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8/7/2019 CSLF ADB CCS Financing Roundtable
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CCS Financing Roundtable
Role of Public Sector Financing -The Financing Gap
Singapore, 7 April 2011
8/7/2019 CSLF ADB CCS Financing Roundtable
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Clinton Climate Initiative
Solutions that Work
Projects not Targets
Reduce Emissions
High Impact
Large Scale
Global
Support Structure
Technical Assistance
Project Assistance
Purchasing Assistance
Network Access
Measurement Tools
Financing
2
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3
Financial
TechnicalRegulatory,Legislative &
Political
Community
Commercial
BARRIERS FACING LARGE-SCALE CCS
Costs too high
Risks too highand uncertain
Technologiesunproven at scale orstill immature
Regulatoryframeworks stillimmature
Communitiesmostlyuninformed
These barriers likely to be higher in developing countries
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COST OF CCS
Retrofit has high energy demand (30-40%), new build has high capital cost
Current costs range from US$60 110 /tCO2 avoided (new build and retrofit) andcan add ~80% to cost of production
Image: McKinsey
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The financing gap
Whilst there are no insurmountable technological, legal,institutional, regulatory or other barriers that prevent CCS
from playing a role in reducing GHG emissions, early
CCS projects face economic challenges related to climate
policy uncertainty, first-of-a-kind technology risks and thecurrent high cost of CCS relative to other technologies.
CCS technologies will not be widely deployed in the next
two decades absent financial incentives that supplement
projected carbon prices.
7 April 2011 5
The Report of the Interagency Task Force on Carbon Capture and Storage
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Key barriers to financing CCS
Uncertainty on architecture of international climate changeagreements and carbon prices
High initial capital cost and operating cost penalty for first-mover projects
Expectation of forward carbon prices too low to driveinvestment
Generally poor reputation of CCS relative to other lowemission technologies
Lack of:
Funding sources, either international or domestic, for CCS projects indeveloping countries
Funding mechanisms for CCS deployment
Mechanisms to management investment risks
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Generic financing solution elements
Direct application of public funding to support the earlystage development technologies, either directly for CCS
or more broadly for low-emission technologies
Policy predictability/certainty regarding the value of GHG
emissions reductions
Underwriting of carbon risk against a future carbon price
or other direct, output-based, support
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A risk perspective
Current policy uncertainty and the risks associated with the first largescale capture plants provide a justification for risk management bythe public sector
The interdependence of CCS elements exposes individual linkswithin the chain of capture, transport, and storage to additional risks
Perceived and real risks translate to unfavourable financing terms forCCS projects, which may inhibit many projects
The CCS network concept assists in reducing the CO2 volume riskassociated with a single capture source
Direct contracting with operators of CCS network elements by the
government has potential to substantially reduce risk Risks across the chain for large scale integrated CCS give rise to an
early stage role for government in establishing a robust commercialframework that is most likely to deliver the optimum financialstructures and funding for the network
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8/7/2019 CSLF ADB CCS Financing Roundtable
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CCS Financing Roundtable
Role of Public Sector Financing -The Financing Gap
Singapore, 7 April 2011
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CCS Financing Roundtable
What would it take for private investment to flow?
Singapore, 7 April 2011
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What is required?
Direct application of public funding to support the earlystage development technologies, either directly for CCSor more broadly for low-emission technologies
Policy predictability/certainty regarding the value of GHG
emissions reductions Underwriting of carbon risk against a future carbon price
or other direct, output-based, support
Together, these elements address the challenges ofopportunity and risk
7 April 2011 11
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Specific financing solution elements
Capital grant funds, either CCS-specific or for low-emissiontechnologies
Contracted price support or carbon floor price
Feed-in Tariffs or Low-emission obligations
Government support CCS authority with subsequent sell-down
or withdrawal
Direct funding and development of storage characterisation,
likely contracted to private sector companies
Establishment of common user principles and financial
structures for transport and storage, in which government
ownership is an option
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8/7/2019 CSLF ADB CCS Financing Roundtable
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Possible risk management structure
StorageCoTransportCoCaptureCo
$ for availablecapacity
$ / tonne deliveredto network
$ / tonne stored(guaranteed minimum)
Contracted by
CarbonNet to supply
pre-capture CO2 on
known price basis)
Contracted by
CaptureCo for
electricity supply
CTX charged cost
+margin by
CarbonNet
Contracted by
CarbonNet to provide
desired capacity (no
volume or price risk)
Physically handles
CO2 but CarbonNet
retains title & risk
Initially funded &
operated by
CarbonNet for basin
procurement and
validation
Externally funded
once basin validated
Known price contract
per tonne stored with
guaranteed volume
minimum (no price or
volume risk)
CarbonNet accepts
containment risk
Contracted by
CarbonNet to supply
captured &
compressed CO2 on
known price per tonne
that exceeds cost of
capture Backed by OEM
performance
guarantees where
possible
$ / tonnecaptured
Generator/CTX
CarbonNet
CO2 CO2 CO2
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CCS Financing Roundtable
What would it take for private investment to flow?
Singapore, 7 April 2011
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CCS Deployment Status
15
Objectives
G8 aspirations :
CO2 emissions cuts of 50-80% in 2050 vs
2000
Commit to 20 large scale CCS demonstration
projects by 2010
CCS (geological) necessary to achieve goals
In addition to use of clean fuels technologies In addition to alternate CO2 conversion
options
Current Global Status
Regulatory/political environment:
Future carbon pricing uncertain
Government funding committed, howeverproject selection processes convoluted and
disconnected from each other
CCS in developing countries more difficult
CCI experience to date:
Challenging environment for projects
Geological storage a significant issue
Funding & Finance increasingly central
Business Solutions to Accelerate CO2
Reduction
Needs remain
Climate change targets necessitate use of
CCS, with geological sequestration, to be
deployed within 10 years
Global interest in CCS is increasing
Increased recognition for need of CCS tobattle CO2 emissions
Many CCS forums/committees started
Public sector funding for large scale CCS
projects has been announced by the EU,
Australia, US, UK and Canada
CCI project experience highlights importance of
Early stage characterisation of storage sites Development of viable and replicable
business models
Potential for complementary beneficial CO2
usage technologies
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GLOBAL CCS INSTITUTE PARTNERSHIP
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Shared objective to accelerate the deployment of commercial-scale, integrated CCS
Acceleration of early mover projects complemented by development of new projects
Primary application of relevant expertise:
Key Element Global CCS Institute CCI
Capacity building X
Project development X
Technical evaluation X
Funding & finance X
Community
Communication
X
Knowledge sharing X
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Lowering Barriers - Summary
Barrier Lowering MechanismsCommercial Policy drivers:
Broad cap and trade, tax
Focused portfolio standards, feed in
tariffs
Financial Publicly funded capital grant schemes
Integrated business models that
allocate risk efficiently
Technical R&D funding
Publicly funded storage
characterisation
Regulatory Knowledge sharing internal
Community Knowledge sharing external
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