Private sector banks are ready to put money into carbon capture and storage projects (CCS) if they are viable without public funding, according to a new report released on Monday (20 September).
Two research organisations, the Climate Group and the Ecofin Research Foundation, have gauged the views of 30 private sector capital providers on CCS.
They found that there is money available for CCS projects if they can compete with other forms of energy generation without public funding. Moreover, the project must have sponsors with an established track record in managing complicated construction projects and a performance guarantee across the whole capture and generation chain, they said.
Specialist equity is unlikely to be involved in financing CCS projects due to low expected returns or risks linked to high technology, according to the report. Bond or equity holders from big pension funds and insurance companies, on the other hand, said they were comfortable with corporates using their balance sheets to finance CCS if the scale is limited to a small percentage of the group's assets.
"We were surprised at the level of engagement from senior decision-makers in financial institutions and their readiness to consider funding CCS," said Chris Rowland, director at the Ecofin Research Foundation.
The EU aims to put in place a network of up to 12 large-scale CCS demonstration projects within its borders by 2015. For this purpose, it earmarked a sizeable slice of its economic recovery funds for six CCS projects.
The findings of the report indicated, however, that private funding will only be sufficient for two CCS demonstration projects. This would leave Europe far behind its goal of a comprehensive network of projects that can test the whole range of CCS technologies in a variety of geological environments.
Moreover, the report recommended European governments to focus public financing on "far fewer" projects rather than spreading them too thinly over various technologies and risking not addressing any challenge properly. The need for government funding will fall sharply once the concerns of private sector debt providers are addressed, it argued.
Meanwhile, the European Commission launched last week (17 September) what it called the world's first project network for CCS. It aims to foster knowledge-sharing between early demonstration projects with a view to making the technology commercially viable by 2020.
The network is open to projects with plans to be operational by 2015.
- European Commission:The European CCS Demonstration Project Network
- European Commission (press release):Commission sets up world's first project network for CO2 Capture and Storage (17 September 2010) [FR] [FR] [DE]
- European Commission:European Energy Programme for Recovery
- Climate Group:CCS: Mobilising Private Sector Finance(20 September 2010)