The European Union's ambitious goal of capturing and storing carbon emissions is facing significant challenges, according to a recent analysis by Wood Mackenzie. The study, commissioned by major energy companies like ExxonMobil, OMV Petrom, Shell, and TotalEnergies, reveals a stark reality: the EU is on track to fall short of its legally mandated carbon capture and storage (CCS) target by a substantial margin. This shortfall could reach a staggering 17.5 million tonnes per year, even if all projects currently in development are completed as planned.
The analysis focuses on storage capacity that will be fully operational by the end of 2030, the benchmark set by the Net Zero Industry Act (NZIA). Based on this criterion, the EU is currently 35% below the 50 million tonnes per year (mtpa) threshold. However, the situation becomes even more dire when project delays and shortfalls across the entire capture and transport value chain are taken into account. This comprehensive assessment highlights the complex and interconnected nature of the CCS ecosystem.
One of the primary issues identified is the fragmented value chain, which is characterized by a hub-based model where ownership is split among multiple parties. This fragmentation means that no single component of the value chain can advance without the necessary guarantees and commitments from other stakeholders. The EU's policy framework, which treats capture, transport, and storage as separate activities, exacerbates this problem by failing to recognize their interdependence.
The analysis also points to a significant shortage of capture supply. The EU's capture pipeline capacity is 36.5 mtpa, while planned storage capacity stands at 32.5 mtpa, both of which fall short of the target. Furthermore, 11 mtpa of the 26 mtpa lacking a confirmed storage solution is considered potentially stranded, lacking proximity to planned pipeline or existing CO2 infrastructure.
Persistent delays in storage projects are another critical issue. The average overruns across EU storage projects are 1.5 years, and this trend is worsening. This delay not only affects the timeline but also the overall feasibility of reaching the CCS target.
The economics of CCS present a further challenge. Wood Mackenzie's modeling indicates that the EU Emissions Trading System (ETS) price will remain below the levelized cost of CCS for projects approaching final investment decision (FID). The ETS primarily delivers avoided compliance costs rather than concrete revenue, and its prices carry both price and political risk.
The analysis also uncovers a mismatch in how obligations and public funding are distributed. The NZIA obligations are based on oil and gas production rather than industrial emissions, leading to inconsistencies. Some obligated countries have no pre-2031 storage capacity in development and limited EU Innovation Funding, while others, like Sweden and Spain, receive substantial funding despite not having NZIA obligations or pre-2031 storage capacity.
In conclusion, the EU's journey towards achieving its CCS target is fraught with challenges. The fragmented value chain, insufficient capture supply, persistent delays, and economic considerations all contribute to a complex and uncertain future. Addressing these issues will require a comprehensive and coordinated approach, involving policy reforms, increased investment, and a more integrated approach to the CCS ecosystem. The success of the EU's carbon capture and storage efforts is crucial for the global transition to a low-carbon economy, and it is imperative that these challenges are tackled head-on.
