accelerating low carbon industrial growth through ccus ... d5.6.1 commerci… · 1.2.1 theme 1:...

ACT ALIGN CCUS Project No 271501

This project has received funding from RVO (NL), FZJ/PtJ (DE), Gassnova (NO), UEFISCDI (RO), BEIS (UK) and is cofounded by the European Commission under the

Horizon 2020 programme ACT, Grant Agreement No 691712

Accelerating Low CarboN Industrial Growth through

CCUS

Deliverable Nr. D5.6.1

Commercial methodologies for early CO2

cluster development and expansion

Dissemination level Public

Written By Justus Andreas, Bellona

Ward Goldthorpe, Sustainable Decisions Limited

Lionel Avignon, Sustainable Decisions Limited

Date: 07/07/2020

Checked by WP5 Leader Lydia Rycroft (TNO) Date: 23/07/20

Approved by the coordinator Peter van Os (TNO) Date: 24/08/20

Issue date Date: 24/08/20

Document No. Issue date Dissemination Level Page

ALIGN-CCUS D5.6.1 Commercial methodologies for early CO2 cluster development and expansion.docx 24/08/2020 Public 3/68

This document contains proprietary information of the ALIGN CCUS Project. All rights reserved. Copying of (parts) of this document is forbidden without prior permission.

Table of Contents

1 ASSESSMENT OF WP5 CASE STUDY COMMERCIAL METHODOLOGIES ........................................ 5

1.1 INTRODUCTION ..................................................................................................................................... 5 1.2 KEY THEMES IMPACTING INVESTMENT AND COMMERCIAL MODELS ........................................................... 5

1.2.1 Theme 1: strategic rationale for CCU/CCS for cluster and sectors ........................................... 5 1.2.2 Theme 2: investment risks and investment barriers .................................................................. 6 1.2.3 Theme 3: market development .................................................................................................. 6 1.2.4 Theme 4: preferences for risk mitigation/risk allocation ............................................................ 6 1.2.5 Theme 5: public/private sector collaboration ............................................................................. 6 1.2.6 Theme 6: cluster competition and phasing ................................................................................ 7 1.2.7 Theme 7: financing structure and funding model ...................................................................... 7 1.2.8 Theme 8: societal and social acceptance .................................................................................. 7

1.3 SYNTHESIS OF KEY THEMES ACROSS CASE STUDY METHODOLOGIES ....................................................... 8 1.3.1 Theme 1: strategic rationale/system perspective ...................................................................... 8 1.3.2 Theme 2: investment risks and investment barriers .................................................................. 8 1.3.3 Theme 3: market development ................................................................................................ 10 1.3.4 Theme 7: funding model .......................................................................................................... 10 1.3.5 Theme 8: social and societal acceptance ................................................................................ 10 1.3.6 Missing themes ........................................................................................................................ 11

1.4 ADDRESSING INVESTMENT BARRIERS FOR DEPLOYMENT OF ALIGN CASE STUDIES ................................ 12 1.4.1 Investment barriers by country ................................................................................................ 12 1.4.2 Collaboration to overcome investment barriers ....................................................................... 13

2 PRACTICAL TESTING OF CO2 TRANSPORT AND STORAGE DEVELOPMENT MODELS USING WP5 CASE STUDY DATA .............................................................................................................................. 14

2.1 INTRODUCTION ................................................................................................................................... 14 2.2 LESSONS LEARNED FROM ELEGANCY AND ALIGN CASE STUDIES ...................................................... 14

2.2.1 Case study scope and structure .............................................................................................. 14 2.2.2 Generic lessons from stakeholder engagement on deployment of infrastructure for decarbonisation of industrial clusters ...................................................................................................... 14

2.3 RECOMMENDATIONS FOR SELECTION OF CO2 TRANSPORT AND STORAGE DEVELOPMENT MODELS ......... 19 2.3.1 Phased development ............................................................................................................... 19 2.3.2 Full system analysis ................................................................................................................. 19 2.3.3 Selecting the business model - use of a risk sharing approach .............................................. 20

3 GENERIC METHODOLOGY FOR THE ASSESSMENT OF CCUS DECARBONISATION PATHWAYS FOR EUROPEAN INDUSTRIAL REGIONS ................................................................................................... 21

3.1 INTRODUCTION ................................................................................................................................... 21 3.2 METHODOLOGY: ASSESSING DECARBONISATION OPTIONS, REQUIREMENTS AND PATHWAYS ................... 21

3.2.1 Cluster business context definition .......................................................................................... 21 3.2.2 Addressing investment barriers and risks: building the framework to begin transforming industry 26 3.2.3 Societal and social acceptance: generating support and overcoming misconceptions .......... 28

4 DECISION SUPPORT METHODOLOGY AND TOOLKITS ................................................................... 31

4.1 INTRODUCTION ................................................................................................................................... 31 4.2 ALIGN DECISION SUPPORT TOOL ...................................................................................................... 31

4.2.1 Summary .................................................................................................................................. 31 4.2.2 Emitter assessment matrix ...................................................................................................... 32 4.2.3 Policy assessment matrix ........................................................................................................ 33 4.2.4 Investment barrier assessment matrix ..................................................................................... 34 4.2.5 Capability assessment matrix .................................................................................................. 35




4.3 THE ELEGANCY METHODOLOGY AND TOOLKIT FOR BUSINESS MODEL AND BUSINESS CASE

DEVELOPMENT ............................................................................................................................................... 36 4.3.1 Summary .................................................................................................................................. 36 4.3.2 ELEGANCY business model development methodology ........................................................ 36 4.3.3 System and operational business models ............................................................................... 37 4.3.4 The relationship between business models and business cases ............................................ 39 4.3.5 Business case development and assessment ......................................................................... 39 4.3.6 ELEGANCY business case development toolkit ..................................................................... 41

5 CONCLUSION ......................................................................................................................................... 43

APPENDIX A. ALIGN WP5 CASE STUDIES PARTICIPANT INTERVIEW SUMMARIES........................ 44

A.1 WP5 TASK 5.1 THE UNITED KINGDOM INTERVIEW SUMMARY ............................................................... 44 A.1.1 Project Description ................................................................................................................... 44 A.1.2 Theme 1: Strategic Rationale .................................................................................................. 44 A.1.3 Theme 2: Investment Risks/Barriers ....................................................................................... 44 A.1.4 Theme 3: Market Development ............................................................................................... 45 A.1.5 Theme 4: Preferences for risk mitigation/risk allocation .......................................................... 46 A.1.6 Theme 5: Public/Private sector collaboration .......................................................................... 46 A.1.7 Theme 6: Cluster Competition and Phasing ............................................................................ 46 A.1.8 Theme 7: Financing structure .................................................................................................. 46 A.1.9 Theme 8: Societal and Social Acceptance .............................................................................. 46

A.2 WP5 TASK 5.2 THE NETHERLANDS INTERVIEW SUMMARY ................................................................... 48 A.2.1 Project Description ................................................................................................................... 48 A.2.2 Theme 1: Strategic Rationale .................................................................................................. 48 A.2.3 Theme 2: Investment Risks/Barriers ....................................................................................... 48 A.2.4 Theme 3: Market Development ............................................................................................... 49 A.2.5 Theme 4: Preferences for risk mitigation/risk allocation .......................................................... 49 A.2.6 Theme 5: Public/Private sector collaboration .......................................................................... 49 A.2.7 Theme 6: Cluster Competition and Phasing ............................................................................ 49 A.2.8 Theme 7: Financing structure .................................................................................................. 49 A.2.9 Theme 8: Societal and Social Acceptance .............................................................................. 49

A.3 WP5 TASK 5.3 GERMANY INTERVIEW SUMMARY ................................................................................. 50 A.3.1 Project Description ................................................................................................................... 50 A.3.2 Theme 1: Strategic Rationale .................................................................................................. 50 A.3.3 Theme 2: Investment Risks/Barriers ....................................................................................... 50 A.3.4 Theme 3: Market Development ............................................................................................... 51 A.3.5 Theme 4: Preferences for risk mitigation/risk allocation .......................................................... 51 A.3.6 Theme 5: Public/Private sector collaboration .......................................................................... 51 A.3.7 Theme 6: Cluster Competition and Phasing ............................................................................ 51 A.3.8 Theme 7: Financing ................................................................................................................. 52 A.3.9 Theme 8: Societal and Social Acceptance .............................................................................. 52

A.4 WP5 TASK 5.4 NORWAY INTERVIEW SUMMARY ................................................................................... 53 A.4.1 Project Description ................................................................................................................... 53 A.4.2 Theme 1: Strategic Rationale .................................................................................................. 53 A.4.3 Theme 2: Investment Risks/Barriers ....................................................................................... 53 A.4.4 Theme 3: Market Development ............................................................................................... 53 A.4.5 Theme 4: Preferences for risk mitigation/risk allocation .......................................................... 54 A.4.6 Theme 5: Public/Private sector collaboration .......................................................................... 54 A.4.7 Theme 6: Cluster Competition and Phasing ............................................................................ 54 A.4.8 Theme 7: Financing Structure ................................................................................................. 54 A.4.9 Theme 8: Societal and Social Acceptance .............................................................................. 54

APPENDIX B. REMOVING INVESTMENT BARRIERS FOR CO2 TRANSPORT AND STORAGE ......... 55

APPENDIX C. MITIGATING BUSINESS RISKS IN CO2 TRANSPORT AND STORAGE ........................ 56




1 Assessment of WP5 Case Study Commercial Methodologies

1.1 Introduction

ALIGN’s WP5 case studies cover a range of areas relevant to the deployment of CCUS and the decarbonisation of industry. Cases include the conversion of captured CO2 into synthetic fuels in Germany, the creation of an intermediate storage hub in Norway, the supply of H2 to pre-existing natural gas power plants in the Netherlands, and a shared CO2 transport and storage infrastructure serving two industry clusters in the UK. None of the ALIGN case studies was designed to investigate all aspects of delivering a complete new first-of-a-kind large scale CCUS infrastructure. The purpose of the work described in this report has therefore been to synthesise a simplified holistic commercial methodology that enables early stage assessment and decisions for embarking on the decarbonisation of an industrial cluster using CCUS technologies. This chapter summarises the data collected from ALIGN WP5 case study participants on cross cutting themes and commercial models for embryonic development of CO2 emissions abatement pathways in an industrial cluster. These themes have been identified from the overall work completed on the definition of business models within the ELEGANCY project1, which included joint stakeholder workshops with ALIGN participants and the EU Zero Emissions Platform, and from experience of development of CCS across Europe over the past 15 years. They are presented in section 1.2 below with the intention that they be used as guidance for stakeholder engagement meetings in other forums where the objective is to gain an understanding of what aspects of early CCUS development for an industrial cluster need to be addressed. The results of a series of informal interviews with the ALIGN WP5 case study participants have been collated and the main results are summarised in this chapter in section 1.2. Section 1.3 then provides an overview of the recommended focus areas for each case study in order to overcome the investment barriers that would prevent them progressing to actual deployment. The individual interview summaries are provided in Appendix A. This work is aimed to support policy- and decision-makers, who are in the process of delivering climate infrastructures. It therefore pre-supposes a general knowledge surrounding the discussed issues.

1.2 Key themes impacting investment and commercial models

Commercial or business case methodologies need to include an assessment of barriers to investment from both public and private sectors. Investment barriers can usually only be removed by the government and its public sector authorities. Private sector capital will be able to flow only when such barriers are dealt with. Commercial methodologies also need to incorporate a structured approach to the factors that influence the investment decision-making context and political economy of the industrial region or cluster being investigated. This section describes the eight essential themes used to review the methodologies of the ALIGN case studies.

1.2.1 Theme 1: strategic rationale for CCU/CCS for cluster and sectors

This theme focuses on:

• understanding the extent of development of the strategic rationale of each case study/project; and

• understanding the investment barriers linked to the definition of the project and facilitate adjustment as necessary.

Discussion topics used as guidance for interview:

1 ELEGANCY Publications, 2020a, https://www.sintef.no/projectweb/elegancy/publications/

https://www.sintef.no/projectweb/elegancy/publications/




• What is your strategic rationale and vision for CCU/CCS for your cluster?

• How does it fit with the system decarbonisation? Competition or integration with other sectors?

• What are the main industrial sectors in the cluster? (chemical, refining, cement/steel, other…)

• What are the key drivers for CCU/CCS decarbonisation for each sector? How do they differ?

1.2.2 Theme 2: investment risks and investment barriers


• understanding the main risks and investment barriers for each cluster; and

• understanding which barriers relate to which sectors and which barriers are common across all sectors and need to be overcome for the whole system to be developed.


• What do you think are the risks and main investment barriers to CCU/CCS cluster development? (commercial/market risks, technical/operational risks, political/policy/social risks, outcome risks)

• Sectoral versus system risks and barriers: key commonalities and differences for each industrial sector. (for example: market uncertainty, international competition, technical complexity, age)

1.2.3 Theme 3: market development


• understanding the main market failures for CCU/CCS, for hydrogen and for low carbon industrial products and discussing how those could be addressed; and

• Discussing the value of hydrogen as a new system-wide carbon free source and its role in industrial decarbonization and in facilitating the deployment of CCS infrastructure – versus the deployment of individual decarbonization solutions for each sector/plant.


• How to address market failures for CCU/CCS as waste management service? o for the whole cluster and for each sector.

• Market enabler - discussion on role and value of market enabler for CCU/CCS.

• Role of hydrogen as carbon free energy source vs individual sectoral decarbonisation. 1.2.4 Theme 4: preferences for risk mitigation/risk allocation


• the potential options to remove the investment barriers, investment risks; and

• the allocation of responsibility between public and private sector.


• Discussion on number of investment barriers. For example: storage liability, cross chain default, industrial downtime, international competitiveness.

• Discussion on options/preferences to address them, allocation between private/public sector. 1.2.5 Theme 5: public/private sector collaboration


• the extent of collaboration between the public and private sector in the decarbonisation of the cluster; and

• discussing the value of collaboration and how to foster it.





• What is currently happening regarding collaboration?

• How to facilitate engagement and develop joint solutions

• Regional and cross-country collaboration 1.2.6 Theme 6: cluster competition and phasing


• how the government is fostering collaboration or competition between the clusters; and

• understanding whether phasing of development can be coordinated across clusters and whether this is beneficial to the overall system solution; and

• understanding the main bodies managing this collaboration and/or competition.


• How do you define an industrial cluster? Difference between internal and external perception.

• Advantages and risks of cluster competition.

• Coordination within and with other clusters.

• How to phase development across cluster and nationally. 1.2.7 Theme 7: financing structure and funding model


• the funding models available for the industrial cluster; and

• the extent of public sector required; and

• the differences between the funding models across multiple sectors and across the CCU/CCS chain.


• Any preferences for financing? public/private sector?

• Differences between Capture and Transport& Storage? Individual subsidies vs central funding. 1.2.8 Theme 8: societal and social acceptance


• the differences between societal acceptance on a large scale and social acceptance of activities at a local level; and

• the moral hazard of continuing to subsidise fossil fuel use with benefits to the oil and gas industry;

• societal education; and

• the need for public support of business cases and their supporting narratives.

Discussion topics used as guidance for interview: • What is the region’s/country’s perspective on the project and further expansion?

• How does the public perceive the fossil industry and role in CCS for the project?

• What is the level of understanding of CCS and its relevance to industrial region decarbonisation?




1.3 Synthesis of key themes across case study methodologies

The ALIGN WP5 case study interviews were based on the themes identified above and resulted in the following main characteristics for each cluster. 1.3.1 Theme 1: strategic rationale/system perspective

• Germany

o This case study is focused on CCU as a contribution to decarbonisation of North Rhine-Westphalia by capturing CO2 and converting into synthetic fuels (DME or OME).

o The strategy in this case study is to use the significant geographical concentration of CO2 emissions and existing quality shared infrastructure (pipeline, heating networks, electricity grid) as well as possibilities of integrating with renewable energy technologies.

• Norway o The case study is focused on the design consideration for a local hub/intermediate storage

facility near one of the industrial clusters in the Grenland region. o Due to low volume of in-country emissions and the geographical location of the main storage

reservoirs, hubs are considered the most cost effective and flexible solution for local decarbonisation. A number of small hubs may be developed to combine emissions locally before being transported to a larger subsurface reservoir.

o The strategic rationale is built on the use of large storage reservoirs anchored by high volumes of CO2 related to energy exports (natural gas or hydrogen). Those reservoirs would have sufficient capacity for local emissions to be stored cost effectively.

• Netherlands o The objective in this case study is to supply H2 at scale to existing natural gas fired power

stations which can run on high concentration of H2 blending and to a number of strategic industrial users (refinery and petrochemicals).

o Industrial users have favourable characteristics: ▪ decarbonisation alternatives are not attractive (high temperature heat, number of

emissions points) ▪ there is a secure long-term future for their products ▪ scale: there can be a significant impact on emission reduction ▪ complexity: ease of transition by converting existing boilers and use of existing

infrastructure corridors which can be expanded o Geography: proximity of offshore CO2 storage location. o Aligned with Dutch policy to limit use of CCS to avoid fossil fuel lock-in.

• UK o The case study is focused on transport and storage of CO2 from the Teesside and

Grangemouth industrial clusters. o The rationale is to focus on large industrial clusters with large-scale volumes of CO2 and to

make use of the coastal location, proximity of large-scale offshore storage reservoirs (with good technical definition) and opportunities for synergies with other clusters on the east of England coast.

1.3.2 Theme 2: investment risks and investment barriers

Generally, industrials are willing to take on responsibility for the physical capture of emissions in their facilities but do not want to be responsible for CO2 transport and storage or for the provision of alternative clean fuels such as hydrogen.

• Germany: o It is important to recognise that each industry has different strategies which impact on their

long-term CO2 emissions and as a consequence each will have different risk profiles for viability of investment in large scale synthetic fuel plants.




o There is significant uncertainty on the future of the final product resulting from the use of CO2, i.e. the role of and market for synthetic fuels, and the availability of alternative processes to reduce process emissions that are more attractive for emitters.

o North Rhine-Westphalia has many different industries producing emissions from processes and from heat. These industries would use different technologies in order to reduce emissions in fit-for-purpose applications so there is no one-size-fits-all for investment decision making. For example, in paper and wood, emissions result from the large amounts of heat required and heat generation can be substituted with fuel switching. On the other hand, emissions from cement manufacture will be more difficult to eliminate with approximately 60% residual emissions originating from the calcination process itself even with best available technology

o Scalability: ▪ CCU to make synthetic fuels (DME) requires large amount of electricity which limits

the use of the technology; ▪ Lack of certainty on long term deployment pathway.

• Norway o Volume commitment: a major barrier for industrials is to commit to a specific CO2 volume. o Market risk: uncertainty on future demand for product

▪ Yara (fertilizer company) backed out of the ALIGN project due to the uncertainty on capture for their Norwegian plant – this was related to market risk on future product demand and the age of their plant.

o Technology risk: the risk of potential changes in alternative technologies for capturing CO2.. o Scalability:

▪ Low number/size of hubs combined with limited industrial application as a result of the sector size limits the value of CCS in Norway.

▪ Cost effectiveness is achieved through import of emissions from other countries. o Full chain risk:

▪ This risk is increased with low volumes and low number of emitters/sinks. ▪ Ship transport gives more flexibility in terms of chain (volume and destination).

• Netherlands o Full chain risk:

▪ Need for security regarding the long-term hydrogen supply contracts with users. ▪ Need for coordination with T&S. Risk may be mitigated by the creation of a separate

body who will offer T&S services.

• UK o There is a lack of investment rationale for decarbonisation for industrial clusters.

▪ The cost of carbon capture is excessive especially when considering the market risk (uncertainty on future demand for product), lack of a market pull for decarbonised products, and complexity both operationally and commercially.

o Current government approach creates a perception that cluster decarbonisation is dependent on large government subsidies to specific plants/clusters.




1.3.3 Theme 3: market development

In general, the cost of the CCS chain is unacceptably high for industry compared to the potential product value:

• Norway: o Cement: customers may pay an additional ‘green premium’ in the long-term but not

sufficient to justify current investment. o Lack of premium for clean (low associated emissions) products impacts on the ability for

companies to create new markets organically.

• UK: o Chemicals: internationally traded commodity products, interest from suppliers for green

credentials on plastics but no premium paid. o Each industrial customer has different investment drivers and risks for decarbonisation

dependent on their context (market, technology, age of plant). The present and potential future value of manufacturing decarbonised product varies between each plant but is insufficient to justify scale, long term risk and complexity of investing in carbon capture.

• Netherlands and Germany: o Market Development was not included in the case studies’ project scope.

1.3.4 Theme 7: funding model

There is a lack of a clear funding model for CCUS deployment across all the ALIGN case studies:

• Netherlands: new FiT tariff is being rolled out but will be based on competitive bids.

• UK: No clarity on long-term funding models and the competition between clusters. o Multiple projects are trying to compete for government interest. o Industrial CCS is dependent on large subsidies/grants to specific plants/clusters. o Potential Contract for Difference (CfD) model for power plant with CCS. o Potential Regulated Asset Base model for T&S but there is significant complexity on

resolving how to allocate the costs to users and how to socialise them widely.

• Norway: No clarity on funding model. o Cluster funding model is dependent on large subsidies to industrials for implementation.

There is no indication of any potential solution. o System funding model appears to be dependent on the use of the T&S infrastructure by

other countries, and on financial support from European countries.

• Germany: o Funding was not included in this case study’s project scope.

1.3.5 Theme 8: social and societal acceptance

Social Acceptance / Consumer Behaviour have a strong impact on the potential for uptake and market demand to drive technology deployment. Customer behaviour can be unpredictable and is often based on perceptions.

• Germany: o Even though biofuels are available at lower price in petrol stations, the public has not taken

up buying the product.

• Netherlands: o One of the key questions is how to communicate the continued use of refineries and therefore

of fossil fuels? There needs to be an understanding that blue hydrogen is a stop gap solution until green hydrogen, and will provide an opportunity to create the initial infrastructure.

o There is a lack of awareness of CCS technology in general (ALIGN WP6)

• Norway: o There is a different perception of moral hazard because most of Norway’s emissions are

exported to other countries but the oil and gas sector is considered necessary as a strong economic contributor.

• UK: o There is a lack of public awareness of CCS technology even within industrial clusters.




o The public is unlikely to support the handing out large subsidies for companies responsible for pollution, i.e. industrial polluters and oil and gas companies.

o The driver for decarbonisation is climate change rather than clean air. Over the past decades, significant work has been carried out successfully to improve air quality in industrial regions.

1.3.6 Missing themes

With the exception of the UK, case study methodologies have generally not addressed the following themes:

• Theme 4: Risk mitigation and allocation

• Theme 5: Public/private sector collaboration

• Theme 6: Cluster competition and phasing These themes are therefore not covered in this report as no comparison or synthesis is possible.




1.4 Addressing investment barriers for deployment of ALIGN case studies

1.4.1 Investment barriers by country

To achieve deployment of the projects investigated in the WP5 case studies, each country will need to focus on removing investment barriers as indicated by the colour coding in the table below.

WP5 Perspective

Investment Barrier NL Germany Norway UK Romania

Missing System Perspective/Business Case Strategic Rationale

N/D

Missing long term markets for low carbon products (and/or H2) to justify cost of large-scale deployment of technology

N/D

Missing H2 and CO2 transport and storage infrastructure

N/D

Limitations on scalability: single facility, single industrial sector, risk of competition from alternative technologies

N/D

Unacceptable Full Chain Risk (Intra-chain counterparty performance)

N/D

Missing funding model for large scale deployment

N/D

Missing societal acceptance and unacceptable moral hazard of fossil fuels use

N/D

Table 1-1 Investment barriers requiring removal for each case study.

N/D = no data

KEY

Barrier

No barrier




1.4.2 Collaboration to overcome investment barriers

For each investment barrier relevant to each WP5 case study the collaborations between the principal actors required to remove that barrier are shown in the table below. These collaborations are highlighted by the coloured cells corresponding to the actors who are recommended to jointly work together on mechanisms and activities for removing the particular barrier.

Principal Collaborations for Barrier Removal

Investment Barrier Government & Public

Authorities

Developers & Operators

Finance & Insurance

Need for System Perspective/Business Case Strategic Rationale


Missing H2 and CO2 transport and storage infrastructure


Full Chain Risk - Intra-chain counterparty performance

Need for funding model for large scale deployment

Societal acceptance and moral hazard of fossil fuels use

Table 1-2 Recommended collaboration between actors for each investment barrier




2 Practical testing of CO2 transport and storage development models using WP5 case study data

2.1 Introduction

This chapter summarises the practical lessons learnt with regard to the major drivers in the development of investable business models for transport and storage infrastructure in the support of the decarbonisation of industrial clusters. These lessons are distilled from the practical engagement as previously mentioned with the stakeholders of both ALIGN and ELEGANCY case studies and with third parties during a number of joint ELEGANCY and ZEP workshops. Secondly, this chapter then provides a number of recommendations to accelerate the commercial deployment of such transport and storage commercial models. A more thorough application of these has been undertaken in the ALIGN UK WP5 case study.

2.2 Lessons learned from ELEGANCY and ALIGN case studies

This section focuses on the lessons learnt and limitations identified with regard to progressing the case study work defined in ALIGN into investable models for industrial decarbonisation. 2.2.1 Case study scope and structure

From the interviews and reviews of the scope of the case studies, a number of limitations were identified which risk driving the projects into “un-investable territory” from the perspective of their actual deployment:

• Most case studies are defined and resourced from mainly a technical perspective or from a theoretical business perspective, rather than a practical business perspective. The actual development of investable business cases which can be financed and the major deployment themes, defined in section 1.2 of Chapter 1 are not included in the scope of most case studies.

• The definition of most case studies lacks flexibility to adapt to changes in the main parameters (loss of stakeholder for example) or in the light of new investment barriers which may be identified.

• The projects are generally articulated around a specific industrial cluster/sector, a specific technology or a sponsor, and therefore lack a requirement to understand how it will fit within an overall system strategy for the country or region.

• A key limitation of these kinds of case studies was identified to be the type and number of stakeholders involved in the project. For example, without the involvement of government representatives the feasibility of creating new (low carbon) markets is highly uncertain.

With regard to the approach and structure of the case studies, the following additional limitations were identified:

• Process: o The case studies do not follow a rigorous process to address the major themes identified. o The case studies do not follow a structured process to identify major risks/investment

barriers and potential mitigations.

• Resourcing: the project resourcing is primarily technically focussed and generally do not include resources to understand the business perspective and work through the non-technical investment barriers.

2.2.2 Generic lessons from stakeholder engagement on deployment of infrastructure for decarbonisation of industrial clusters

2.2.2.1 How to “satisfy” industrial users from a T&S perspective?

Overall, industrial users have a number of key hurdles to overcome before deep and long-term decarbonisation of their activities can become an investable business proposition.




• Responsibility for transport and storage (T&S) service provision: o Allocation of T&S responsibility is outside the role of industry. Industrial companies want

the service to be provided by third parties and to meet their key technical and commercial requirements. They want to focus on their core business activities and on managing the complexity of selecting and implementing and integrating carbon reduction technologies with their business.

o In the Netherlands, Gasunie and in Norway, Equinor are taking responsibility for transport and storage for all potential users.

• Cross chain risk: o Users need confidence in the timing of infrastructure to align with operational start of

carbon capture facilities. o Users need confidence that there will be no impact on operational performance of the

industrial plant. o Users need guaranteed availability of infrastructure.

• Cost: o Users need long term certainty on the T&S costs. However, it must be noted that those

costs represent only circa 10% of overall decarbonisation costs and economies of scale do not make a significant difference to the overall economics and the business decision to decarbonise for industry

2.2.2.2 The complexity of industrial carbon capture

A number of limitations have been identified regarding the complexity of industrial carbon capture and are summarised below. These limitations relate to the specific nature of the barriers and issues which need be addressed for each industrial sector and are likely to make industrial carbon capture a targeted solution for industrial decarbonisation rather than a fit-for-all solution for industry. It is clear from the case studies that industrials struggle with justifying the heavy long-term investment required for decarbonisation combined with the uncertainties, e.g. lack of premium for low carbon products, uncertainty of market demand for the products, and the potential impact on business operations from integrating CCS. Many industrials will require significant government subsidy to make such decisions with an uncertain frame of reference and therefore risk that the government may want to withdraw its support in the case where there is a change to their business. These limitations impact all industrial sectors and require complex and custom technical, commercial, financial and regulatory solutions need to be defined and implemented by the public and private sector in close collaboration. Such a case by case approach impact the overall potential to achieve economies of scale from industrial carbon capture and increase the effort and time to find and implement such solutions. There are two aspects to this complexity, technical and commercial:

• Technical complexity o Complexity of selecting the appropriate carbon capture technology for each industrial

sector and manufacturing process. Technical studies have highlighted that different capture processes work better for different industries.

o Complexity of engineering the actual carbon capture process to integrate with manufacturing process and need to customise a process for each plant.

• Commercial and funding complexity o There is a need to future proof the investment decision for both the public and private

sector which clashes with the intrinsic market and technology uncertainty which is specific to each industrial sector in each region

o Industrial users are exposed to industry specific market uncertainty on both the demand for their products, product type and the price for such a product. The development and maturing of the market for low carbon products will drive certainty for industrials, but this stage remains far away and stable and credible policies are needed to underpin such a development process. But market development may also drive the increase in reuse and recycling of materials reducing overall footprint and impacting overall product demand to some unknown extent.




o Industrials are also exposed to the risk of technology change for their manufacturing processes, this is applicable whether decarbonisation will be best achieved through new clean manufacturing processes, new low carbon energy sources or through carbon capture.

2.2.2.3 How to “anchor” the initial infrastructure investment?

Initial infrastructure investment requires long-term stable strategic “anchors” with the following characteristics:

• Scale o a minimum volume demand for the service is necessary to achieve the necessary scale

for the infrastructure deployment which will deliver T&S at a competitive and acceptable cost for the users and for the government. As it was noted in the previous section, it is difficult to achieve this from the industrial sector.

• Optionality o infrastructure must be deployed with sufficient optionality to deal with the uncertainty on

CO2 supply profiles, and especially the potential increases in volume from the cluster and from geographical outreach into other clusters and regions.

o This optionality is necessary to deliver an overall infrastructure at the best overall system cost and protect the government from the risk from stranded assets and from future cost.

• No regrets o selecting the right “anchor” sector will avoid locking in a fossil fuel-based technology and

facilitate acceleration of low carbon technology deployment.

It is difficult to achieve this by relying solely on industrials due to the complexity of CCS technologies and all the other risks highlighted above, in summary:

• It is hard to achieve the sufficient volume certainty required by infrastructure developers/investors to build the necessary infrastructure capacity to realise economies of scale from industrial emitters.

• There is a risk for governments to lock-in polluting manufacturing technologies with carbon capture subsidies when there is uncertainty around recycling of carbon-based end products, and the potential creation of new low carbon alternatives to replace existing products and processes.

• Anchoring infrastructure on industrials removes the optionality for the development of new low carbon fuels and low carbon manufacturing processes.

• Industrial emitters can contribute to initial anchoring of the infrastructure, but their participation requires careful selection. For example, in the Netherlands, refineries are strong and stable emitters because there is lack of alternatives for decarbonisation, good volumes and a strong long-term market demand for their products. In this case, refineries are therefore well positioned to make initial infrastructure investments.

2.2.2.4 Making transport & storage infrastructure choices

Designing the right transport and storage infrastructure to support cluster decarbonisation is specific to the context of each cluster. Decisions must be made with an understanding and assessment of cluster specific characteristics, broader understanding of the characteristics beyond the industrial cluster and of the overall strategic drivers at cluster and system level (such as societal acceptance, economic value of industry, perspective on energy security, etc.). Each region has its specific technical and geographical storage characteristics which influence the final development model for T&S for that industrial cluster: large storage reservoirs, small complex reservoir, no storage, existing infrastructure etc.

• UK




o There are numerous, large and well-defined CO2 stores offering multiple initial and step-out/back-up storage options in the UK sector of the North Sea and in the East Irish Sea.

• Norway o There are also numerous, large and well-defined stores offering multiple initial and step-

out/back-up storage options in the Norwegian sector of the North Sea.

• Netherlands o There are numerous small depleted or near depleted gas fields and a small number of

less well-defined potential aquifer stores.

• Germany o There are no notable storage options. o Access to storage options in Norway.

These characteristics have an impact on the preferences for the investment proposition and the design of the associated transport and storage network, which may include:

• Storage in-country or in another country.

• Transport by pipeline or shipping. Shipping offers more flexibility for small hubs due to less initial investment being required and greater volume flexibility with an increased number of ships.

• Continuing the use and dependence on fossil fuel or substitution with another low carbon energy source.

In addition, based on lessons learnt from the UK case study in ALIGN and the UK CCS commercialisation programme, the impact of the potential T&S network configuration and likely evolution over time on the regulatory and commercial complexity must be considered upfront. For such phased development, the technical, regulatory and commercial complexity should be minimised for the first infrastructure deployment. Table 2-1 below illustrates the relationship between commercial and regulatory complexity and various transport and storage options and configurations. Understanding the nature of this complexity helps influence and support the decisions with regard to the configuration of the first infrastructure.

Regulatory Complexity

Commercial Complexity

Pipelines

Single Import to Cluster Low Medium

Multiple Imports to Cluster Low High

Single Inter-Field Low Medium

Multiple Inter-Field Medium High

Storage Sites

Single Aquifer Medium Medium

Single Aquifer subdivided with multiple injection sites

High High

Single Depleted Field Low Medium

Multiple Sites – one region Medium High

Multiple sites – multiple regions Medium High

Shipping

Single Onshore Facility Low Low

Multiple Onshore Facilities Medium Medium

Single Offshore Facility Low Medium

Multiple Offshore Facilities Medium High

Table 2-1 Complexity in phased development of offshore CO2 transport and storage




2.2.2.5 Funding T&S infrastructure

The following key points have been extracted from interviews and workshops conducted during ALIGN:

• There is a direct relationship between the funding model for T&S and the funding model for industrial decarbonisation. T&S infrastructure will be used in most cases by multiple users (industry, power, hydrogen production, etc.) and understanding it will be funded and how costs will be allocated between all the users will impact on the funding model for the industrials.

• There needs to be clarity on the articulation of how funding will be allocated between industrial clusters. This funding strategy impacts the definition of the investment propositions and the proposed T&S network configurations. A competitive approach between clusters and regions, such as the UK and the Netherlands, encourages clusters to work in isolation. This supports individual company sponsorship and individually funded projects as they risk losing funding and economic advantage to other regions/cluster is they collaborate. A better approach is to cooperate with each other to develop the best and most cost-effective system approach.

• There is a need for the clear articulation of government funding strategy for industrial decarbonisation. Without such clarity, industrials cannot make investment decisions.

2.2.2.6 Societal acceptance

From the interviews across ALIGN and ELEGANCY, the following key points on societal acceptance can be summarised:

• Societal acceptance is a critical factor in the final investment decision given the initial infrastructure deployment will require significant public contribution. Therefore, lack of or insufficient societal acceptance is a major investment barrier which must be addressed.

• There is generally a lack of awareness of CCS in most countries and it is easy to confuse the lack of awareness with a lack of acceptance given the public opposition that can arise from both.

• Addressing the risk of locking in fossil fuel use (by deploying CCS on fossil fuel-based technologies and processes) and defining a clear pathway away from fossil fuel is critical in most countries. Government policies can drive the development of the right projects and contribute to addressing such concerns as demonstrated in the Dutch case study.

• The public perception of CCS and societal acceptance is influenced by the role of the oil and gas industry in each national economy, especially whether the nation is an importer or exporter.

• There is a risk of regional and national governments being influenced by individual company sponsored projects which do not fit with the societal drivers.




2.3 Recommendations for selection of CO2 transport and storage development models

2.3.1 Phased development

Appendices B and C contain expert recommendations from the EU Zero Emissions Platform working group supporting the ELEGANCY and ALIGN projects on dealing with barriers and risks when selecting business and deployment models for CO2 transport and storage. The ALIGN case studies in the UK and the Netherlands have had a particular focus on how transport and storage networks might evolve over time in order to provide a phased expansion of infrastructure that matches capture profiles and infrastructure utilisation. While oversizing pipelines does not incur substantial cost penalties the same cannot always be said for the development and construction of offshore storage facilities and the associated cost of building multiple platforms, and wells etc. Furthermore, the studies have shown that operability conditions and storage site characteristics have a far greater influence on network evolution and investment decisions than the present value cost of the infrastructure.

The regulatory and commercial complexity of phased transport and storage development has already been highlighted in

Table 2-1. Because of the influence of technical system components on network evolution, business models need to take into account the current and future uncertainty in these components in combination with the risks that are generated by the regulatory and commercial complexity. The following recommendations can be made based on the results of modelling within the ALIGN case studies (the modelling results will be presented in other WP5 ALIGN deliverables). 2.3.2 Full system analysis

Investment, ownership and operation of the infrastructure all take place within a combination of the full energy system context and the region or industrial cluster decarbonisation context. Key considerations that need to be taken into account when examining the full system analysis are outlined below. These need to be incorporated in any business model selection for successful delivery of phased infrastructure expansion. 2.3.2.1 Key principles

• No regrets investments

• Ensure effective climate options are identified at each FID point

• Understand network operability requirements and the impact on ownership of facilities.

• Determine if regional coordination and management is required for optimal network evolution and the impact regional coordination would have on private ownership

2.3.2.2 Understand investment barriers

• End user (consumer or industry) market evolution

• Revenue uncertainty (private) or stranded asset (public)

• Storage performance risk and uncertainty

• Uncertainty regarding backup options. Do they exist for extending or moving storage into a separate structure and what is the implication on ownership?

• The uncertain securitisation of leakage liability associated with storage containment

• Uncertainty regarding intra-chain counterparty risk 2.3.2.3 System component analysis

Business model drivers also need to incorporate key system components both regarding scale and timing of infrastructure requirements. The key system components are given below alongside their main characteristics which impact the business model.




2.3.2.3.1 Supply profile

There are 2 main supply profile characteristics which impact the business model:

• Confidence in the supply volumes expressed as the probability allocation across multiple scenarios and the extent of the variations between the various supply scenarios. This uncertainty in the CO2 supply volume determines the revenue uncertainty for investors and the risk of stranded asset; and

• The shape of supply profile i.e. the pace of growth or whether the supply is stable.

2.3.2.3.2 Storage sites

The main reservoir characteristics which impact the business model are:

• the key technical characteristics and uncertainty/risk on key performance drivers

• the type of storage fields: single reservoir with multiple injection locations, multiple reservoirs, near locations, remote locations

• the type of ownership 2.3.2.3.3 Pipeline or shipping

The main transport characteristics which impact the business model are:

• the pipeline design (options)

• export and interfiled pipelines

• the comparative benefits and costs of shipping infrastructure versus pipelines 2.3.3 Selecting the business model - use of a risk sharing approach

The key considerations below are based on the work completed in ELEGANCY Work Package 3 on the development of business models2:

• Use of four risk allocation areas regarding allocation of risk between public and private sectors (Figure 2-1 below) based on scenario modelling conclusions and earlier system component analysis

• Application is required at various key investment phases and FID points

• Assessment of preferential public/private risk allocation of both risk and uncertainty

• Adaptable business models (in particular asset ownership and risk allocation)

2 Elegancy WP3 D3.3.3 Report, 2019,

https://www.sintef.no/globalassets/project/elegancy/deliverables/elegancy_d3.3.3_business-models_commercial-structures.pdf/






Figure 2-1 Principal components of risk transfer between the public and private sectors




3 Generic Methodology for the Assessment of CCUS Decarbonisation Pathways for European Industrial Regions

3.1 Introduction

European emission targets for 2030 and 2050 will require industrial regions to fully decarbonise (i.e. achieve net-zero emissions) by mid-century at the latest. For many industry branches, this transition will result in new value chains and processes that need to be developed and implemented. New resource inputs need to become available at scale and at competitive prices, and new low-carbon goods markets in which to sell industry’s new products. However, in the absence of clear regulatory frameworks, timely investments and close coordination between the public and the private sector, it is unlikely that this transformation will take place at the necessary pace and at the lowest possible cost. Industrial regions thus risk an exodus of fundamental job providers and sources of economic growth. Through their focused and detailed approach, the ALIGN case studies have shed light on a variety of case specific conditions and applications. In order to build on these findings and develop CCU and CCS projects at an industrial cluster scale, additional factors need to be evaluated that are represented in the outlined eight cross-cutting themes described in chapter 1. Based on the experiences of the ALIGN case studies and beyond, this section establishes a generic methodology to inform the decision-making process Europe’s industrial regions are facing as they evaluate their options to decarbonise. This methodology can act as a check list for clusters that want to identify which pre-conditions they meet as well as those which are crucial to be obtained.

3.2 Methodology: Assessing decarbonisation options, requirements and pathways

Based on the evaluation of the ALIGN case studies, this section identifies both issues of importance that have already been recognised and issues that have been somewhat neglected through the cases but are nonetheless crucial to implement CCS and CCU at scale in European industrial clusters. The goal is to provide a comprehensive approach along the eight themes that cover these issues and can be applied for future projects and industry regions in Europe and beyond when evaluating decarbonisation pathways around CCS and CCU. It is important to note that this evaluation assumes that there is a motivation to decarbonise, i.e. the rationale as to ‘why’ to decarbonise is not established as part of this report. 3.2.1 Cluster business context definition

Generally, industry clusters will have to follow an initial set of decisions based on their specific business context to develop preferences for decarbonisation. As depicted in Figure 3-1, the cluster specific factors interact with the energy system context as well as the strategic drivers to filter which technology routes are best pursued or even available depending on local preferences. This cluster business context definition includes:

• the assessment of existing physical pre-conditions for each technology route within the industrial cluster, be it CCS, Hydrogen or CCU. There are two crucial factors: the specific makeup of the industry within the cluster (section 3.2.1.1) and the geography of the industrial region (section 3.2.1.2);

• an assessment of the system context, i.e. how the cluster and its decarbonisation objectives fit within the broader energy system section 3.2.1.3; and

• an assessment of the strategic drivers for decarbonisation (section 3.2.1.4). 3.2.1.1 The makeup of the industrial cluster

For the different process industries CCS in combination with CCU, for minor shares of total available industrial CO2 emissions, as well as hydrogen, will be crucial. Their application will differ in scale depending on several external factors, such as type of industry and access to resources and therefore to each respective




technology. Carbon capture technologies are nevertheless at the core of decarbonising process industry as they have the potential to be implemented at steel, cement, and chemical plants alike. Hydrogen has a more targeted role to play, particularly for transforming steel and chemicals. Yet, the same CO2 storage that is required for direct industry emissions can again help regions to have early access to hydrogen at scale (through steam methane reforming (SMR) of natural gas together with CCS). Depending on respective industries’ presence in a given cluster, different technology focuses will take place, also in light of potential cooperation/ sharing of climate infrastructures between sectors. 3.2.1.2 Geography of industrial clusters

The location of industry regions affects the access to decarbonisation options and the commerciality around them. This applies to CO2 use and storage and to the supply of hydrogen. Industry clusters close to the coast in proximity to offshore CO2 storage and offshore renewable wind potential are in a generally advantageous position. As are those that can re-use existing fossil infrastructures, such as offshore CH4-pipelines, which can be retrofitted for transporting CO2 (see respective ALIGN analyses on the technical requirements of infrastructural re-use). For inland industrial clusters, access to onshore storage or to offshore storage via riverways and costal CO2 hubs will dictate the timely availability of CCS as a technology option. Issues of societal acceptance around onshore storage or CCS in general play a role as well. This will be discussed later. For Hydrogen, there is an opportunity cost to be paid regarding the use of renewable electricity to decarbonise the grid or to produce green hydrogen via electrolysis. Generally, regions with high renewable potential and low energy demand have strong drivers to invest in green hydrogen production simply due to the expected scale of demand as hydrogen pushes out unabated natural gas. Regions endowed with preferable conditions for green hydrogen production can either supply this as a feedstock in industry clusters without such preferable conditions, or they can attract industry investments into the region itself, e.g. new H2-based steel mills. If access to CO2 storage and the natural gas grid is available, then a local blue hydrogen production may become an alternative until a larger hydrogen market is established. An example would be for a steel producer to utilise its access to a regional natural gas grid to produce blue hydrogen on-site, thereby ensuring supply meets demand and justify the investment in a new H2-based steel mill. Similar to the case of green hydrogen, if certain regions have the conditions for CO2 storage and natural gas exploration, then producing blue hydrogen for regions without local access to hydrogen production, or difficult access to CO2 storage, becomes an option as well. This would have the benefit of kick-starting the hydrogen economy and reducing investment risks into hydrogen-based industry processes. CCU is the most demanding technology path of the three, as it both requires CO2 capture and vast quantities of hydrogen, at least for the largest CCU product markets such as synthetic gas and as a feedstock for the chemical industry. Beyond the resource intensity of almost all CCU processes, there are two additional challenges of CCU. Firstly, the CO2 abatement potential, even under ideal conditions, is in most cases limited to 50% due to the reemission of industrial CO2 at the end of life of CCU products, such as plastic incineration, or synthetic gas and fuel combustion. Secondly, blue hydrogen is not available as a hydrogen source for CCU processes. Decarbonising a fossil fuel only to re-carbonise it with CO2 from a different fossil source is self-defeating and would create significant associated energy losses during production. The direct combustion of the fossil fuel initially used for the hydrogen production would be less climatically damaging in such a case. Due to the limited abatement potential of using industrial CO2 emissions for CCU processes and the requirements on the hydrogen source, CCU is only viable for regions with vast additional renewable energy potential to provide the green hydrogen, and in regions without access to CO2 storage. With an abatement of close to 100% through CCS, compared to 50% through most CCU applications, CCS will be key to achieve net-zero.




3.2.1.3 System context: an integrated perspective

The unequal distribution of pre-conditions highlighted in the previous sections also causes an unequal distribution of regional access to climate solutions. This creates drivers at system level for other regions with little to no local industry, to help provide access to CO2 storage and hydrogen for industrial regions. Transforming industrial clusters to become sustainable and low-carbon but with low fossil fuel dependence, requires a whole-systems approach that identifies the interconnections and interactions with other sectors of the economy. This is required in order to prevent inefficient use of scarce resources, such as renewable electricity. Such interactions and opportunities for cooperation are most pronounced between separate industry clusters that require similar climate technologies and respective infrastructures but may have different pre-conditions and therefore timelines of implementation. It is fundamentally in the interest of project planners to account for additional utilisation of infrastructures beyond single clusters. Building CO2 pipelines with an initial overcapacity, such as planned for in the Porthos project to allow for CO2 from other industry clusters to be stored, is important to allow the system to scale to rising demand at the lowest cost and thereby provide a sustained long-term business case. As decarbonisation plans for distinct industry clusters are developed it is therefore crucial to understand the reach and opportunities of such projects beyond their immediate application. This includes the consideration of investment cycles of industrial emitters across other regions to align infrastructural capacity as in the above example, and thereby provide the net-zero framework that ensure a cluster can develop its own plan in conjunction and make timely investment decisions. Although the pre-conditions of clusters, particularly regarding the geography, are likely to dictate the first movers of industry regions, the gradual scaling requires an awareness and solution to the phasing of transport and storage. For the transport aspect, initial increase in users will require additional flexible modes of transportation, such as barges and lorries, to reach the CO2 hub and its pipeline network that was built with this scale-up in mind. Eventual pipeline networks to connect increasing numbers of clusters and the establishing of additional intermediate storage hubs are likely and require similar foresight planning as the previous projects. Although CO2 storage locations can hold several million tonnes of CO2, for the safety of the injection process, growing volumes of CO2 requires additional wells to be drilled, which increases cost. It is important in the evaluation and choice of CO2 storage locations to account for the eventual scaling of CO2 injection. Fundamentally, as climate solutions for industry clusters are developed, the overall needs of a net-zero economy need to be considered. New energy carriers, such as hydrogen, alongside an increased demand for renewables are not just emerging in industry but also in other sectors, such as for residential heat and transport. As clusters make their decarbonisation plans, identifying situations of competition but also opportunities for cooperation is essential. Through a whole system approach, policy makers and decision makers can identify the possible synergies but also priorities of where scarce low-carbon resources are best used for reasons of maximum CO2 abatement potential, sustainability and lack of alternatives. 3.2.1.4 Strategic drivers: the foundation of the transformation The political economy of an industrial region, and indeed that of a country and the EEA as a whole, has a profound influence on the societal, environmental, and economic drivers of investment and policy decision making. There are several key strategic drivers that interconnect with each other and primarily revolve around the physical conditions of an industry clusters: its location and composition. Building on 3.2.1.1 and 3.2.1.2, Figure 3-1 visualises this interplay of factors in the form of a decision tree. In addition to the physical setting of an industry cluster, it is imperative to define the value of retaining industry in the region to appreciate the fundamental driver for decarbonisation of industry versus deindustrialisation. This step is crucial to also make a political case for investment into climate infrastructures and technologies. Such economic value refers to jobs and value added to the economy, as well as the need for raw materials (e.g. minerals and metals) as inputs in downstream industry that is present in the region. Ensuring the entire supply chain of industry has access to emissions mitigation technologies and their respective infrastructures




protects these industries from rising political and economic pressures surrounding climate action. Due to the capital intensiveness of such climate infrastructures, regions that have access to a CO2 and hydrogen network arguably gain a competitive advantage over regions that do not, as carbon prices increase and consumer choice favours low-carbon goods. The capitals of Scandinavia have already indicated a willingness to use their considerable procurement power to lower so-called “embedded carbon” emissions, e.g. CO2 emissions from construction materials such as steel and cement.

Figure 3-1 Business Proposition Decision Tree - the interaction between strategic drivers for decarbonisation and the business context at cluster and system level for the definition of a business case proposition Squares = Thematic categories, Circles = Factors, Hexagons = existing fossil energy




industry. Social Acceptance affects all technologies. Fossil infrastructure re-use is optional and regionally dependent. *most CCU processes re-emit the CO2 again at end-of-life. This re-emission of industry-CO2 is not depicted in this diagram.




3.2.2 Addressing investment barriers and risks: building the framework to begin transforming industry

Investing in climate technologies and infrastructures faces fundamental risks and barriers. As identified through the feedback received from the ALIGN cases, these revolve effectively around every aspect of the project chain: from changes in socio-economic environment that can affect the strategic rationale behind projects to the societal acceptance and risk of losing public support, management risks in the implementation phase of the project and stemming the initial capital expenditures, but also the overall commerciality in the short and long-term. How will the operational costs be covered? Will there be a market for the low-emission products that will be sold at a premium? All these issues are interlinked in the sense that without a clear idea of how to solve each area, projects will not begin. Solving all financial issues to initiate construction will do little if there is no critical political and local support carrying the project, or a commitment of buyers to purchase low-emission materials once they become available to the market. Overcoming those investment barriers and risks requires public and private sector collaboration. A key role for the public sector is to remove barriers to private sector investment and to manage market development where the end use markets are immature or non-existent. 3.2.2.1 Strategic rationale: why is CCUS investment ‘worth it’ at cluster and system level?

Grounding a project in a sound motivation and developing an understanding for why implementing such transformative, capital expensive technologies and infrastructures is crucial to withstanding commercial and political scrutiny and changes in the socio-economic and technological environment, as well as to generate social support. This robustness in project rationale can thereby directly affect investment barriers and risks which are further discussed in the following sections. As mentioned in Section 2, the strategic rationale for developing CCS/CCU differs for each cluster business context. Establishing the rationale for implementing CCUS in an industry cluster in line with the requirements identified in Figure 3-1 is fundamentally a weighing of possibilities, i.e. capabilities, opportunities and risks. After having identified the particular combination of technology solutions to industrial emissions and making the case for those industries to remain in the region with all the associated benefits of jobs, growth and secured supply chains, the final assessments needs to balance the possible losses with those gains along the path of decarbonisation. Crucially, decarbonising industry should not be tackled in isolation. There are significant transformation requirements for the entire economy through the necessary replacement of carbon intensive energy carriers with low-carbon alternatives, for example, in transport and residential heating. Technologies, such as hydrogen and CO2 storage and use, have to be considered and allocated across these needs. A holistic system-wide approach is therefore paramount, rather than evaluations on an individual sector or even plant basis. Creating a hierarchy of technologies and resources and their biggest climate effect per sector has to be part of EU and national and regional government strategies around achieving net-zero as soon as possible. This implies ensuring sectors with no alternatives have access to CO2 storage, and scarce resources like hydrogen are used where they can have the biggest impact. 3.2.2.2 Anchoring infrastructure at scale: overcoming first-of-a-kind investment barriers

The single emitter, single storage site approach of the past was part of the failure of prospective CCS projects to materialise, as it was not possible to reduce costs and risks for the public and private sector to acceptable levels. The now preferred cluster approach which facilitates building scale at an early stage of deployment, however, comes with additional new challenges as well as old ones. Generally, providing industry clusters access to CCUS infrastructures requires a close cooperation between emitters and CCS operators. This in turn requires public oversight and coordination as well as policy and financial support. The cluster focused approach increases the planning requirements for CO2 infrastructures and storage site development. Increased uncertainties over scale due to potentially higher numbers of emitters, planned for in




the long-term at the very least, mean pipelines and storage sites need to be developed with an initial overcapacity. Timing is an important aspect of the managing requirements of projects that depend on different links of the overall chain, like CCS. Ensuring storage is available and emissions ready to be captured at the same moment to avoid either system to lie idle is fundamental for the economics of the project. Access to these infrastructures need to be fair and therefore regulated. Particularly for the initial capture sites being assured a set price for CO2 transport and storage from their sites is key. Lack of trust between emitters and private operators needs to be overcome through sound governmental and regulatory oversight. The coordination and cooperation between the private and public sectors are fundamental to ensuring infrastructures are provided on time and at appropriate scale, as well as operated fairly. For CCU and hydrogen paths, the same applies to the availability of feedstocks at a fair price. The key risk, particularly for the first demonstration projects, within a cluster surround the monopolistic power of storage operators and hydrogen producers. Therefore:

❖ Governments need to coordinate the provision and operation of infrastructures through a system management body.

❖ Monopolistic powers need to be prevented through clear contractual obligations and government oversight.

3.2.2.3 Commerciality: addressing market failures and ensuring competitiveness of the future

industry

The fundamental market risk is about cost and revenue uncertainty. As already mentioned, government R&D support and shared funding of demonstration plants is crucial to reduce CAPEX and therefore investment risks. What is further required is a sense of a future advantage, for example, through a set CO2 price trajectory that ensures first-movers will not bear a commercial disadvantage from their additional decarbonisation costs. The European ETS has proven to be a poor indicator in terms of certainty over future CO2 pricing and additional frameworks, for example a price floor (as implemented in the UK) is needed. Therefore:

❖ Companies need to be given certainty that they are investing into a competitive future industry through clear frameworks that ensure no competitive disadvantage through decarbonisation costs.

For both private and public entities, it is fundamental to gain certainty over the future commerciality of the technologies delivering a net-zero industry. This includes access to a market on which to sell green products, certainty over financial liabilities around potential leakages from the storage site as regulated under the EU’s CO2 Storage Directive from 2009, and for the government the perspective of phasing out initially necessary subsidy schemes. The following is therefore recommended:

❖ Evaluate different government support schemes that reduce cost and respond to potentially fast-moving market dynamics, such as Carbon Contract for Difference schemes.

❖ Develop initial market for low-carbon products, for example through public procurement schemes or partnerships with downstream manufacturers in preparation of an economy wide future green market through carbon pricing mechanisms.

❖ Ensure sufficient financial security is available in accordance with the EU CO2 Storage Directive of 2009. To alleviate the financial strain for operators, public-private partnerships should be evaluated to allocate responsibilities between public and private sector.

3.2.2.4 Societal acceptance and moral hazard

A lack of societal acceptance has been shown to be an investment barrier for both the private sector and governments. In particular the moral hazard associated with continued use of fossil fuels can create a barrier even for public sector involvement in carbon capture-related activities beyond research and innovation




funding. It is important that policy frameworks are put in place to facilitate the delivery of CO2 infrastructure and industrial decarbonisation include mechanisms that demonstrate a phasing out of the reliance on fossil fuels. This barrier can be addressed most effectively by applying a system thinking approach that cross-fertilises investment and activities in different sectors using mandates and incentives beyond an individual sector or product market focus. Societal acceptance is discussed further in section 3.2.3. 3.2.2.5 Funding climate infrastructures and capture technologies for large scale deployment

Building first-of-a-kind capture units at an industry scale is a costly and risky endeavour that will usually require government support. In the European Union, the Innovation Fund is an ideal tool to support such projects but requires mirroring support at a national level. Other regional and national funds need to be identified and applied. It is important to stress that funding schemes should be designed to scale and roll-out climate technologies to whole sectors, and not only support first-of-a-kind innovators. The provision of infrastructures, e.g. pipelines, intermediate storage, offshore storage equipment, has historically always been associated with governmental support; from electricity grids to sewage systems and oil and gas explorations. Developing the networks for industry clusters to decarbonise therefore needs to be similarly considered to be for the good of a new economy and therefore the public. There are different models of government involvement, through direct ownership, regulated asset base, loans etc. Governments have in general been keen to encourage clusters to be in competition with one another over first-of-a-kind carbon capture decarbonisation projects. The principle they have applied has been based on short-term thinking to reduce the burden on public funds by identifying the lowest cost demonstrator to invest in. Cooperation and coordination between clusters may however be the least cost and highest reward option in the long-term and should be considered and evaluated. It is also crucial for most governments to understand how these initial investments will be recovered, or at least, how a CCS system does not have to be reliant on a continuous drip feed of tax-payer money. In the medium to long-term, as additional climate policies such as economy-wide CO2 pricing are implemented, it can be expected that CCS systems will not be dependent on rigid government regulations and finances. Instead, as multiple actors enter the field of capturing, transporting and storing CO2 a market for CCS will be created, with spot-pricing dynamics similar to LNG.

3.2.3 Societal and social acceptance: generating support and overcoming misconceptions

Climate action is at a point of blanket uncertainties that breed imperfect solutions and therefore imperfect decisions. Uncertainties continue, including whether it is possible to solve the climate crisis by mid-century through what is inherently a long-term systemic transformation of society. Can economies achieve fundamental behavioural changes to a wholly fossil free and circular economy, that is enabled by technologies not yet discovered (e.g. perpetual recycling routes) and system capacities we are still far from attaining (e.g. recycling capacity that meets demand as well as fully renewable energy systems that produce all necessary energy carriers at zero emissions). Or do we require known, scalable and implementable climate technologies to help us eliminate the problem (i.e. emissions) today, such as CCS, effectively buying us time to develop a more sustainable economy? But aren’t these technologies just going to lock us into our existing system, making us miss the opportunity to become truly sustainable? The crucial stress factor around these questions is time. With little to none left to act before global warming reaches 1.5 or even 2 °C, decision makers are faced with the need to remove emissions at scale and as fast as possible while retaining the current standard of living and creating a more sustainable economy for the future. A goldilocks solution does not seem at hand. Naturally, each stakeholder’s differing prioritisation has resulted in equally different perceptions as to what is ‘necessary’ and what is ‘right’. At a localised level social acceptance, or rather lack of acceptance, has thereby become the crux of climate action, as no one path appears acceptable for all, for private, commercial or ideological reasons. This commonly results in a political stalemate. Such inaction is particularly applicable




concerning decisions over infrastructure solutions, from NIMBYism around onshore wind and grid expansions, to resisting climate technologies that are seen to continue the capitalist fossil economy like blue hydrogen and CCS and CCU. Underlying the polarisation of interest groups is a real and perceived greenwashing agenda by respective technology advocates. While acceptance of climate technologies, infrastructures and their ‘new’ products is considered important, generating it in times of deep ideological and political polarisation is no small feat. This is not to say that such projects cannot be implemented in the face of resistance - indeed every climate action faces opposition from selected interest groups. Yet, it means that the public and particularly the local communities need to be taken along on the path of industry transformation to net-zero and the deployment of climate technologies. Crucially, at the societal level, there exists what is best described as a perception of the public perception. That is to say, an assumption of how the public feels about these technologies based on vocal and dominant interest groups, while the majority of the public has no awareness of them at all. Taking ownership of these technologies and their role in achieving net-zero is fundamental. A sound strategic rationale around the value of the project, why it takes place and the benefits that come with it, is also essential. Both for the political decision-makers who are to support it, and the local communities that ultimately implement it. The goal is not necessarily to overcome all resistance, but to generate sufficient political will and support to carry the project. Once the technology is proven through several demonstration projects, societal acceptance will grow accordingly, as seen with natural gas grids and storage, or the uptake of electric cars in a growing number of countries. 3.2.3.1 CCS and CCU technologies from a societal perspective

Knowledge or even awareness of CCS differs significantly by country and section of the population. The technology generally suffers from several pre-conceptions: i) CCS is fundamentally associated with the use of fossil fuels and the oil and gas industry, which is generally perceived as untrustworthy when it comes to environmental protection. CCS is seen as a means to keep the fossil economy going (keyword: lock-in). This perception has to some extent survived CCS’ shift of focus away from coal power towards process emissions in industry. Its role to kickstart the hydrogen economy in the absence of sufficient renewable electricity to scale green hydrogen is similarly considered by some as a sanctimonious act to justify continuation of natural gas exploration. CCS is thereby also seen to undermine the ‘polluter pays’ principle, insofar as CCS rewards oil and gas producers with double revenues; first from selling the CO2 in form of fossil fuels, and then from burying it again in the subsurface.

❖ It is imperative to support and implement frameworks that avoid fossil fuel lock-ins and create market dynamics to phase out fossil-based energy carriers and products with embedded carbon as green alternatives become available.

ii) Fear of a CO2 leakage is the primary reason why on-shore CO2 storage is generally not considered in Europe. This is not in response to an actual risk of CO2 leakage, in terms of probability and consequence, but to avoid confrontation with local communities. Scientific evidence is clear about the safety of CO2 transport and storage, as research projects, including ALIGN, have established and continue to ensure.

❖ Communicating information in a clear and easily comprehensible way is key. ❖ Addressing concerns and including local communities in the project helps develop greater

understanding and creates a sense of local ownership. iii) The cost of CCS and CCU is another argument commonly brought up as a risk for perpetual subsidies and unnecessary infrastructural investment. The cost of CCS is rarely compared to the cost of alternative technologies (where applicable) that could achieve a similar emission abatement scale. Put into perspective, CCS is only costly if ‘no climate action’ is the benchmark. Across net-zero compliant technologies, CCS is comparatively cheap as shown in the Climate Path Study (p.160) of the German Industry Association (BDI, 2018).




CCU suffers from similar issues as CCS, that refer to associated industries (particularly petro-chemicals and industries providing the CO2), leakage of CO2 (through transport and final use), and cost (CO2 capture and energy). The latter includes also an opportunity cost for renewable electricity. However, compared to CCS, which is more analogous to a waste management system, CCU has the perceived benefit of doing something useful with the CO2. CCU is indeed first and foremost an alternative resource technology, not a climate mitigation tool. Its advantage is the assumed sustainability gain, which suffers from the lesser climate benefit (due to reemission and energy intensity) and continued environmental issues in carbon containing products (e.g. with plastics). Generally, employing scientific evidence is a solid tool to counteract misinformation, yet emotions need to be considered as well. In some circumstances it will be difficult to overcome preconceptions if they serve an ideological stance. Developing a sound strategic rationale and translating this into a comprehensible narrative can drive local and political support that can sustain in the face of selective opposition. 3.2.3.2 Climate infrastructure for the public good

Generally, gas pipelines are commonplace in developed economies, yet NIMBYism is a key hurdle in all major infrastructural projects. The flexibility of transporting CO2 (truck, train, barge, ship, pipeline) can help overcome this issue for first projects. However, scaling up CO2 infrastructure for industrial clusters is unlikely to be able to avoid pipeline solutions in the long-term. Hydrogen will require these from the start. At that point, existing experience with selected industry clusters should alleviate safety concerns and enable a large-scale roll out, which can also help the domestic application of hydrogen. 3.2.3.3 Green products

Decarbonising industry is not expected to result in major changes to product experience for consumers. Yet, there may be reluctance to buy a green product over quality concerns. As CCS does not affect the product itself, but only the emissions during process of production, again this is unlikely to apply to those industries. For CCU products, consumer choice trends against plastic use and combustion fuels is expected to undermine long-term demand. For hydrogen use in residential heating, involvement of local residents in pilot projects to create better understanding can help in the transition. Overall, a degree of tacit acceptance and explicit support of technologies, infrastructures and products is necessary. Securing political and local support can alleviate investment risks and secure a project. In contrast, vocal and wide-spread opposition that is not met with a sound strategic rationale for a project that generates political will and local support can topple it. As the case of the Ketzin CO2 injection test site in Germany shows, the biggest support for CCS exists in the one place in Germany where it was actually implemented, because the community was respected and integrated in the process. The design of a project and its communication to decision makers and interest groups is therefore paramount. Policies that address the more general concerns over fossil lock-in need to be supported and pushed for to provide the right framework for implementation.




4 Decision Support Methodology and Toolkits

4.1 Introduction

This chapter provides an overview of the methodology and decision support tool developed for this ALIGN report. It also includes a brief summary of the business model and business case framework and tools of the ERA-NET ACT ELEGANCY project, which are also applicable to decision making processes for industrial decarbonisation and regional CCUS infrastructure. The first part of this chapter describes a decision support tool specifically designed to streamline and visualise the evaluation of necessary factors and conditions that are prerequisite to achieving successful CCUS projects and industrial cluster decarbonisation. The tool can be used by industry cluster stakeholders and decision makers to identify challenges in kick-starting a decarbonisation pathway using CCUS technologies for emissions abatement. This tool makes use of the results from the ALIGN cluster case studies presented earlier and also incorporates some simplified content from the ELEGANCY toolkit presented in the second part of this chapter. The decision support tool is publicly available freely with this report on the ALIGN project website. It is released under the Creative Commons Attribution NoDerivs (CC BY-ND) licence. The second part of this chapter describes in summary form the methodology3 and tools4 developed in Work Package 3 of the ELEGANCY project, which has been focussed on deploying hydrogen with CCUS infrastructure in industrial clusters and in regions of countries where hydrogen can be used as an energy carrier for domestic heating and transport. Some of the case studies in ELEGANCY overlap with those in ALIGN. The business model and business case development methodology and toolkit for H2-CCS chains has universal applicability to other CCUS infrastructure and therefore provides a useful and more detailed extension of the ALIGN tool presented herein.

4.2 ALIGN Decision Support Tool

4.2.1 Summary

This high-level decision support Excel tool has been created to:

• guide the definition of a business case proposition for the decarbonisation of an industrial cluster by facilitating the assessment of the business context and the strategic drivers relative to the cluster;

• understand major investment barriers for that investment proposition;

• understand the likely parties responsible for removing such investment barriers; and

• assess the capability of these parties to remove the barriers and mitigate the major risks. The decision support tool is split into four assessment matrixes: (i) specific strategic drivers for the industrial emitters in the cluster, (ii) relevant industrial decarbonisation policies, (iii) investment barriers and (iv) capabilities to remove the investment barriers. These matrices allow targeted assessment to identify major gaps, barriers and priorities for moving forward in order support the definition of the business investment proposition and potential business models. They explained in the sections below.


4 ELEGANCY Publications, 2020b, https://www.sintef.no/projectweb/elegancy/programme/wp3/business-case-development-toolbox/

https://creativecommons.org/licenses/by-nd/4.0/


https://www.sintef.no/projectweb/elegancy/programme/wp3/business-case-development-toolbox/





4.2.2 Emitter assessment matrix

A simple emitter assessment heatmap matrix (Figure 4-1) has been developed as part of the decision support tool to facilitate the assessment of the relevant industrial cluster sectors against a number of predefined strategic drivers and guide the definition of the business investment proposition for the early stage cluster decarbonisation. The categories were defined based on the themes used for the interviews, lessons learnt in section 2.2 and strategic drivers compiled in the ELEGANCY project. The illustrative version below has been prepared based on the ALIGN UK case study.

MARKET & FINANCING

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Figure 4-1 Strategic driver assessment by cluster emission source (illustration)




4.2.3 Policy assessment matrix

A simplified and customised policy assessment matrix (Figure 4-2) has been derived from the detailed policy gap analysis and heatmap tools of the ELEGANCY toolkit. This simplified version (as illustrated based on the UK case study) helps to identify and visualise the areas where policies are insufficient to support the deployment of CCUS for each of the relevant business sectors of an industrial cluster and therefore highlight areas of prioritisation for policy development

MARKET TECHNICAL COMMERCIAL SOCIAL

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Availability of Relevant Policies to Support CCS for Net Zero Activities

Sufficient

Insufficient

Not applicable

Figure 4-2 Policy availability assessment matrix




4.2.4 Investment barrier assessment matrix

Figure 4-3 below shows a checklist of common investment barriers to assess. The objective of this review is to support an industrial cluster with the prioritisation of their business and policy development activities, and to determine a preliminary allocation of the responsibilities for barrier removal between the principal actors. The investment barriers included in this tool are derived from the reviews undertaken with the WP5 case studies presented in section 1.4.1, from a series of joint workshops held with experts and the Zero Emissions Platform, and from the ELEGANCY project (see Appendix B for a summary of the investment barriers identified from the ALGIN case studies).

Principal Collaborations for Barrier Removal

Common Investment Barriers PRESENT YES/NO

Government & Public Authorities

Developers & Operators

Finance & Insurance

Missing system Perspective/Business Case Strategic Rationale

YES ✔ ✔ ✔


NO ✔ ✔ ✔

Missing H2 and CO2 transport and storage infrastructure YES ✔ ✔ ✔


YES ✔ ✔

Storage financial security requirements and leakage liability

YES ✔ ✔

Unacceptable Full Chain Risk - Intra-chain counterparty performance

YES ✔ ✔ ✔

Missing funding model for large scale deployment YES ✔ ✔ ✔

Societal acceptance and moral hazard of fossil fuels use YES ✔

✔

Figure 4-3 Investment barrier checklist and collaboration




4.2.5 Capability assessment matrix

A capability assessment matrix (Figure 4-4) that combines the requirements to remove the major investment barriers (previously identified with a set of risk mitigation instruments that have been identified through the stakeholder and expert engagement in the ALIGN and ELEGANCY projects) and external workshops (see Appendix C) is included in the decision support tool. The objective of this matrix is to assess the existing capabilities of the public and private sector actors, to identify gaps, and to define priorities for intervention. The version below is based on the UK case study.

GOVERNMENT & PUBLIC AUTHORITIES DEVELOPERS & OPERATORS FINANCE & INSURANCE

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Mechanisms for storage financial security and leakage liability

Mechanisms for intra-chain counterparty performance

Funding model for large scale deployment

Societal acceptance and addressing moral hazard of continued fossil fuels use

KEY

Sufficient

Available Capability

Insufficient

Figure 4-4 Investment barrier removal capability assessment




4.3 The ELEGANCY methodology and toolkit for business model and business case development

4.3.1 Summary

The ELEGANCY project has been conducted in parallel to this ALIGN project as part of the ERA-Net ACT first call funding round in 2016. ELEGANCY has been focussed on the delivery of low carbon hydrogen produced in combination with CCS technologies and infrastructure. When focussing on decarbonising industrial regions through CCUS infrastructure there is a clear overlap between the two projects and the case studies that have been explored within both projects. Work Package 3 of the ELEGANCY project had the objective of creating a methodology5 and toolkit6 for developing business models and business cases for H2-CCS networked infrastructure. The results of this work have universal application beyond H2-CCS chains to general CCUS, BECCS and DACCS projects and regional decarbonisation of industry. Summary information on the ELEGANCY work is provided in this section that can support the high-level commercial methodology and tools presented above. The ELEGANCY methodology is a detailed, in-depth approach to the development of business models and business cases and can be used to complement the methodology presented in section 3.2 and any assessment carried out using the decision support tool in section 4.2. In order to develop and select business models for integrated CCUS projects and network infrastructure a large number of factors ranging from the political and market environment through to the technology and operational influences on investment choices have to be addressed. Assessing a business case for a particular business model also requires an understanding of the costs and benefits of the various mitigation options for a particular risk profile created by these factors. A business case can be defined and assessed once a business model is selected. The ELEGANCY business case assessment methodology is therefore applied to business models chosen through the process described below. As business model preferences can change with changing business contexts as well as with the maturity of a project, the combined selection and assessment process is iterative, but follows the same steps and analysis at fit-for-purpose levels of detail. 4.3.2 ELEGANCY business model development methodology

The ELEGANCY Business Model Development process is divided into four distinct steps: Step 1: Definition of the scope of the particular CCUS infrastructure for the relevant case study

The process commences with an initial focus on the specific case study or project technical sub-components, business segments, and associated market sectors of main interest, the geographical extent (including industrial hubs, production facilities, storage areas, end-users, cross-border interactions, etc.), and market potential.

Step 2: Focussed market background review and gap analysis

The purpose of this second step is to guide an overall assessment of the market background for any case study or project in preparation for the third step of understanding the investability and handling of major business risks. The major barriers and business risks that are faced by potential developers and financiers in the CCUS business chain have been identified by stakeholders to be non-technical, and robust economic scrutiny is essential for any large-scale infrastructure investment. Technology components within the CCUS infrastructure chain and end markets exist and have proven functionality. Hence, investing in, and delivering, low-carbon products using CCS at scale requires an understanding of the risks associated with government policy, market development, and regulatory frameworks. Full chain operability issues are another area of risk that is dealt with in Step 3 below.


6 ELEGANCY Publications, 2020b, https://www.sintef.no/projectweb/elegancy/programme/wp3/business-case-development-toolbox/







Step 3: Business and investment risk identification and mitigation

Based on the information gathered during step 2, the third step is to identify and quantify the major business risks that impact the level of investment potential for each of the market sectors and business opportunities from both a public and a private sector perspective. A bespoke risk assessment spreadsheet tool has been designed that can be applied to any individual or bundled business opportunities along the CCUS chain. In summary the risk assessment methodology is divided into:

1. Investment Barriers: these are circumstances or facts that raise the risk of detrimental investment outcomes to an unacceptable level for any type of investor. Generally, these barriers will affect multiple segments along the chain, or the whole chain, and require a ‘system view’ and multi-party (often in collaboration with government) approach to mitigation measures. These barriers need to be addressed in priority for any investment to be possible; and

2. Major Business Risks: these are risks that impact cost, revenue, liabilities, financing, schedule and therefore the risk/return equation for a final investment decision (FID). Individual businesses will generally be capable of mitigating these through familiar technical, commercial, insurance and other standard measures.

This step facilitates an early identification and prioritisation of risks to be addressed by a project or case study lead organisation and guide the subsequent communication and conversations with potential private investors and public/government organisations.

Step 4: Business model development

The fourth step in the method focuses on how to remove the investment barriers and mitigate business risks, and to select appropriate business models for any given case study. ELEGANCY reports describe the business model selection process, its relationship with preparing and assessing a business case, and a business model selection tool. When applied to case studies, the outcome will be the development of a number of viable commercial structures and business models, investigation of the potential investor mix and the allocation of risks between those investors for each of the market opportunities, the de-risking mechanisms required from the financial and carbon markets and from the EU and national governments.

4.3.3 System and operational business models

In the case of European first-of-a-kind (FOAK) or early stage CCUS infrastructure, such as investigated in the ELEGANCY and ALIGN case studies, the business model should be considered a way to organise and structure all the relevant and material elements of investment, market development and asset operation that can deliver the combined objectives of the public and private sector sponsoring parties.

The choice of business model will depend on a number of factors; the technological and organisational capabilities of the entities and their competitors, the stage of maturity of the relevant markets, the wider social, economic and institutional context including policies and incentives. There is a vast array of traditional forms of business models for infrastructure investment, each host country having their own cultural and historical preferences. In addition, these models are also ever-changing to adapt to the challenges of the external environment at any given time. Infrastructure investment is quite unique and requires business models that can address its specific characteristics: requirement for major upfront capital investment, long term revenue streams, public involvement, natural monopolies, and complex value delivery (economic, social, environmental value in addition to financial returns).

Technical, policy and commercial innovation is essential in the case of first-of-a-kind project with the creation of new markets. Therefore, the framework developed in ELEGANCY aims to offer the user the flexibility to




define the most appropriate business models for his or her investment opportunity or case study. The framework includes a number of fundamental building blocks combined with the information gathered on business context and risk from the earlier stages of the ELEGANCY process. At the same time the business model selection is guided by existing traditional business models but without being constrained by them.

In order to create further clarity about business models the ELEGANCY methodology differentiates between system or macroeconomic business models and business segment or micro-economic business models (

Figure 4-5). The dashed boxes in the figure demonstrate that different activities may also be aggregated together in one business. System business models are the principal means for the mitigation of exogenous risks (including political, policy, social and outcome risks) that cannot in general be managed by the private sector alone and provide a macroeconomic solution that can overcome barriers to investment by both the public and private sectors into the various operational segments of a full chain H2-CCS infrastructure. Operational business models focus on the risks and delivery of the outputs and services for a particular business segment within the H2-CCS chain.

Figure 4-5 Business model characterisation (ELEGANCY report D3.3.3)

Unlike renewable energy entering mature electricity networks, CCUS infrastructure and its applications have not in general been supported by fit-for-purpose holistic ‘programmatic’ government interventions. In large part this has been because of a lack of commitment to CCS as a climate mitigation technology. This in turn has created barriers to investment which extend beyond the business risks that an individual project may experience, even with government financial or fiscal incentives.

The ELEGANCY research has led to the conclusion that a viable system business case is a pre-requisite for achieving an investable project business case. The development and selection of sector- or project-specific business models is dependent on an over-arching system business model that, at a minimum, must address the following:

a. System-level strategic rationale and objectives; b. Cross-sectoral synergies and sector coupling; c. Development of ‘low carbon’ end use markets;




d. Enduring system governance and oversight until markets are self-sustaining; e. Public-private risk sharing reflecting system characteristics/properties; f. Public-private collaboration and capacity/capability building; g. Societal and social acceptance with removal of moral hazard; and h. Development of real options for low regrets transition pathways.

4.3.4 The relationship between business models and business cases

To make a business case for an investment proposition, or strategic macroeconomic objective, there needs to be a business model that describes how the outcome will be achieved and what mechanisms will mitigate risks and support delivery actions. The business model selection process therefore has a link to the metrics that will define its corresponding business case. The ELEGANCY methodology recognises an iterative process between business models and business cases, as summarised in Figure 4-6 below. Decision gates refer to points at which decisions are made to undertake increasingly more detailed work and increasing expenditure on project and policy design and development. For concept level studies, there will only be one initial pass through the process in order to advance the proposals to a point where there is useful input to government and industry stakeholders.

Figure 4-6 Iterative development of business investment decision (ELEGANCY report D3.3.3)

Business model development and selection is based upon the drivers that have been tailored to the strategic purpose and objectives of a case study or infrastructure project. The information regarding business context resulting from the detailed risk and policy assessments undertaken in previous steps of the method is used to determine stakeholder preferences for the investment and commercial models. These form the basic structure of both the system business model (for removing investment barriers) and the operational business model for high priority business segments that interact with, or have an impact on, those barriers. Once an allocation of risks and mitigation measures has been made between relevant stakeholder entities, a business case assessment can be undertaken. Depending on the outcomes of this assessment it may be necessary to review the business model and modify its structure and mechanisms. In some cases, it may also be necessary to revisit the business context analysis to alter or vary the associated stakeholder preferences. This can lead to a different business model being selected. The business case is then again assessed. The process can repeat until stakeholders converge on an agreed outcome.




4.3.5 Business case development and assessment

As a decision support exercise, a business case will be strongly influenced by the perspective and purpose of the entity or audience for whom it is developed. Thus, in complex infrastructure and new market investments as exemplified by the ELEGANCY and ALIGN case studies, public sector objectives (macroeconomic, social and environmental) and private sector business imperatives (shareholder returns commensurate with risk and opportunity cost) have to be blended together in such a way to deliver a combined business case that works for all stakeholders. To facilitate this, the ELEGANCY framework has differentiated between two contexts and scales; one for system business models and one for operational business models as described above. This methodology enables a targeted analysis for the system business case as well as the subordinate, but interlinked, business cases for component businesses. For a given project, investment, or case study objective a complete business case will comprise:

1. Characterisation of the business and investment context; 2. Selection of a business model from a suite of preferences; 3. An allocation of risk and mitigation measures to stakeholders; 4. A qualitative and quantitative assessment against metrics that measure the value and delivery of the

project against the objective; 5. A comparison with counterfactual alternatives if the project is not executed; and 6. Recommended ownership, financing and commercial structure.

In the ELEGANCY methodology a business case is prepared for a selected business model because of the strong relationship linking risk and liability sharing with financing and ownership. Consequently, an iterative process is used for business case definition and analysis that commences with a range of preferences of stakeholders, and changes or updates the selected business model where appropriate as the process progresses. For the process to deliver an outcome satisfactory to all stakeholders there is a need for initial selection and ranking of appropriate metrics that will effectively parametrise and quantify the infrastructure proposition for comparison with counterfactuals as well as alternative business investment opportunities. To achieve the ‘consensus’ business case described above, the ELEGANCY development and assessment process has been devised as a synthesis of best practice from standard private sector procedures and a number of public sector protocols. 4.3.5.1 Business case dimensions

A complete business case at either CCUS system level or for an individual business segment within the chain is characterised in the ELEGANCY framework by the six dimensions illustrated in Figure 4-7 and described in more detail in Table 4-1. The data required and outputs of the assessment in each of these dimensions evolve with the iterative development of the business case through decision gates and increasing levels of expenditure.




Figure 4-7 ELEGANCY Business case dimensions (ELEGANCY report D3.3.4)

Table 4-1 Overview of ELEGANCY business case dimensions

Business Case

Strategic Drivers and Rationale

Financial Cost and Benefits

Economic and Value Benefits

Commercial Feasibility and

Delivery

Technical Feasibility and

Delivery

Outcome Management

Business Case Dimension Description

Strategic Drivers and Rationale

• Business case definition

• Objectives of project, investment and/or intervention

• Key strategic issues to be addressed

• Business Model Preference

• Key performance indicators and metrics

Financial Cost and Benefits

• Standard evaluation of cost and revenues

• Standard metrics of Return on Investment (RoI), IRR, NPV

• Assessment of additional sources of value created by the project

Economic and Value Benefits

• Quantification of direct economic impacts, economic rate of return (ERR) and economic net present value (ENPV)

• Identification, and quantification where possible, of indirect economic, social and environmental benefits, distributional impact

Commercial Feasibility & Delivery

• Business model selection

• Commercial structuring and capital sourcing

• Contracting, procurement

Technical Feasibility & Delivery

• Assessment of technical design and construction, operating and decommissioning arrangements for physical delivery

• Technology assessment and comparison

Outcome Management

• Standard risk identification, quantification and mitigation

• Monte Carlo, scenarios, real options, optimism bias

• Monitoring metrics for delivery and governance




4.3.6 ELEGANCY business case development toolkit

The ELEGANCY business case development toolkit is a collection of spreadsheets released under the Creative Commons Attribution NoDerivs (CC BY-ND) license. It can be found on the ELEGANCY website along with the detailed reports and guidance at: https://www.sintef.no/projectweb/elegancy/programme/wp3/business-case-development-toolbox/ There are numerous tools (spreadsheets) that address the following business case elements:

Supporting Tools Source

(ELEGANCY Reports)

• Market Background Assessment

• Market Failures Report D3.2.1

• Risk Assessment and Matrix

• Policy and Financial Support Analysis Report D3.3.2

• Risk Mitigation Heat Map

• Policy Needs Heat Map

• Business Model Selection Tool

Report D3.3.3

• Business Case Definition and Assessment Tool Report D3.3.4

https://creativecommons.org/licenses/by-nd/4.0/





5 Conclusion

This report summarises the data collected from the ALIGN case study participants in the UK, Netherlands, Germany and Norway. This report focuses on cross-cutting themes and commercial models for embryonic CO2 cluster development. The themes used in this report for analysis of the ALIGN case studies have been identified from work completed previously within the ELEGANCY project on the definition of business models and from experience of development of CCS across Europe over the past 15 years. Key to the findings in this report are a series of informal interviews with the ALIGN WP5 case study participants that have been collated and summarised (Appendix A). From these case study specific findings, this report has expanded the results and outlined generic practical lessons learnt. These lessons learnt highlight to the major drivers and limitations in the development of investable business models for transport and storage infrastructure and support of the decarbonisation of industrial clusters. Based on the experiences of the ALIGN case studies and beyond, this report has established a generic methodology to inform the decision-making process Europe’s industrial regions are currently facing as they evaluate their options to decarbonise. This methodology can be used as a checklist for industrial clusters that want to identify which pre-conditions they meet as well as those which are crucial to be obtained. Finally, the report joins the tools developed in ALIGN with the results and tools of the simultaneously running ELEGANCY project that are also applicable to general CCUS, BECCS and DACCS projects and to the regional decarbonisation of industry. Together they provide a high-level commercial methodology, including the development and selection of business models, to support the delivery of integrated CCUS projects and network infrastructure.




Appendix A. ALIGN WP5 Case Studies Participant Interview Summaries

A.1 WP5 Task 5.1 The United Kingdom Interview Summary

A.1.1 Project Description

• The objective of the UK case study is to investigate reducing the cost of CCUS deployment in the Teesside and Grangemouth Industrial Clusters through use of shared infrastructure and optimised CO2 transport and storage. The Tees Valley is one of the UK’s most densely clustered sites of manufacturing industries. Future plans include “clean hydrogen” production using CO2 capture and storage. The Grangemouth cluster is a refinery complex for chemical products and is the site of Scotland’s only crude oil refinery.

• The project uses techno-economic modelling of CO2 sources and offshore storage sites to gain a better understanding of optimal options for phased infrastructure development. The plans of the Teesside and Grangemouth stakeholders will be taken into account to facilitate identification of high-level system investment barriers and major investment risks. Potential mitigation measures via public-private risk sharing and system-level business models are being studied.

A.1.2 Theme 1: Strategic Rationale

• The overall strategic objective is the decarbonisation of an industrial cluster in a cost-effective manner in order to create an attractive proposition for industry and to protect existing and get new investment in the region:

a. Mitigating the risk of industry closing down as a consequence of future impact of EU ETS on profitability and avoiding negative socio-economic impact on the region: “Safeguarding industry”;

b. Creating opportunities for economic growth through the construction of new infrastructure and the development of local supply chain built on existing expertise.

• Tees Valley: The focus of TVCA activities have evolved over time: the initial focus was on power + CCS for the UK competition, then the focus shifted towards industry decarbonisation, and it is now back on power as an anchor for CCS with the interest publicly expressed by the OGCI. Possible subsequent industrial decarbonisation includes capture from a fertiliser plant and a hydrogen plant.

• Grangemouth: CCUS in Grangemouth is part of the Scottish Government’s overall strategic vision for Scotland to be at the forefront of large-scale decarbonisations skills, technologies and supply chains in the UK and in Europe.

• Hydrogen o Hydrogen is gaining a lot of momentum in the clusters with its potential for fuel switching in

industry, power and heating. o Hydrogen use for heating needs important policy decisions which remain some years away.

Applications for hydrogen are also less well developed. o CCS is only way to decarbonise some of the industry and needs to be part of the solution

A.1.3 Theme 2: Investment Risks/Barriers

• Moral Hazard: see below

• Cluster competition: see below

• Lack of investment framework for industrials

• High level of costs: o Costs of capture have not reduced drastically over time o Capture costs are linear and not decreasing with volume;




o Capture costs (actual capture + utilities (i.e. new power station)) represent 90% of CCUS total cost for industrials. Transport and Storage costs are minor in comparison.

• No value added on green products - Issue with competitiveness of global commodity market o Lack of market pull for low carbon products o No price premium on industrial products for chemical and fertiliser producers o Facilitation for industrial decarbonisation has to come from the local country/market o Issues with competition in EU ETS market: it is cheaper to import products if and when the

CO2 price gets higher and the consequence is deindustrialisation as companies stop manufacturing in UK and products are imported.

• Low confidence in government and incentives o Lack of government decision-making: delaying decisions. o Past experience with incentives and degradation of incentives over time. o For example, two different incentives for CHP plant – heat and power. o Incentives are being discounted by investors in FID. o Incentives need to be long term (>15yrs). o But investors fear they will be penalised by the support mechanisms from the government if

their plant becomes sub-economic due to market changes and they have to stop production. The government will force to keep on producing or repay.

A.1.4 Theme 3: Market Development

• Risk of negative impact from EU ETS: industries are benefiting from free allowances but the nature of international competition for commodity products (and some other products).

• Voluntary decarbonisation: The focus needs to be on creating a position where industry decarbonises voluntarily because the actual drivers for decarbonisation exist. The opportunities for decarbonisation need to be more attractive for industry. At the moment, industry and regions are locked in a conversation on cost/subsidy against a backdrop of threats from industry closing down.

• Making a first investment to facilitate an evolution: o The initial investment will facilitate the development of other opportunities. There needs to

be an acceptance of the uncertainty and the risk. Not doing anything should not be an option.

o There is too much focus on cost for first project and there needs to be a long-term view of the value from CCS services.

o CCS cannot be compared with the development of the wind industry or other low carbon technology: the same serial production cost saving opportunities as do not exist with CCS technology.

• There should be a focus to drive CCS by developing market for low carbon products: The market will drive companies to decarbonise

o Focus on identifying specific products with more immediate potential for low carbon value o Different behaviours towards CCS exhibited by industrial companies according to the nature

of their product/markets:

▪ Sabic is not interested in CCS because their product is a commodity product with competition from other markets without carbon pressure

▪ On the other hand, the agricultural market is putting pressure on CF (fertiliser company) to decarbonise

o Role of government procurement to drive market for specific green products (cement, steel) using its publicly funded projects.

o Use of standards: the automotive industry manufactures cars and abides by European/global standard on emissions. This may be driven by a globally shared need to




reduce pollution due the extent of the impact of cars on air pollution and health. Can such a driver be replicated?

o Market development for hydrogen could build and enhance existing hydrogen engineering expertise located in Tees Valley (BOC) .

A.1.5 Theme 4: Preferences for risk mitigation/risk allocation

• Public-private partnerships and government sharing of risks to be consistent with 2050 net zero policy.

A.1.6 Theme 5: Public/Private sector collaboration

• There is collaboration between regions, but it is clashing with the government competition for industrial decarbonisation.

• The regions are using glossy PR brochures and incorporating hydrogen in their proposals to impress.

• There is a requirement for each region to develop a Net Zero roadmap. For this activity, each cluster are focusing within their own at the moment – and liaising with local plants to understand their plans. However, this industrial input remains at an operated level rather than a top corporate level and may not reflect the actual company’s intents across their regional and global portfolio.

A.1.7 Theme 6: Cluster Competition and Phasing

• Clusters are under pressure to support individual private projects in their regions where sponsor companies are spending cash and resources rather than looking at the broader options for a system change where the commitment from the government is uncertain and the benefits for the region are less visible. The self-interest of the companies is acknowledged but their interest is aligned with regional economic objectives.

• The Net Zero policy has changed the direction and is driving change with regard to the role of BECSS, DACSS.

• There is a need for a coordinated cluster approach where there is no real advantage to the winner compared to others - shared benefits rather than cluster competition which incur lots of costs and are demoralising to losers.

• There is also a need for a more integrated approach - only T&S.

A.1.8 Theme 7: Financing structure

• Important to understand the role of economic multipliers and the value of decarbonisation for society

• Market development for low carbon products: o CO2 border tax? import charge, set price internally to market - issues with world trade rules

• Infrastructure funding: o potential commercial structures exist (contract for difference, RAB…) but who pays ultimately

and how is the cost allocated between all the parties? o Users? Producers? Manufacturers? o Embodied CO2? Carbon VAT? General taxation?

• Coordination at regional level with coordinated regional stimulus. A.1.9 Theme 8: Societal and Social Acceptance

• Clean Air: this is not really a driver for decarbonisation of the case study regions. Industry has made many changes about management of wastewater, and improvement clean air (desulphurisation).




• Public Pull: TVCA has focused its efforts so far on government advocacy, and less on public perception. Opportunity for the public to drive change in industry through being proud of their industry, as this is where many local people work.

• Job creation: There is a need for local job creation at the same time as decarbonisation. TVCA is focused on supporting the contribution of the local value chain. This requires commitment for the local content from the private investors at corporate level.

• The Moral Hazard o Major issue of public money subsidising O&G industry and locking in a fossil fuel future

instead of facilitating the creation of new clean processes. NGOs and the public have not so far put pressure on TVCA but TVCA is aware that this issue exists and may come up later. There is a lack of awareness of the public about CCS which may explain the lack of reaction at the moment.

o Is there a risk that supporting hydrogen is also locking in fossil fuel?




A.2 WP5 Task 5.2 The Netherlands Interview Summary


• The project is focused on the reduction of emissions from the Shell and BP refineries and petrochemical plants located in Rotterdam through the use of hydrogen (manufactured from natural gas) to create the high temperature heat required for their processes instead of through the burning of mix of natural gas/process gases. The project scope also covers the investigation into the specific use of hydrogen in some of the existing gas fired power plants which could run with a high concentration of H2 blending (up to 40%).

• The project is designed around the centralised emission capture from a new H2 plant and relies on CO2 transport to North Sea provided through the separate public Porthos project.

• The project scope does not cover other refineries/chemical plants, and other sectors (power, heating) are not included in the scope of the project. The study does not consider the nature of ownership/operation of H2 production plant.


• Geography: proximity of storage location.

• Infrastructure: the companies involved are used to sharing infrastructure and existing corridors can be expanded for hydrogen transport.

• Close proximity of emitters with the same characteristics and same requirements o High temperature heat. o Multiple emission points within same facility.

• The central production of H2 (with capture) is a better fit compared to alternatives: o Continuing the current use of fossil fuel with multiple capture facilities implies the cost of

multiple capture facilities and complex pipework within the facilities. o Renewable electricity cannot provide the high temperature heat.

• Significant reduction impact on emissions from the Shell and BP facilities (1.4-2.8MT/year)

• Ease of transition: some of the boilers/furnaces can already operate on blending.

• Market: The industries involved will exist for the foreseeable future and are expected to retain the benefit of strong export markets.

• Policies: o Emission reduction targets set by Port Authorities. o There is a government policy which limits the use of CCS for industrials to 7MT/yr and puts

an obligation to look at alternatives to CCS. This is designed to prevent a CCS lock in for the future.

• Possibility to export hydrogen to other areas with CO2 storage in their proximity such as Antwerp – area with similar energy users and existence of H2 pipe (though this is not being actively considered)


• Complexity and limitation of project participants: the main emitters (Shell and BP) are not members of the ALIGN project and there are 3 others refinery/chemical plant owners who are not included in the scope of the project.

• Scale of investment required and lack of a clear funding model: The critical factor is how subsidies will be given for companies to remove emissions. This may be mitigated by the launch of the new FiT model (SDE) – see below.

• Suitability of the new FiT Model (SDE): o Is the scale of overall subsidy budget (€300m per year) sufficient to finance large scale

decarbonisation (both capture and transport and storage) projects? o Subsidy timeframe: 15year duration only compared to investment timeframe.




• Societal support: o How to communicate continued use of refineries and fossil fuel? o How to present and guarantee to the public that the use of fossil fuel derived hydrogen is only

a “stop gap” solution until green hydrogen can emerge and develop commercially. How to demonstrate that there is an opportunity to create the initial infrastructure for the future?

• Full Chain Risk: o Security on long term hydrogen supply contracts with users is required o Coordination with the development of the transport and storage infrastructure o It is envisaged that a central body will offer T&S in the Netherlands which could facilitate the

mitigation of this risk: ▪ The Porthos project is designed to provide services for circa €10-€20/ton in

Rotterdam area. ▪ The Athos project is designed to provide services to Amsterdam. ▪ Additionally, Nuon is working with Equinor on the Magnum project.

• International competition: how to address the commercial competition from other countries who do not decarbonise, e.g. Antwerp?


Not included in the scope of the case study A.2.5 Theme 4: Preferences for risk mitigation/risk allocation

Not included in the scope of the case study. A.2.6 Theme 5: Public/Private sector collaboration

Not included in the scope of the case study


There are a number of other clusters and projects around the Netherlands investigating decarbonisation. The H-Vision project is of direct relevance as it focuses on overall decarbonisation of the Port of Rotterdam with cooperation between all the parties in the port of Rotterdam. According to the newly launched Feed-in-Tariff system, companies/groups of companies will participate in a competitive auction to win an overall tariff for CO2 capture, transport and storage from a limited annual budget provided by the Dutch government. Full details were not available at the time of the interview.

A.2.8 Theme 7: Financing structure

Not included in the scope of the case study. See references to the newly launched FiT (SDE) as a potential financing mechanism for full chain decarbonisation projects. A.2.9 Theme 8: Societal and Social Acceptance

Not included in the scope of the case study.




A.3 WP5 Task 5.3 Germany Interview Summary


• The project focus is on the contribution of Carbon Capture and Utilisation (CCU) to decarbonise North Rhine-Westphalia by capturing CO2 and converting it into synthetic fuels (DME or OME). DME is primarily used in peaking power plants, whereas OME is primarily used as a transport fuel

• The project aims to identify emissions sources and demand for DME and OME as well as the possibilities for linking them with appropriate infrastructure


• Making use of significant geographical concentration of CO2 emissions and existing quality shared infrastructure (pipeline, heating networks, electricity grid) as well as possibilities of integrating with renewable energy technologies .

• CCU can only make a limited contribution to achieving net zero emissions but the RWE demonstrator will provide real data and proof of concept for understanding scale-up, potential for export of technology and/or fuels.

• Local, national and international narratives can be created around technology, products (markets), and public acceptance (though not part of the scope of WP5).


• Dependence on large amounts carbon free electricity: CCU only makes sense if the CO2 footprint is lowered and hence carbon free electricity is required. In addition, the technology is highly electricity intensive - large amounts of renewable electricity are required to make “green” synthetic fuel:

o The amount of renewable energy available is an inherent limitation to the contribution to overall system decarbonisation.

o The overall amount required for large scale CCU is also not aligned/consistent with the plans for renewable electricity capacity building in Germany

o The technology has to/will have to compete with other technologies for use of renewable electricity (e.g. electric transport, ‘Power to X’ including power to heating and power to gas).

• Difficulty and ambiguity to assess the actual “Green” Impact: in the case of synthetic fuels, there are emissions resulting from the end use in transport. The methodology used for the Life Cycle Analysis (LCA) has a critical impact on the metrics and on the actual quantification: cradle-to-gate versus cradle-to-grave. Both methodologies are being considered in ALIGN WP4 but selecting appropriate KPIs is complicated.

• Misuse of LCA methodology: LCA can be misused in lobbying by the various industries with potential for ‘double counting’. With regard to export and international trade of synthetic fuels, the framework is critical to trace the “greenness” of the manufacturing process (renewable vs non-renewable electricity). Such a framework does not exist. Public trust was lost in biofuels due to issues with the emission accounting rules.

• Lack of certainty on physical deployment pathway: German policy is an ongoing “conversation” with primarily a focus on innovation and only limited funding moving towards demonstration to achieve deployment.

• Social Acceptance / Consumer Behaviour: These factors have a strong impact on the potential for uptake and market demand to drive technology deployment. Customer behaviour can be unpredictable and based on perceptions. Even though biofuels are available at lower price in petrol stations, the public is not buying the product.

• European regulations and policies have a big impact on deployment pathways that might be followed. For example, increasing the size of the electric car fleet can have a much more effective impact than the 5% biofuel blending obligation.




• Full Chain Risk: it is important to recognise that each industry has different strategies which impact on their long-term CO2 emissions and as a consequence create different risk profiles for viability of investment in large scale synthetic fuel plants:

o What is the future of the product and what is the availability of alternative processes to reduce process emissions?

o North Rhine-Westphalia has many different industries producing emissions from processes and from heat. These industries would use different technologies in fit-for-purpose applications so there is no one-size-fits-all for investment decision making.

o For example, in paper and wood, emissions result from the large amounts of heat required and heat generation can be substituted with fuel switching. On the other hand, emissions from cement manufacture will be more difficult to eliminate with approximately 60% residual emissions originating from the calcination process itself even with best available technology.

o RWE knows that the coal plant will shut down in the future but the focus on the demonstrator is to prove the conversion technology.

• Custom Technology Application: Each installation that makes use of flue gases for CCU will have to address its own gas composition and impurities which can impact catalysts and electrolysers and increase the overall cost structure. Hence there is a risk that it is not possible to transfer and commercialise technology at scale.

• Global technology competition: Japan, for example, is a leader in electrolysers and fuel cells. and Ballard, a Canadian company is a leader in fuel cells for mobile applications. Europe is competitive in technology development but there is still a risk that it can be copied or reverse engineered. Varying or unknown costs and potential cost reduction feed into market sentiment for technology take-up.


Not included in the scope of the case study except for estimates of potential DME and OME demand. Early ideas of potential market development pathways were explored through the discussion:

• A potential pathway for the market development is through the potential value from exporting the technology and expertise from Europe to other countries. German companies researching or developing these CCU and conversion technologies are often global and can apply that expertise elsewhere in the world.

• A benefit of the CCU technology for production of DME or OME could be to facilitate the transfer of renewable energy from places where the production is due to lack of local or grid constraint, e.g. countries with a high share of renewable resources including wind and solar (e.g. South Africa and Australia) could produce DME at a large scale. However, there are significant issues with international movement of clean fuels from recycled materials – in particular whether the fuels have been made using clean electricity.

• DME/OME could be used as a chemical feedstock but there are no market drivers yet for such a demand to emerge.


Not included in the scope of the case study A.3.6 Theme 5: Public/Private sector collaboration

The project is at an early stage of development and collaboration between organisations/sectors within the North Rhine Westphalia region is emerging. For example, there are joint projects between cement and chalk facilities and there are industry talks in some cases looking at connection synergies such as between electricity and heating uses.


Not included in the scope of the case study and not applicable.




A.3.8 Theme 7: Financing

Not included in the scope of the case study. The current pathway of innovation and research into CCU is likely to continue with large amounts of public funding remaining available. A.3.9 Theme 8: Societal and Social Acceptance

Not included in the scope of the case study except for a high-level understanding of the existing impact of consumer behaviour in relation to biofuels.




A.4 WP5 Task 5.4 Norway Interview Summary


• The project focus is the technical design of a hub/intermediate CO2 storage facility (collecting area) in an industrial area where the cement industry, fertilizer production and a chemical plant are operating. The hub will consolidate the emissions prior to shipment to a large storage facility.

• The project aims to understand how different approaches with regard to the full chain could impact the technical design of the hub through work in cooperation with Imperial College (modelling). The project considers the impact of changes in volume, the availability of excess transport/storage capacity and CO2 stream purity specifications.


The project objective is local/national. Due to the low volume of local emissions in Norway and the geographical location of the main storage reservoirs, hubs are considered the most cost effective and flexible solution. Emissions can be combined locally before being transported to a larger subsurface reservoir. It is anticipated that a number of such hubs could be developed. The storage reservoirs would have additional capacity for storing emissions from other countries and it is anticipated there are technical and commercial synergies between the local and international dimensions. A.4.3 Theme 2: Investment Risks/Barriers

• Volume commitment risk from industrials: o Market risk: uncertainty on future demand for product o Technology: potential changes in alternatives for capturing CO2 o Cost: lack of premium for clean products

The fertilizer company (Yara) backed out of the project due to the uncertainty on capture for their Norwegian plant – the uncertainty is related to the market risk on the future demand for their product and the age of their plant.

• Cost The cost of CCS chain is currently unacceptably high for industrials compared to the potential product value:

o Cement industry: there is a possible additional green premium in the long term, but it is not sufficient to justify investment. Feasibility studies have been completed, but the financing is yet unresolved.

o Fertilizer industry: the main end users are farmers, and no green premium is anticipated.

• Uncertainty of storage cost over long term: if industrials and governments are to invest millions, can they trust the cost of storage will remain reasonable and storage providers will not be opportunistic in the future benefiting from the chain dependence?

• Full Chain Risk Any upstream and downstream changes have a major impact on the design (and the cost) of the whole project: risk of change in emission volume (losing one emitter for example), risk of losing the storage reservoir. This risk is increased given the low volumes and the low number of emitters/sinks. Ship transport is a potential mitigation as it gives more flexibility in terms of chain (volume and destination).


Not included in the scope of the case study.





Not included in the scope of the case study. A.4.6 Theme 5: Public/Private sector collaboration

Not included in the scope of the case study. In general, the feedback from the Norwegian industry is that they can be responsible for the physical capture of emissions from their operations but they do not want to be responsible for the transport and storage activities, and such a service needs to be made available by the government/third parties. Equinor and Shell are currently indicating they will take care of transport. A.4.7 Theme 6: Cluster Competition and Phasing

Not included in the scope of the case study. With regard to the physical hubs, those are more local so there is no real competition between them. It is understood that hubs will be needed for the industrial areas and they will feed into a bigger storage reservoir. With regard to knowledge, the private companies are rather open and collaborative. Driving cost down is the focus for the oil and gas companies.

A.4.8 Theme 7: Financing Structure

Not included in the scope of the case study. With regard to financing, industrials cannot justify the overall CCS cost and it is clear that they expect government intervention. It is unclear how any extra transport/storage capacity will be financed especially if the infrastructure is to receive emissions from other countries and if it is for the benefit of the storage companies. A.4.9 Theme 8: Societal and Social Acceptance

Not included in the scope of the case study. There is a general acceptance to use some public money to fund the CO2 transport and storage infrastructure. It is understood that the public does not put the responsibility on the oil and gas companies to decarbonise the system because Norwegian emissions are low; the majority of the fossil fuel produced is consumed/burnt by other countries; and oil and gas companies invest significantly to reduced their individual footprint, i.e. the emissions from their own activities, and demonstrate best in class performance.




Appendix B. Removing investment barriers for CO2 transport and storage

Recommended measures for removing CO2 transport and storage investment barriers:

Investment Barrier Possible Mitigation Measures

Missing market for CO2 transport and storage services

• Government underwriting the provision of affordable service to CO2 emitters

• Creating end use markets that can socialise and regulate the additional cost of clean energy and products e.g. Hydrogen for heat or transport

• CO2 emitter obligation plus mechanism for import/export competitiveness adjustment

• Appropriate short and long-term price for CO2 as environmental pollutant via e.g. carbon market, carbon tax

Dependence of investment case on stable government policy and coordinated delivery of infrastructure/utilisation

• Parliament commitment to first infrastructure in statute with binding mandate and budget given to an appropriate public authority

• Implementation agreements split between emitters and the CCS chain with government providing State mandates and assurances to enable financing

3. Uninsurable long-term leakage

liabilities defined in EU Directive and

national regulations with large front-

loaded Financial Security

• State owned transport and storage operator with no private sector involvement other than technology supplier with guarantees and warranties

• State owned transport and storage company accepting liabilities with private sector operator as contractor to state having capped guarantees and warranties

• Joint public-private transport and storage company with private partner liability capping and government underwriting of liabilities above agreed level

• Private sector transport and storage company based on agreed risk sharing principles (e.g. defined events, defined volume and carbon price collar) with liability capping and government underwriting beyond cap

4. Guaranteed intra-chain counterparty

performance is required between

CO2 producer/capturer and CO2

capturer/gatherer/transporter

(+storer)

• Utilise a binding umbrella agreement that guarantees intra-chain counterparty performance with government providing state step-in, guarantor of last resort, assurances and underwriting as required

5. Poor or inconsistent public

acceptance of utilisation of CCS

technologies and chain for

decarbonisation

• Long term proactive education, communication and engagement plan and actions

• Promotion and development of socio-economic and environmental benefits




Appendix C. Mitigating business risks in CO2 transport and storage

Recommended measures for mitigating CO2 transport business risks:

CO2 Transport Business Risk

Possible Mitigation Measures

Market Risks: 1. Lack of certainty as to the risk/liability sharing for

infrastructure (i.e. pipelines) that could be re-used for

CO2 transport

2. Lack of guarantee of income (tariff price) for transport

of CO2

3. Absence of business models that provide guaranteed

revenue streams for all parts of the chain (banks will

require visibility of revenue streams) - especially for

non-electricity CCUS projects. Currently cheaper to

emit CO2 to atmosphere

4. Missing guidelines for industrial risk-sharing

5. Overreliance on the market to deliver large scale CCS

& excessive requirement on quantifiable benefits to

prove business case

▪ Government retains the risk/liability for the duration of the project, whilst current or new asset owner

operates it.

▪ Strong support (i.e. financing guarantee/capital grants/liability underwriting) from the governments would

contribute greatly in reducing the cost of capital. The Innovation Fund is a good route through which

some business risks can be addressed.

▪ ‘Railway type’ approach where independent operators (either private or public) use their certified

equipment on a common infrastructure. This would need to be supported by government policies.

Alternatively, finding analogies in other sectors to allow both risk estimate/capping and adequate

communication to stakeholders, collecting learned lessons and methodologies. Lessons and best

practice from the nuclear and aviation sectors. Insurance caps (there are many industries or activities

with this). Develop solutions where possible with insurance companies, European Investment Bank

(EIB), International Maritime Organisation (IMO) and OECD

▪ Introduction of an EU carbon floor price

▪ State owned regulated entities receive support for demonstrated projects

▪ Government underwriting the provision of affordable service to CO2 emitters

▪ Creating end use markets that can socialise and regulate the additional cost of clean energy and

products e.g. Hydrogen for heat or transport

▪ CO2 emitter obligation plus mechanism for import/export competitiveness adjustment

▪ Government needs to collaborate developing an initial revenue model for the first few projects. Revenue

needs to be acceptable to financing community.






Macroeconomic Risks: 1. Risk of future carbon price being too low

2. Growth in new industry/service sectors pulls jobs and

skills development away from CCS generally and T&S

particularly

3. International climate change efforts fail to address

disparity between carbon content of goods and

services produced in different regions and

jurisdictions resulting in disequilibrium in global

markets and disincentives for industry decarbonising

▪ Introduction of an EU carbon floor price

▪ Co-ordinated sector strategies that are consistent with requirements for delivering emissions targets and

ensure skills training and education programmes are pro-actively implemented in advance of shortages

occurring.

▪ Support measures for industry introduced (including import border adjustment, export price

compensation) in accordance with a designed timeline consistent with meeting emissions targets

Financial Risks: 1. CAPEX and OPEX uncertainties

2. Lack of operating full chain power and industrial

demonstration project to give investors’ confidence in

outcome of CCS schemes

3. High associated off-shore CAPEX costs to prepare a

natural resource which will have a high public value

▪ Learning by doing, comprehensive business risk analysis, audits

▪ Prioritise a full chain power and industrial demonstration project to prove concept to stakeholders. Also,

Potential EU interim support scheme for mitigation of demonstration of pilot projects

▪ Future amendment in state aid, appropriate policy to support equivalent to low carbon power

generation. Also, appropriate level of EU grant for initial demonstrator CCS projects

▪ Government to work with oil and gas regulatory authorities to put mechanisms in place to preserve

strategic assets from decommissioning

Legal & Regulatory Risks: 1. Poor understanding on the (re)certification process of

existing pipelines in order for them to be used for CO2

transport (given that there is a change in use

envisaged)

2. Mandatory third-party access to infrastructure leading

to operational and commercial problems such as

controlling CO2 quality specs and inability to meet

performance guarantees

3. Inconsistent laws and regulations between end use

▪ Encourage government to address the re-use issue and ensure that re-certification process is not overcomplicated

▪ Ensure government pushes for recognition of the re-use issue and introduces adequate policies and regulations to accelerate permitting and limit delays

▪ Establish a regulatory regime that governs CO2 quality specifications rather than leaving it to contractual

arrangements

▪ Establish an oversight council including regulators and others to ensure consistency and compatibility of

regulations

▪ Establish an oversight council including regulators and others to advise government on the impact of

end use market regulation on segment businesses






markets and those governing CCS permitting and

operations affect construction and/or service delivery

4. Change of laws/statutes/regulations governing end

use markets having a detrimental impact on segment

businesses

5. Change of laws/statutes/regulations governing CCS

having a detrimental impact on segment businesses

6. Statutory remedies including compensation and

penalties for defined and limited events (incl. death)

result in expensive insurance for an operator

7. Pipeline consents, permits, leases or licences are not

easily obtained (delayed, conditional or not granted

due to technical and/or safety uncertainty)

8. Risks associated with cross-border transport of CO2


CCS regulation on segment businesses

▪ Proactively work with the insurance industry, regulators and public authorities to characterise the

linkages between remedies and insurance products and develop least cost or most efficient solutions for

T&S infrastructure operators

▪ Proactively and collaboratively engage early with relevant stakeholders including regulators, local

authorities, environment agencies etc.

▪ Proactively and collaboratively engage early with relevant regulators ▪ Bi-lateral treaties for cross-border transport. Potentially involve the IMO and OECD, who are also

interested in the issue of unidentifiable risk. Commercial lessons from the recent EIB approval of the trans-Adriatic pipeline. Examine EBRD decision-making on the investment in the pipeline project in Southern Europe/Turkey

Political Risks: 1. Risk of policy changes which could have an adverse

effect on CCS project viability

2. Lack of long-term and stable investment policies with

clear ROI and profitability

▪ Enshrining CCS in EU directives to avoid the risk of local political decisions derailing projects

▪ Parliament commitment to first infrastructure in statute with binding mandate and budget given to an

appropriate public authority

▪ Stable framework of incentives allowing for private sector decision and public infrastructure decision

Technology Risks: 1. Pipelines cannot cater for the CO2 transport

requirements, e.g. not being able to handle the

physical and chemical properties of blended CO2

streams. Results in re-engineering or loss of

customers

▪ Government compensation for transport operator above agreed threshold

▪ Insurance cover wherever possible

▪ Umbrella agreement including government compensation for transport operator above agreed threshold

▪ Technical collaboration between EPCMs and technology suppliers across the chain to stress-test

integrated designs

▪ Understand infrastructure lifetimes and select accordingly

▪ Conclude JV with offshore specialists

▪ Clear policy & support mechanism from government for initial projects to get things started and learning






2. Full chain technical/technology integration and

performance don't meet design criteria requiring re-

design, remediation, or re-engineering

3. Legacy issues around re-use of existing infrastructure,

and potential effect on commercial structures.

4. Lack of specialist offshore knowledge

5. Lack of demonstration/full-scale projects in

Europe/UK means risk allocation not yet fully

understood.

by doing

Operational Risks: 1. Negative performance impact on transport and

operations of upstream emitter or CO2 capture

operations

2. Delays in construction and commissioning

3. Varying CO2 purities and trace elements from multiple

sources (IGCC, post capture, oxygen blown

combustion) for transport long-term integrity

(corrosion issues in particular)

4. Short term unavailability of CO2 transport operations

would lead to emitter operational risks

5. Project scale-up delay due to London protocol

amendment not being ratified in time

▪ Use of proven technology and designs

▪ Supplier guarantees and warranties

▪ Insurance cover

▪ Emitter or capture operator compensation to transport operator

▪ Learning by doing, comprehensive project monitoring and risk analysis.

▪ Third party assessment with proper integration of knowledge transfer and experience, and need of

detailed and comprehensive list of criteria for legal acceptability of CO2 from a given emitter with quality

control

▪ Plant design with equipment redundancy

▪ Contractual liability caps for customers

▪ Contractual guarantees with EPC and O&M companies

▪ Contractual guarantees with CO2 transport companies

▪ Industry and government to promote international cooperation

▪ Government compensation for transport operator above agreed threshold






Social & Societal Risks: 1. Negative public opinion

2. Public perception that investment in CCS is less

money for renewables technologies

3. Poor or inconsistent public acceptance of utilisation of

CCS technologies and chain for decarbonisation

4. NIMBY reaction to individual components of H2-CCS

chain preventing or delaying FID

5. Insufficient education and skills training programmes

to provide workforce needed across the H2-CCS

chain leading to slower city conversion and

underutilisation of hydrogen production service

▪ Communication of risks and finding a way to convey a realistic picture to the public. Risk estimate

dependence on acceptability cf. on-shore vs off-shore risks

▪ Promote the critical role of CCS as an integral part of balancing future power transmissions system and

an enabler of high renewable energy penetration

▪ Long term proactive education, communication and engagement plan and actions

▪ Promotion and development of socio-economic and environmental benefits

▪ Proactive engagement and education programmes ahead of FEED studies and detailed design

▪ Ensure training and skills development is integral to clean growth and industrial strategies at the sector

level




Recommended measures for mitigating CO2 storage business risks:

CO2 Storage Business Risk


Market Risks: 1. Market demand declines from, or doesn't meet,

projection in investment case

2. Initial or cornerstone customers delayed in start-up

and use of transport and storage service

3. Negative effects of dynamics of end use hydrogen

markets, electricity markets or industrial product

markets

▪ Take-or-pay contract with base-load emitters with sufficient capacity reserved and secured market

demand to cover a threshold return on investment. Appropriate pass-through if third party capture

provider.

▪ Choose counterparties with secure market demand or business model for a required minimum period

▪ Terms of take-or-pay contracts include public sector underwriting for transport and storage

compensation mechanism or revenue support

▪ Public sector market-maker that carries coordination responsibility and is guarantor of last resort

▪ Market regulations extended to include mechanisms to dampen impact on transport and storage

operators such as contracts for difference, revenue compensation, capacity payments

Macroeconomic Risks: 1. Carbon price on ETS stays too low for too long to

incentivise decarbonisation investments in industry

(incl. hydrogen production)

2. Growth in new industry/service sectors pulls jobs and

skills development away from CCS generally and T&S

particularly

3. International climate change efforts fail to address

disparity between carbon content of goods and

services produced in different regions and

jurisdictions resulting in disequilibrium in global

markets and disincentives for industry decarbonising

▪ Carbon price floor and/or a new carbon tax increased in line with a credible price trajectory to meet

national emissions targets and value the CO2 externality for the economy, with compensatory

mechanisms for the disparity between domestic and global markets.

▪ Co-ordinated sector strategies that are consistent with requirements for delivering emissions targets and

ensure skills training and education programmes are pro-actively implemented in advance of shortages

occurring.

▪ Support measures for industry introduced (including import border adjustment, export price

compensation) in accordance with a designed timeline consistent with meeting emissions targets

Financial Risks: 1. Uninsurable components of the transport and storage

infrastructure and operations require alternative and

▪ Public sector underwriting where no insurance available, underwriting beyond limits on carbon pricing

(guarantees for capped carbon penalties for geological storage), no-fault compensation mechanisms,

guarantor of last resort






novel underwriting and guarantee mechanisms for

lenders otherwise finance is unavailable

2. New technology/supplier guarantees and warranties

will be required by lenders otherwise finance will be

unavailable or high cost

3. Lenders seek onerous termination provisions or step-

in rights making finance essentially unavailable

4. Lenders conditions incompatible with regulatory

regime making finance essentially unavailable

5. Lack of confidence from banks in end user market

and viability of long term agreements with emitters

▪ Contract with technology suppliers who can provide substantive warranties and guarantees within a

partnership structure under the terms and conditions of a suitable umbrella agreement

▪ Mandate another public authority to perform step-in functions as part of regulatory oversight including

permit/licence suspension or termination. Include cost capping and underwriting minimum repayment

thresholds as required in the umbrella agreement

▪ Utilise umbrella agreement to establish required statutory provisions and regulations for private sector

finance to be available

▪ Include government/public authority guarantees in an umbrella agreement

Legal & Regulatory Risks: 1. Mandatory third-party access to infrastructure leading

to operational and commercial problems such as

controlling CO2 quality specs and inability to meet

performance guarantees

2. Inconsistent laws and regulations between end use

markets and those governing CCS permitting and

operations affect construction and/or service delivery

3. Change of laws/statutes/regulations governing end

use markets having a detrimental impact on segment

businesses

4. Change of laws/statutes/regulations governing CCS

having a detrimental impact on segment businesses

5. Statutory remedies including compensation and

penalties for defined and limited events (incl. death)

result in expensive insurance for an operator

6. Pipeline consents, permits, leases or licences are not

▪ Establish a regulatory regime that governs CO2 quality specifications rather than leaving it to contractual

arrangements

▪ Establish an oversight council including regulators and others to ensure consistency and compatibility of

regulations


end use market regulation on segment businesses


CCS regulation on segment businesses

▪ Proactively work with the insurance industry, regulators and public authorities to characterise the

linkages between remedies and insurance products and develop least cost or most efficient solutions for

T&S infrastructure operators

▪ Proactively and collaboratively engage early with relevant stakeholders including regulators, local

authorities, environment agencies etc.

▪ Proactively and collaboratively engage early with relevant regulators

▪ Proactively develop legal "toolkits" focussed on civil law with experts, regulators and international bodies such as IEA & GCCSI






easily obtained (delayed, conditional or not granted

due to technical and/or safety uncertainty)

7. Storage permits, leases or licences are not easily

obtained (delayed, not granted or require onerous

conditions for example in monitoring and

decommissioning plans)

8. Prosecuting or defending civil law cases is difficult

and expensive due to novelty of storage related

activities and no precedents other than analogues in

other sectors

Political Risks: 1. Change in political priorities, policy or supporting

mandates related to CCS or the end use markets (e.g.

hydrogen market sectors, industrial CO2 utilisation)

2. Successive governments delay dealing with

decarbonising trade exposed industries resulting in

slow uptake of storage services beyond initial emitters

▪ Long term political and financial commitment to first clean infrastructure project in statute and cross-

party consensus on energy policy

▪ Minimise upfront investment and seek joint government funding for engineering studies

▪ CCS infrastructure umbrella agreement between state/public authority and private sector providing loan

guarantees, long tenor debt repayment, revenue compensation at agreed threshold

Technology Risks: 1. Pipelines cannot cater for the CO2 transport

requirements, e.g. not being able to handle the

physical and chemical properties of blended CO2

streams. Results in re-engineering or loss of

customers

2. Full chain technical/technology integration and

performance don't meet design criteria requiring re-

design, remediation, or re-engineering

3. Storage site cannot cater for required dynamics of

▪ Government compensation for storage operator above agreed threshold

▪ Insurance cover wherever possible

▪ Umbrella agreement including government compensation for storage operator above agreed threshold

▪ Technical collaboration between EPCMs and technology suppliers across the chain to stress-test

integrated designs

▪ Umbrella agreement including government compensation for storage operator appraisal and

characterisation programme, FEED or detailed design above agreed threshold

▪ Characterise a back-up storage site pre-FID

▪ Regulator/Competent Authority implements flexible or less onerous compliance and site transfer rules






CO2 stream (includes surface facilities, wells and

geological formation) requiring selection of another

site

4. Existing MMV technologies are not able to provide

necessary data for regulatory compliance purposes

Operational Risks: 1. Negative performance impact on transport and

storage operations of upstream emitter or CO2

capture operations

2. Short term geological storage outage: e.g. well

closures, injectivity problems, facilities problems,

maintenance overruns

3. Underperformance of geological storage site (incl.

capacity, lifetime injectivity, migration)

4. Unpredicted behaviour of CO2 plume during post-

closure phase causing delays to hand-over to

Competent Authority or requiring remediation

▪ Use of proven technology and designs

▪ Supplier guarantees and warranties

▪ Insurance cover

▪ Emitter or capture operator compensation to storage operator

▪ Government compensation for storage operator above agreed threshold

▪ Extended pre-FID appraisal and characterisation period including injection testing, pressure monitoring

and 4D seismic surveying

▪ Engineered redundancy in wells and storage formations

▪ Pre-appraised and characterised back-up storage sites prior to FID

▪ Public sector underwriting where no insurance available, underwriting beyond limits on carbon pricing

(guarantees for capped carbon penalties for geological storage), no-fault compensation mechanisms,

guarantor of last resort for financiers

▪ Pro-actively increased MMV programme to reduce unexpected outcomes

▪ Reduce storage site utilisation factor to minimise plume migration distances and reservoir pressures

Social & Societal Risks: 1. Public attitudes become negative after FID or

construction causing underutilisation of the storage

facilities and service

2. Insufficient education and skills training programmes

to provide workforce needed across the H2-CCS

chain leading to underdevelopment of T&S

infrastructure service

▪ CCS infrastructure umbrella agreement between state/public authority and private sector providing

revenue compensation at agreed threshold

▪ Ongoing education and engagement programmes to ensure public support

▪ Ensure training and skills development is integral to clean growth and industrial strategies at the sector

level

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