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Norway: massive cuts in CCS spread doubt, but cuts still reversible

The Norwegian Government cut funds for carbon capture and storage (CCS) in its proposed national budget for 2018, with over 300 million NOK compared to previous grants, and far from what is needed to continue the planned process without delays. They also propose a new treatment of the full-scale CCS project in the parliament during spring next year. In sum this means a new break in the FEED process, and in practice a postponement of the entire project. This creates uncertainty among the actors involved in the realization of a Norwegian full-scale CO2 management project.

Photo: Business Green

The signals the Government is giving now raises doubts about actual political will to realize CCS in Norwegian industry. Which is the last thing these spearhead players need. ZERO believes it is important to facilitate the continued work of full-scale CCS as planned. It should therefore be granted a sum in line with previous grants, estimated at 300-400 million kroner. This in order to make it possible to proceed with the FEED study as quickly as possible in 2018, without revising or rescheduling in the Parliament. This would avoid a delay of the process of four to six months and that the industry withdraws from the process, as a result of it.

ZERO's input to the Parliamental negotiations is therefore a grant total of NOK 360 million for Gassnova's full-scale CCS work in 2018.

Background

Norway has defined carbon capture and storage (CCS) as one of five priority areas for Norwegian climate policy in the combat against climate change. Norway has invested in technology development in CCS for many years through the CLIMIT research program and the construction and operation of Technology Center Mongstad TCM.
In 2013 the Government renewed the ambition to realize a chain for CCS with at least one full-scale CO2 capture plant. This ambition has resulted in several studies that have identified three current sources of emissions. These are Norcem's cement factory in Brevik, Yara's ammonia factory at Herøya and the energy recovery plant at Klemetsrud in Oslo. Gassco is working withthe transport part where Larvik Shipping and Brevik Engineering have been awarded contracts, and Statoil will be responsible for developing the storage project together with Shell and Total.

Now uncertainty is spreading


The Government cuts in its proposal for national budget for 2018 grants for CO2 management from 2 billion in 2016 and 1.3 billion in 2017 to 509 million now.
The main cuts come in funds for TCM (due to fulfillment of loan) and to Gassnova's administration for realization of full-scale CCS. For Gassnova the cut was significantly: in 2017, NOK 360 million was awarded for further studies of full-scale CCS, for 2018 it is now proposed 20 million.
The Goverment also makes it doubtful whether there will be a continuation of the full-scale project by writing: 
«There will thus be new information about both costs and benefits of a full-scale CO2 management project in Norway in the concept studies. The Government wishes to submit this information to the Parliament before it is decided to continue the full-scale project or not. The government will therefore return to the Parliament with a comprehensive presentation of the work on full-scale CO2 handling in Norway after the results of the concept studies on capture have been reviewed, at the latest in connection with the revised national budget in 2018.»

Breaks with the planned progress 

Concept study and FEED was originally intended as one phase. In connection with the national budget in 2017, the Government announced that "Concept studies will continue until the autumn of 2017. The implementation of the project into a pre-project phase will be dealt with in the budget for 2018. This will allow an investment decision to be made in spring 2019."

The Government's proposal for national budget for 2018 breaks with this progress plan, as there are no means for continuing the concept studies into pre-projects. Funds for pre-projects may be granted in revised budget as late as in June 2018. This means that the work on concept studies and pre-projects will be put on hold for six months.
Half a year's delay in realizing full scale CCS is not dramatic in itself. But half a year's break in the work is unfortunate for two reasons:
1) Norcem, Yara and the Klemetsrud facility must stop their work on studies. This means that both internal staff and consulting companies are out of commission and must find other assignments.
2) This creates uncertainty about the Government's intention and willingness to realize full-scale CO2 management.

Complete the work and create a sound foundation for investment decisions

Status of the process is that all industrial actors, with the exception of those who develop the storage project, have delivered concept studies. These are treated by Gassnova now in November, and secondly by the Department of Oil and Energy (OED). The result of this is now in the national budget for next year, proposed to be a comprehensive presentation of Norwegian full-scale CCS to be submitted to the Parliament. The original plan was to use the same foundation, ie the completed concept studies, for a recommendation on which projects that should proceed to FEED studies.

The Government will thus have the foundation needed to make a decision on which projects that will receive funding for FEED, and if some are rejected. This should be given the Government the opportunity to do, thus not creating any delays . ZERO believes that the concept studies speak for themselves and that the outcome of an assessment of these will be the same if it takes place in the Government and governmental agencies, as planned, or in the Parliament as proposed now.

Economic framework for work in 2018

For such industrial projects, the experience is that this last pre-projection phase is the most resource-intensive. It requires that the national budget allocations should be stepped up in line with previous grants, estimated at 300-400 million, for planning and development of the entire chain, with all relevant actors.

ZERO believes that all three capture projects should proceed in the process so that the Parliament has the opportunity to look at the basis of all projects that will cut emissions and contribute to a common infrastructure for CO2 management. These are all industries that want to play an important role in future zero-emission communities, and deliver the products and services we need to get there.

All parties in the planned full-scale project are scheduled to be completed with their FEED studies in the autumn of 2018. This will then be an important part of the investment decision-making basis for the Parliament, planned for spring 2019.

A need for long term measures for CCS - more than ever

Uncertainty and stopping points for the annual political budget allocation processes, provide both major delays and lack of long-term planning and implementation of industrial projects.
This shows with all possible clarity that it is neither durable nor wise that Norwegian authorities through budget negotiations each year, have to set the operation of CCS up against grants for kindergartens and hospitals. And that there must be established another type of funding for carbon capture and storage.

ZERO has launched the idea of a dedicated CCS fund with means from an earmarked fee. Other mechanisms can also trigger CCS. ZERO awaits a committed work to ensure that carbon capture and storage will pay off for the industry in the long run. The most important tool for achieving full scale capture projects, is to establish schemes that make it economically viable for each industry to choose CO2 capture as a solution.
In order for such an investigation and development of a long-term economic instrument to have effect and apply to the current projects for full-scale CCS, work must be started now and be in place before final investment decision is taken in spring 2019. This means that money must be granted , now in the national budget for 2018.
Thus, this climate solution can live regardless of political games and annual budgeting.

Norway cannot be known to again fail and be unable to build such a central climate solution to reduce emissions from industry. An industry that we still will need in a zero-emission society. This sends very bad signals globally. If not Norway can show that they have economic muscles to build such a big project, and boost, for the efforts to stop climate change, who will?

Related news: Norway slashes carbon capture and storage budget

Facts:


Project name:

Klemetsrud (Oslo) waste management and energy recovery CCS project

Scale:

Small

Status:

Feasibility study


Read more:



Facts:


Project name:

Yara CCS project

Scale:

Medium

Status:

Feasibility study

Capture method:
Post-combustion

Capture technology:
Ammonia


Read more:



Facts:


Project name:

NORCEM Cement plant in Brevik, Norway

Scale:

Small

Status:

Operative

Capture method:
Post-combustion

Capture technology:
Amine


Read more:





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