Barriers Remain to Commercial CCS Rollout in Europe, Despite High Carbon Prices

Bracewell’s Ro Lazarovitch told S&P Global Commodity Insights that, while CO2 prices in Europe appear on paper to cover capture and storage costs, other barriers remain.

“There are quite a few challenges and things that need to come together in order for this whole sector to move forward and establish itself, and one of those is getting the economic model right, but it’s not the only thing,” said Lazarovitch.

“When I look at the whole CCS sector, I’m thinking to myself, here we are trying to create a new industry from scratch,” he said. “If you look at established industries like the global LNG trade, that has its roots in the 1980s and earlier, and that took a really long time to get to the mature market we have today.”

Building an industry on such a scale would take much longer without state support, Lazarovitch said, noting that business models were needed to develop both sides of the market — capturing industrial emissions and the storage side — simultaneously.

Storage hubs need to know they will have the CO2 supplied to them from when the facilities start operating, and industrial emitters likewise need guarantees there will be somewhere to put the captured CO2, he said.

Lazarovitch added that further barriers remain in technology risk at the early stage of market development and issues arising from contractual obligations, which financiers would be very alert to. The solution lies in equity, using proven technology or manufacturer guarantees, all of which make projects more expensive and complicate financing arrangements, he explained.

Furthermore, the sector is at what Lazarovitch called the “exploration” stage, with many developers scoping feasibility, with desktop studies and geological surveys, all of which will take time, and are not guaranteed to lead to project development.

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Article also appeared in S&P Global Commodity Insights’ Carbon Markets Daily.