BRUSSELS, 2021/05/10 – The Dutch government yesterday granted €2 billion in subsidies to a consortium planning to deploy a massive new carbon capture and storage project at the Port of Rotterdam.
“This is incredibly positive news, coming just a few months after the Norwegian Government invested in the Longship Project. It highlights the strong momentum for carbon capture and storage in Europe,” said Lee Beck, CATF’s International Director, Carbon Capture. “This decision shows that all technologies must be on the table to deliver emissions reductions on the road to net-zero emissions.”
Four companies in the port of Rotterdam will capture and even more will collaborate in storing CO2 in an empty gas field under the North Sea. It is the first time that CO2 will be captured and stored on a large scale in the Netherlands. These plans were first raised four years ago and named the Porthos project. Once completed, it will be one of the largest carbon capture and storage projects in the world.
“This decision underlines the importance of improving the support for carbon capture and storage at the EU-level,” continued Beck. “In the near term, that means the optimization of the TEN-E regulation to include CO2 storage and further modalities of CO2 transport.”
The subsidies were granted as part of the SDE++ program, which will award a total of €5 billion in 2021. SDE++ encourages the adoption of crucial technologies that can move the needle on the emissions from the so-called ‘hard to abate’ sectors like cement production, steel manufacturing and waste management.
“This is a fantastic step forward towards the decarbonisation of Europe’s largest port,” said Magnolia Tovar, CATF’s Zero Carbon Fuels Policy Director, Europe. “In Europe, industrial emissions have long been overlooked in the broader climate policy discussion, so the fact that the Dutch government has backed this project is very encouraging. It enables the Port of Rotterdam to become a state-of-the-art decarbonization hub where low-carbon hydrogen production and CO2 capture, transport, and storage infrastructure deployment will help to future-proof European industry for a carbon constrained world.”
How does SDE++ work?
The SDE++ expands on the previous scheme called ‘stimulation of sustainable energy production’ – or SDE+. The updated version not only stimulates sustainable energy production but also CO2-reduction. In this way, the Dutch government wants to ensure that the energy transition in the Netherlands remains feasible and affordable.
Projects granted funding will receive subsidies via a carbon contract-for-difference (CFD) mechanism, whereby the difference between the actual cost of applying the technologies and the commercial value of the product the technology delivers or the value of the avoided CO2 is subsidised. In effect, the SDE++ will subsidize only the excess cost of projects delivering renewable energy and/or reducing CO2, as the subsidy amount will adjust with changes in market value, enabling cost-effective and fast CO2 reduction mechanisms.
For electric boilers, that might be the difference between the cost of steam produced with clean electricity and the cost of steam produced with natural gas. For CCS it could be the difference between the cost to capture, transport and store CO2 and the cost to emit CO2 under the EU emissions trading system*.
The mechanism is structured so that only the true incremental cost for industry to undertake carbon reduction projects is funded, and support will be time-limited, reducing over time as the market value of the EU ETS allowances increases.
This is an important feature showing how the EU ETS can be connected to national-level innovation policy. The SDE++ model translates the EU recognition of the importance of financing a range of low carbon technologies such as carbon capture and storage and low carbon hydrogen to the national level. In Europe, coordinating activities to promote a range of solutions will better position the advancement of carbon-reduction goals, and SDE++ could potentially complement the EU’s Connecting Europe Facilities, Projects of Common Interest, and the €10 bn Innovation Fund.