Amid a backdrop of global uncertainty, the International Energy Agency recently published a report of great importance for Asia’s energy future.
The Financing CCUS at Scale report is significant for several reasons, including that it debunks a key myth that detractors have perpetuated about carbon capture and storage.
Far from CCS being “unproven”, the report outlines the start-up in the Netherlands of the world’s biggest capture facility applied to a cement plant, large-scale CO2 storage success at Northern Lights in Europe and Moomba CCS in Australia and more than 30 final investment decisions for facilities globally over the past two years.
This is consistent with what CCS actually is: a proven technology that has been used by industry for decades and which will play a vital role in decarbonisation in the Asia Pacific region.
As the IEA states in a section of the covering insights from the financial sector:
“The challenges of financing CCUS do not relate to technology, but rather to markets, policy and risk allocation.”
While establishing the confidence of the financial sector (and other stakeholders) in the technical aspects of CCS, the report also points to gaps in the policy and regulatory space that must be addressed to enable wide rollout of cross-border value chains in Asia Pacific.
For example, the report highlights differences in public funding for CCS in our region compared to other parts of the world. CCS facilities in Northern America and Europe have benefited from significant public funding, but projects in Asia Pacific – like Moomba CCS and the under-construction Tangguh CCUS – have almost exclusively been undertaken with private capital.
From the IEA presentation on the Financing CCUS at Scale report.
With the IEA report noting that public funding is “particularly critical at the pre-commercial stage” of CCS projects, there is much room for growth in Asia Pacific. Governments in both capture and storage nations have an opportunity to catalyse project development by providing support that will build confidence for private investment.
Similarly, the IEA highlights a need to “harmonise definitions and standards across the value chain” as a foundation of bankable business models. To quote from the report: “Robust and transparent measurement, reporting and verification (MRV) frameworks can support transparent carbon tracking across value chains…[strengthening] the underlying business case for CCUS investments.”
This is an area where ANGEA has been very active, with our Accelerating Cross-Border CCS in Asia Pacific study producing a first-of-its-kind framework to inform bilateral discussions on transboundary CO2 value chains. We continue to have productive conversations with governments around the region about how policy and regulation can be streamlined and aligned to help attract investment in projects.
Progress in this area needs to accelerate to turn the promise of CCS in Asia Pacific into reality.
Finally, the IEA report reinforces the importance of transparency and collaboration to enabling investment in CCS. This is particularly true for data sharing.
Financiers and insurers cannot adequately assess technical, commercial and operational risks for prospective CCS projects when key data is not available. Addressing this in the early stages of Asia Pacific’s cross-border CCS journey will prevent it becoming an ongoing barrier to investment.
Financing CCUS at Scale makes it clear that there is still much to be done for carbon capture and storage to realise its full potential globally. But it also demonstrates the considerable progress that has been made to date – and the results are certainly out there to be seen.
With strategic public funding allocations for CCS continuing to grow ($US50 billion earmarked between 2023-2025), we are starting to see debt financing flow into projects. More than USD US$15 billion of commercial debt has been raised by CCS projects in the past two years alone, overwhelmingly in the form of non-recourse debt in the United Kingdom.
This is an encouraging sign that we would like to see replicated for projects in Asia.
Recently I had the privilege of visiting the gold standard Northern Lights just outside of Bergen. On a crisp but sunny day, I marveled at the way government, industry and other stakeholders had come together to flawlessly execute a project that will store CO2 from four different European nations.
While Asia’s cross-border CCS ecosystem will evolve differently to fit regional circumstances, we can look to Norway for learnings, inspiration and a demonstration of what is possible.
Hanh Le is the Cross-Border CCS Advisor for the Asia Natural Gas & Energy Association, which works with governments, industries and communities in Asia, providing affordable solutions that promote energy security, economic growth and decarbonisation.
