustainable Energy Market”. EUROGAS welcomes the EU Commission’s January 2008 package on renewables and advocates that in the current inter-institutional debate on energy and climate change, natural gas can make a major contribution to reach Kyoto targets. As such, EUROGAS has developed a position paper to outline its views on this topic; the publication is complemented by a brochure that was made available to the audience (and is also available on the EUROGAS website).

EUROGAS supports the Commission’s aim to combat climate change by introducing sustainable ways of meeting Europe’s future energy needs, within a competitive gas (and electricity) market. Gas is the cleanest of fossil fuels, controllable and efficient, in distribution and use. It already plays a positive role in environmental terms by displacing more polluting forms of energy used in power generation, heating and transport. Through its use in Combined Heat & Power production, in new applications and in combination with renewables, it will continue to offer major environmental and technological advantages.

However, while renewables should be encouraged, these should not be seen as a simple substitute for natural gas. Given its strong environmental advantages natural gas must not be overlooked in working towards a sustainable energy market andshould remain a central part of Europe’s energy mix up to and beyond 2020. It is furthermore important to ensure energy diversity within a stable decision-making framework.

Discussion:

COMM acknowledged the important role that natural gas will continue to play in Europe’s sustainable energy mix over the next decades. COMM also underlined that its role needs to be considered realistically, i.e. it would be for example economically and politically hardly possible to replace the entire EU coal fleet by gas capacity.

7. ANY OTHER BUSINESS

UPEI expressed concerns about the relationship between the Commission and the IEA taking into consideration their paper on CCS send to G8 Presidency and worried about whether the two institutions are cooperating or competing in their work on CCS.

COMM emphasised the complementary, rather than competitive, roles of two institutions. As the IEA has a broader membership base than the EU its discussions are understandably much broader.

COMM (RTD) further added that the Commission is involved in the joint- EIA/CLSF task-force to give recommendations to the G8 meeting in June 2008 with inputs provided in line with general EU policies.

NORWAY added that the IEA/CLSF was asked during Gleneagles to organise a workshop on CCS during the next G8 meeting.

WORLD COAL INSTITUTE (WCI) reminded the members of an important opportunity this year to try to include CCS under the Kyoto Protocol/CDM and encouraged them to put in a submission by 16 June 2008. As the WCI believes that it would be important for CCS to be included in the CDM it has drafted a submission for this process and offered to share it with other members (available from the Cleantech and UNCC websites). WCI furthermore stressed that the sizeable opposition to including CCS under the CDM (Brazil, India and Small Island States) should not be underestimated.

IRELAND announced its plans to establish a full-scale 300 MW CCS demonstration project by 2015.

The Commission informed that the next meeting of the SFF WG is planned to take

place before the summer. The date will be confirmed soon.

Source: European Commission, DG TREN, Directorate C (coal&oil), document available in PDF format.