The first and main challenge for the deployment of carbon capture and storage (CCS) is arguably the high cost of such large scale technologies. CCS is for deep-pocketed corporates, and governments who see the future of their large emitters at stake in an increasingly environmentally-conscious world. At the Cleantech Forum XXVII in Paris, CCS experts gathered for the “Carbon Capture & Storage: In Search of Risk Finance” panel session. The outcome of the panel talk was clear: CCS is not yet a playground for venture capitalists (VC). The costs involved in building even just a single CCS unit are outside of a VC’s scope.
Small innovation companies in this area are sparse for this exact reason. However, the panel of speakers agreed that this could easily change and become a hot VC investment area within less than 10 years. That depends on the extent research and development moves forward, and on the deployment of commercial-size demonstration projects to prove the technology is a viable one. Interestingly, U.S. West Coast VCs seem to be one length ahead of the others in that they are already looking for good CCS companies to pour their dollars into.
So what fuels CCS at the moment? Below is a list of some of the most significant cash injections in the recent years.
Government spending, including stimulus money, has been key in driving pilot projects:
- NRG Energy won a US$154 million U.S. government grant in March 2010 for a 60 MW CCS demonstration plant.
- The Australian government has committed A$100 million annual funding for the Global CCS Institute.
- Starting in 2013, the EU is expected to consider stored CO2 as not emitted. This will result in a financial incentive to develop CCS for large polluters regulated by the European Emissions Trading Scheme. On the other hand, inclusion of CCS projects for Clean Development Mechanisms and Joint Implementation is still being debated.
- In early February 2010, the EU agreed to earmark €300 million emission allowances from the EU Emission Trading Scheme to CCS resulting in billions of Euros of funding.
Some corporations with large carbon footprints are also financing CCS by acquiring stakes in CCS companies or by creating partnerships:
- Coal giant Peabody Energy acquired a US$15 million stake in Calera in February 2010. Calera has developed a technology which converts CO2 into building materials.
- St. Marys Cement partnered with stealthy Pond Biofuels to capture CO2 from a cement plant in Canada.
As discussed above venture capital investments in CCS technologies are sparse, although some examples exist:
- US-based Powerspan raised US$50 million in 2009.
- Australia-based Cool Energy received its first funding from Shell Technology Ventures and the Centre for Energy and Greenhouse Technologies in 2005.
Finally, additional to the fact that CCS requires very large investments, venture capitalists might also hesitate to invest in this sector due to the double risk of technical uncertainty, coupled with the risk that a significant CCS market might not materialize. And the industry being so young, there are few CCS experts within the investing community, leading to limited insight into investment opportunities. Right now, the ball is in the corporates and governments’ camp.
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