CCS liability could stunt sector

CCS operators need to provide a hefty liability provision for potential CO2 escapes

Stacking up: CCS storage operators need to provide hefty financial guarantees

Stringent European regulations that force potential carbon capture and storage operators to provide hefty financial guarantees in case CO₂ leaks, could stop the industry from developing, experts have said.

The European Carbon Capture and Storage (CCS) Directive provides the legal requirements to store CO₂ underground. The directive, which has been in place since 2009, covers site selection through to licencing, operation, closure and post-closure and is currently being reviewed by the European Commission.

Operators are required to cover the “local damage to the environment and the climate” should CO₂ escape, in the form of “emissions trading allowances for leaked emissions”.

Although there are none commercially running yet, several geological CO₂ stores, which will lock megatonnes of the gas into naturally-occurring aquifers or depleted gas fields kilometres underground, are expected to be commissioned in the coming years.

Dr Luke Warren, chief executive of the Carbon Capture Storage Association (CCSA), said: “The first projects need investment decisions in 18 months. It’s not clear what the regulator will expect. A regulatory framework that uses the carbon price could hold back projects. An operator cannot have perfect foresight about the future carbon price. It could rise a lot in 20, 30 years’ time. Plus, it is hard to think of scenarios where significant amounts of CO₂ are released.”

Owain Tucker, global deployment leader for CCS and contaminated gas for Shell, said: “It’s of concern that they have to make a liability provision for potential CO₂ credits if CO₂ escapes. A bad store will never get a permit. If you are a single company and have to put money aside for something that is extremely unlikely to occur it creates a barrier.”

In Europe, the Rotterdam Opslag and Afvang Demonstratie (ROAD) project in Holland will become the first fully integrated CCS facility to inject into a depleted gas field next year. Earlier this year the UK government awarded front end engineering and design contracts to Shell for the Peterhead CCS project in Aberdeenshire and an Alstom, Drax and BOC consortium for the White Rose CCS project in Yorkshire. Both facilities are planned to be commissioned by 2020.

Warren from the CCSA added: “The discussion is about how much and how to do it so it doesn’t disincentivise investment. If the price is too high and makes these projects ludicrously expensive it could harm their development. 

“You need safe sites and responsible operators, but it needs to be done in a proportionate way.”