€9bn for Low Carbon Industrial and Power Projects

€9bn is to be made available to support innovative low carbon industrial and power projects across the EU in a funding round called NER400.  This will be open to Carbon Capture and Storage (CCS), low carbon innovation in industrial sectors and renewables.  The emphasis on industrial applications, in addition to utility power generation, creates significant new opportunity for high carbon industry to reduce emissions whilst gaining significant financial support.  Early preparation of industrial CCS and low carbon project concepts and preparation in advance of the funding launch will be key to a successful submission.  

NER400: Coming Soon

The EU announced on Oct 23rd 2014, the creation of a new funding round for low carbon projects, “NER400”.  The programme will sell 400million EU carbon allowances to raise funds, estimated to raise €9bn, for Carbon Capture and Storage (CCS), “low carbon innovation in industrial sectors” and  renewable energy projects.  The announcement also included the potential for funding to “small-scale projects”.  The precise meaning of “low carbon innovation in industrial sectors” and “small-scale projects” is likely to remain unclear until the EU develop their thinking.  At this stage the launch date for proposals also remains unclear, although funding is likely to be available in the 2020s; which given the lead time for CCS and industrial projects, suggests action will be required quite soon.

NER400 could raise over €9bn on the assumption of a carbon price of €23/tonne, based on a forecast made in August 2014 by Thomson Reuters for the period 2021-2030.  Investment projects in all Member States will be eligible.  By comparison the current, NER300, programme raised €2.1bn for innovative renewable energy projects and one CCS project.

NER300: The Details

NER300 is a financing instrument managed jointly by the European Commission, European Investment Bank and Member States, so-called because Article 10(a) 8 of the revised Emissions Trading Directive 2009/29/EC contains the provision to set aside 300 million allowances (rights to emit one tonne of carbon dioxide) in the New Entrants’ Reserve of the European Emissions Trading Scheme for subsidizing installations of innovative renewable energy technology and Carbon Capture and Storage (CCS).  The allowances have been sold on the carbon market and the money raised, €2.1 bn, will be made available to the selected projects when they are operational.

NER300: In Two Phases

NER300 Call One involved the sale and allocation of 200 million carbon allowances and was launched in Nov 2010.  There were 13 CCS project submissions across all member states (including industrial projects); 7 of the CCS projects were from the UK.  However after a lengthy selection process, involving the potential for funding award to several UK projects, no CCS projects in any member state were awarded funding.  The key challenge was the requirement for member states to support projects with additional funding and carry certain risks, which member states, including the UK, were not ready to do.  For the UK, the timing was particularly unfortunate, as the EU’s NER300 decisions were being made as the first UK CCS Demonstration Competition reached an unsatisfactory conclusion with no agreement to progress a project being reached.

NER300 Call Two involved the sale and allocation of 100 million carbon allowances and was launched in April 2013.  There was only 1 CCS project submission across all member states in the EU – the UK’s White Rose project.  Subsequently the White Rose project was awarded funding of up to €300 million, in August 2014, although payments are understood to be made, only once the plant is operational.

What Next?

Industry needs to prepare project concepts: Whilst the EU finalises the approach for NER400, an opportunity exists for a wide range of existing and future emitters in the power and industrial sector to develop project concepts and plans to a level which would enable submission of a compelling funding application.  These could include industrial and power projects for CO2capture on existing facilities, new facilities with CCS and industrial sector low carbon innovation.  CCS projects will also require consideration of CO2 transport and storage aspects.

Government needs to align policy and timetable: In order to avoid some of the pitfalls of NER300, DECC will need to develop policy support for industrial CCS and create a process timetable which enables UK projects to gain NER400 support, with member state backing as required.

 

This article was written by Sam Gomersall.

Written by Pale Blue Dot Energy

Management Consultants for the Energy Transition, delivering support in three key areas: 1. Carbon Capture and Storage 2. Oil and Gas Transition 3. Emerging Energy Systems

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