Ccs Readiness At ŠoŠtanj: Ticking Boxes Or Preparing For .

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bellona environmentalccs teamCCS readiness atŠoštanj: Ticking boxesor preparing for thefuture?A proposal for a methodology to assesscompliance with Art. 33.1 of Directive 2009/31/ECand progress towards full CCS readiness

ContentsExecutive summary6I. Purpose8II. CCS readiness definition10III. Ready or not? Applying the methodology to Šoštanj Unit 618Biblio-graphy28Annex I Key Criteria for any suitable storage site to comply with the Directive30Annex II Definition of Carbon Capture and Storage Ready (CCSR)32Annex III Outline of pre-feasibility study34Annex IV Excerpts from the UK guidance note on space reservation for capture installation36Annex V Key responsibilities of Member States under the Directive38

Acknowledgements and legal disclaimerThis report is released in the name of The Bellona Foundationand Environmental Law Service. The views expressed in this reportare solely those of the organisations at the time of writing and onthe basis of available evidence. The authors would welcome anycomments, reflecting the fact that the topics of the report are constantly evolving.Authors (in alphabetical order): Eivind Hoff, Kristína Šabová, JanSrytr, Gøril Tjetland and Marek Zaborowski. 2011 The Bellona Foundation and Environmental Law Service.All rights reserved. Users may download, print or copy extracts ofcontent from this publication for their own and non-commercialuse. No part of this work may be reproduced without quoting TheBellona Foundation and Environmental Law Service or the sourceused in this report. Commercial use of this publication requiresprior consent of The Bellona Foundation and Environmental LawService.For more information, please contact:Kristína ŠabováEnvironmental Law Service / Ekologický právní serviskristina.sabova@eps.czMarek ZaborowskiBellona Polskamarek@bellona.orgEivind HoffBellona Europaeivind@bellona.org4 CCS readiness at Šoštanj: Ticking boxes or preparing for the future?

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Executive summaryExecutivesummary6 CCS readiness at Šoštanj: Ticking boxes or preparing for the future? Article33.1 of directive 2009/31/EC (‘the Directive’) obligesMember States to ensure that applicants for new thermal powerstations above 300 megawatt electric capacity (MWe) carry out anassessment of whether suitable CO2 storage sites are available aswell as of the technical and economic feasibility of CO2 transportand retrofitting CO2 capture technology, prior to the issuing of aconstruction permit for the power plant.There is no commonly agreed standard for these assessments,although a number of organisations have suggested what the morecomprehensive concept of CCS readiness should entail. This reportdraws on CCS readiness definitions to identify which questions canreasonably be addressed – at low cost – already prior to permittingof a power plant, in order to answer the questions of art. 33.1 of theDirective. In particular, this report sets out key project-specific information that needs to be provided in order to assess technical andeconomic feasibility. Some of the information will necessarily behighly uncertain at present, given the lack of experience with fullscale CCS at power plants.The report then applies this methodology to the documentsprovided under art. 33.1 of the Directive by the project sponsor fora new unit 6 at the Šoštanj thermal power station in Slovenia.Our evaluation shows that the submitted documents fail tocomply with article 33.1 of the Directive because of: the absence of project-specific assumptions concerningeconomic feasibility, including lack of evaluation of economicfeasibility of the capture, transport (in particular by sea) andstorage; the lack of consideration of local geographical conditions’impact on technical feasibility, in particular for buildingpipelines; the absence of any information beyond already available datafrom GeoCapacity on suitability of storage sites; the lack of consideration of the impact of protected areas andNATURA 2000 areas on transport and storage locations.In sum, the information contained within the documents doesnot exhaust what can reasonably be expected under article 33.1 ofthe Directive. It does not allow for the assessment of the feasibilityof the project – neither technical nor economic feasibility, nor theavailability of suitable storage sites.

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I. PurposeI. Purpose This document’s aims are:»»To propose a methodology firstly for assessing thermal powergeneration projects for compliance with art. 33.1 of directive2009/31/EC and secondly for assessing power plants in theirprogress towards what we believe full CCS readiness shouldentail. Evaluation criteria have been defined for all parts ofthe value chain – capture, transport and storage.»»To apply this assessment methodology to the power plantconstruction project in Šoštanj, Slovenia.Directive 2009/31/EC of the European Parliament and of theCouncil of 23 April 2009 on the geological storage of carbondioxide and amending Council Directive 85/337/EEC, EuropeanParliament and Council Directives 2000/60/EC, 2001/80/EC,2004/35/EC, 2006/12/EC, 2008/1/EC and Regulation (EC)No 1013/2006 (OJ L 140, 5.6.2009, p. 114)) (henceforth ‘theDirective’) entered into force 25 June 2009, and Member States haduntil 25 June 2011 to implement it. Article 33 added a new article9a to the LCP (Large Combustion Plants) Directive,1 requiring newthermal power generation installations with an electric capacityabove 300 MWe to 1) assess the feasibility of CO2 capture, transportand storage, and if this feasibility is established, to 2) set aside sufficient space for capture and compression of CO2 from the plant.The article reads as follows:Article 331. Member States shall ensure that operators of all combustionplants with a rated electrical output of 300 megawatts or more forwhich the original construction licence or, in the absence of such aprocedure, the original operating licence is granted after the entry intoforce of Directive 2009/31/EC of the European Parliament and of theCouncil of 23 April 2009 on the geological storage of carbon dioxide,have assessed whether the following conditions are met:- suitable storage sites are available,- transport facilities are technically and economically feasible,- it is technically and economically feasible to retrofit for CO2capture.2. If the conditions in paragraph 1 are met, the competent authorityshall ensure that suitable space on the installation site for theequipment necessary to capture and compress CO2 is set aside. Thecompetent authority shall determine whether the conditions are meton the basis of the assessment referred to in paragraph 1 and otheravailable information, particularly concerning the protection of theenvironment and human health.In other words, Article 33 of the Directive requires applicants fornew thermal power stations to carry out an assessment of whethersuitable storage is available as well as of the technical and economicfeasibility of CO2 transport and retrofitting CO2 capture technology.The introductory wording ‘Member States shall ensure ( )’ ofarticle 33 also requires Member States to 1) judge the assessmentpresented by the project company and 2) require further assessments if the original assessments are not deemed sufficient, beforeissuing a permit for the power plant unit. The present document1 The LCP directive was in 2010 ‘re-cast’ along with other EU legislation related to industrial emissionsto form a consolidated directive on industrial emissions. Art. 33 of directive 2009/31/EC can nowbe retrieved as article 36 of directive 2010/75/EU of the European Parliament and of the Council onindustrial emissions.8 CCS readiness at Šoštanj: Ticking boxes or preparing for the future?

Prosjektlab/Bellonaseeks to assist Member States in interpreting this provision.Article 33.2 requires appropriate space to be set aside to accommodate CO2 capture technology only if assessments showthat CCS is feasible (see Annex IV for further details). However, ifCCS appears to be unfeasible, no requirements related to CCS areimposed on the project. This is why article 33 has a legal meaningonly insofar as its paragraph 1 imposes obligations for assessingthe feasibility of CCS. These conclusions remain unchanged by therecital 47 of the Directive,2 related to CCS readiness.Member States are free, however, to implement article 33 moreexpansively. In the ‘Carbon Capture Readiness (CCR) A guidancenote for Section 36 Electricity Act 1989 consent applications’ issuedby the Department of Energy and Climate Change in November2009, the UK government set out its requirement for proposedpower stations that they be granted the development consent onlyif they are assessed positively against the Article 33 criteria. Thiswas done in order to support its commitment to new power stationsat or over 300 MWe (and of a type covered by the LCP Directive)being built CCR.3This report argues what CCS readiness (CCSR) should mean,building both on the Directive and existing literature. CCSR is un-derstood as the end goal of a process. We break this process intotwo phases: In the first phase, prior to permitting of the plant, keyinformation must be sought and evaluations need to be carried out.This amounts to the feasibility and suitability evaluations requiredby article 33.1 of the Directive. The second phase runs from permitting to the final investment decision to retrofit CCS on the plant.The criteria to fulfil in the second phase do not need to be fulfilledunder the Directive but are important to map out in order to understand what is needed in the first phase, in order to give normativemeaning to article 33.1.This document is structured as follows: The next part (section II)proposes a CCSR assessment methodology. Our process approachto CCSR is first explained in general terms (section II.A), thenCCSR assessment methodology is explained with a focus on phase1 of building CCSR (II.B).The last part of the document (section III) applies this assessment methodology – criteria by criteria – to the Šoštanj projectbased on the CCS feasibility studies provided by the project(section III).2 Recital 47: ‘The transition to low-carbon power generation requires that, in the case of fossil fuelpower generation, new investments be made in such a way as to facilitate substantial reductions inemissions. To this end, Directive 2001/80/EC of the European Parliament and of the Council of 23October 2001 on the limitation of emissions of certain pollutants into the air from large combustionplants (OJ L 309, 27.11.2001,3 ://decc.gov.uk/en/content/cms/what we do/uk supply/consents planning/guidance/guidance.aspxCCS readiness at Šoštanj: Ticking boxes or preparing for the future? 9

II. CCS readiness definitionII. CCSreadinessdefinitionII.A. CCS readiness as aprocess In this document, we use an expansive understanding of CCSR,which includes the whole range of technical, commercial, legaland economic requirements that such a major project would needto fulfill in order for a final investment decision to be taken by theproject company.CCSR should thus be understood as a process of gradually increasing readiness, towards the final investment decision. As anexample, acquisition of the land chosen for pipeline infrastructureinvestment may take up to 10 years in many countries. Therefore,in order to be prepared for the investment, the land acquisitionprocess should be started 10 years prior to the planned introduction of CCS. CCSR thus requires prior definition of a process toreach the state of 100% readiness for the final investment decisionmoment.This CCSR plan should consist of a) definition of the tasks andactivities required prior to the investment along with an indicative task realization schedule and b) specifying of the conditionsthat need to be fulfilled but may be beyond the project company’sinfluence (e.g. fuel cost, EUA price or pipeline access) for a finalinvestment decision.The company and other investors will make the final investment decision. This will depend mainly on two types of factors:Firstly, the net present value of the project, and secondly actionby government (e.g. adoption of proper legislation, carrying outgeological research). In addition, a lack of local support aroundpotential storage sites could well be a show-stopper even if both theeconomics look attractive and government has assumed its responsibilities. Subjective assessments of both upward and downwardrisks for all these factors will be important for the foreseeablefuture.II.B. Establishing CCSRcriteriaAs mentioned above, we distinguish between two sets of CCSRcriteria:»»Phase 1: Requirements under article 33.1 of the Directive,applicable to all permits for new power plant units above300MWe (‘CCS feasibility’)»»Phase 2: Criteria recommended to be fulfilled prior to a finalinvestment decision for retrofitting CCS to the plant (CCSR)In this section, Phase 1 is analysed.For CCSR, some crucial tasks can only be fulfilled by government,not the investor. Some of these tasks are listed in Annex V, but falloutside the scope of art. 33.1 of the Directive, as they concern ‘full’CCSR.10 CCS readiness at Šoštanj: Ticking boxes or preparing for the future?

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II. CCS readiness definitionphoto istock12 CCS readiness at Šoštanj: Ticking boxes or preparing for the future?

II.B.1. CCS feasibilityArticle 33.1 requires assessments of ‘technical and economicfeasibility’ of capture and transport of CO2, whilst for storagethe assessment should be about availability of ‘suitable storagesites’. The reason for the different wordings is presumably thegreater local site specificity for storage. If there is no site with therequired characteristics for permanently storing future capturedCO2, this is a geological reality that technical prowess or moneycan do little about. But this takes us to the term ‘available’, whichbrings us back to economic feasibility: The further away a suitablestorage site, the more expensive the transport will be. Thus, inreality, similar standards for issues to address should be applied toboth capture, transport and storage when evaluating assessmentscarried out for article 33.1 compliance.‘Technically and economically feasible’Article 33.1 of the Directive requires the ‘technical andeconomic feasibility’ of transport and of retrofitting the installation for capture of CO2 to be assessed. Feasibility assessmentsshould be carried out in a systematic manner and be based onreliable and objective methodology. However, the Directive doesnot give any guidelines for technical and economic feasibility assessments. A publication prepared by the European Commission– ‘Guide to Cost Benefit Analysis of Investment Projects’ - fromJuly 2008, can be considered as a best practice example of howto approach feasibility assessments and is one source of criteriain this report.1‘Economically feasible’ means that, during the operating lifeof the plant, there is a probability that a plant if retrofitted andoperated with CCS can earn a reasonable rate of return on investment. The plant’s total cost for capture, transport, and storagewould include planning, construction capital, and operating costs,including the time value of money.The term ‘technically feasible’ is defined in point 2.4.b Annex Ito directive 2003/87/EC2, as technical resources capable of meetingthe needs of a proposed system can be acquired by the operator inthe required time.‘Technically feasible’ or ‘technically capable’ can also be interpreted as meaning that technologies exist that can be applied tocapture and transport and store a significant portion of the CO2emitted from the plant, while substantially preserving the originalfunctionality of the plant.The present document uses the outline for pre-feasibilitystudies3 by P.M. Hawranek in ‘Manual for the preparation of industrial feasibility studies’ as the main reference to define theterms ‘technically and economically feasible’ that are used in theDirective. The outline for a pre-feasibility study can be found inAnnex III. It must include a detailed assessment that takes localconditions into account.For instance, if the operator decides to use an existing transportnetwork, the availability and capacity assessment of this infrastructure must be made in the pre-feasibility study. If, because ofthe lack of connections or lack of transport facilities that match1 http://ec.europa.eu/regional policy/sources/docgener/guides/cost/guide2008 en.pdf2 http://eurlex.europa.eu/Notice.do?mode dbl&lang en&ihmlang en&lng1 en,pl&lng2 ,pt,ro,sk,sl,sv,&val 454769:cs&page 3 Manual for the preparation of industrial feasibility studies; W. Behrens, P. M. Hawranek, United Nations Industrial Development Organization, 2009CCS readiness at Šoštanj: Ticking boxes or preparing for the future? 13

II. CCS readiness definitionCO2 transport criteria, the operator decides to build the networkand facility, a pre-feasibility study for this must be prepared.‘Suitable storage sites are available’A suitable storage site must have a reasonable chance of complyingwith the requirements of the Directive (a list of these criteria can befound in its annex I). It means that sites that are explicitly (underarticle 2 ‘Scope and Prohibitions’) or implicitly (by national orregional law, as onshore storage sites in the UK) excluded from useas CO2 storage sites are irrelevant to an assessment of suitability.A third party should be commissioned (by the project companyor the authorities) to carry out an evaluation of the most promisingstorage sites within a reasonable radius (which could be in the range300-500 km, depending on the economics of a ‘best-guess’ futureCCS project). The achievable level of detail – and probability – isdriven by the data availability and the maturity of previous CO2storage assessments in the study area. An important part of a geological, technical and economic assessment is uncertainty and sensitivity evaluations. These should include stochastic modeling. Ahigher degree of uncertainty should entail that a larger number ofpotential storage sites are evaluated, and vice versa for low uncertainty, but in no case should less than two potential storage sites beevaluated.The evaluation should at least address the parameters identifiedin Guidance Document 2 ‘Characterisation of the Storage Complex,CO2 Stream Composition, Monitoring and Corrective Measures’ tothe Directive:‘The assessment will aim to identify and prioritize the most likelyareas to continue future assessment activities. In performing thisscreening and ranking of regions or basins, a set of selection criteriawith appropriate cut-off limits will be required on which the assessment can be made, e.g. basin depth, structural deformation, porosity,permeability, seal and reservoir quality and effectiveness. For eachregion or basin, the criteria may be adjusted to match the local issuesin terms of criteria that reflect the scale and complexity of the storageneeds such as distance to source, CO2 supply volumes, injectivity rateetc. It is often quite important to adequately document the failurecases, so as to alert potential later attempts to re-assess such areas,and to make it apparent as to why they have been dismissed’.Storage sites should be assessed within the jurisdictions ofEuropean Economic Area (EEA) countries, as CO2 storage outsidethe EEA does not qualify as emission reduction under the EUEmission Trading System and thus will be economically more challenging. If economic feasibility depends on storage outside the EEA(e.g. for use in Enhanced Oil Recovery), they should be assessedagainst the requirements of the Directive, including the ability ofthe country o

8 ccs readiness at ŠoŠtanj: ticking boxes or preparing for the future? This document’s aims are: » To propose a methodology firstly for assessing thermal power generation projects for compliance with art. 33.1 of directive 2009/31/EC and secondly for assessing power plants in their progress towards what we believe full CCS readiness should

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