NER300 - Where are we after 9 February 2012?

For a large majority of people this question is probably rather strange or even totally meaningless. But for the 'CCS World', or at least the European part of it, it is a very important question even if the answer to it is far from clear.

The significance of the date relates to the NER300 exercise in support of low-carbon technologies, including CCS demonstrations. To fund this support, the European Investment Bank (EIB) will sell off 300 million carbon allowances out of the 'new entrant reserve' (hence NER300). During the first phase, the Bank will sell 200 million allowances by October 2012 and this money will be used to fund some of the projects that have, with the agreement of their national governments, submitted proposals in February 2011.

The significance of 9 February is that that was the day by which the EIB would have finished its assessment of 'due diligence' for all the projects and submitted their findings to the European Commission. This list would also contain a ranking of the projects which, in the case of the CCS projects, would be by the cost per tonne of the carbon dioxide stored. This value will be a critical one in the decision making procedure concerning the award of the funding.

The EIB have completed their task and the Commission has received this listing. However, while many interested observers might have hoped that the Commission would release this information to the public it has decided not to do so, at least at this time as some of the information might still be considered commercially sensitive. So the European CCS world is left in suspense! Only those projects that have failed to pass due diligence will be informed of the EIB's findings in their case. They may – or may not – wish to share this information about their project.

Of course, such a situation encourages much speculation as to winners and losers. So what do we know? We know that of the original 13 projects that were put forward to the EIB last year, only 11 remain with the withdrawal of Longannet (UK) and Janschwalder (Germany). We also know that with a very weak ETS carbon price, it is now likely that the EIB will only collect around half the money it was expecting – possibly around €1.6 billion unless the price dramatically increases in the next few months.

Now, in order to ensure a good regional spread of funding, the NER300 Directive states that no more than 15 per cent of the total available funds would be allocated to one project. If the total available funds are €1.6 billion, this would mean a maximum amount of around €240 million to any single project. This is probably an amount that is significantly less than most – or all – of the CCS projects would be looking for.

This raises the BIG question. Which of the proposed CCS demonstration projects would be in a position to take a positive decision to move to the Execute and eventually Operate stage with a grant of €240 million? Will this mean that those projects that have already received Community funding under the European Energy Recovery Plan (EERP) will be at a distinct advantage? Only three of the six projects that received such funding are still in the competition (Belchatow in Poland, Don Valley in the UK and Porte Tolle in Italy). The likely contribution by the different Member States will also likely play an important role – though they now might have to support a higher percentage of the project costs than they were planning to do.

How many CCS demonstration projects could expect to be funded? At the moment, nobody knows, but if the above numbers are anywhere near correct, then at least three projects could expect to be offered funding – and possibly even four. It should be kept in mind that the Commission will be expected to strike a balance between the different capture technologies, the different types of storage (onshore and offshore) and between the power sector and the industrial sector. It will not be an easy task.

How soon will we know anything definite? If some projects have failed due diligence, we may hear about these over the coming days or weeks – or not at all. Other than that, we must wait to hear the Commission's decisions, but only once they have discussed it with the Member States and negotiated with the States hosting the preferred project or projects. As the Commission will not know the amount of money they have to disburse before October, any concrete information is very unlikely before the last quarter of 2012.

But keep watching this space!