Final report for One North East And NEPIC 21/12/10 - The Carbon ...

More documents

Recommendations

Info

The case for a Tees CCS networkFinal ReportTable 8 Assessment of CCS network project structure optionsCommercial risk profileStructure option Policy & regulatory Technical & operating Economic & marketLikelihoodof fundingLikelihoodof successLaissez-faireSignificant withoutgovernment support andinterventionSignificant, and compoundedby multiple parties andinterests („project on project‟risk unmanageable). Structurevery unstable.Significant, andcompounded by multipleparties and interests(„project on project‟ riskunmanageable)Extremely unlikelyExtremely unlikelyCentrally plannedEffectively addressed dueto government acting asproject sponsor as well asprimary policy-maker /regulatorTechnical risks remain but canbe underwritten bygovernment; key operatingrisks can also be managedthrough use of governmentsupply and demandguaranteesEffectively addressed asgovernment has capacity tocreate new regulation andeconomic framework tosupport objectives, andenforce payments in cashflowmodelExtremely high, due togovernment involvement andcommitment (subject toincentives and project terms)Contingent on thedevelopment of newgovernment policy andregulation; approach at oddswith current UK policyapproachSingle entity ledSignificant withoutgovernment involvement,project guarantees andsupport.„First of kind‟ technical riskremains overriding barrier toattracting commercial debt.Non-supply and demand riskscan be addressed throughdesign of suitable contractualarrangements.Significant, exposed to allnon-supply and demand riskdue to limited involvement ofunderlying users of network(“midstream issues”).Challenging, and likely basedon project sponsor‟s creditworthinessand access tocapital (corporate finance).Few corporate sponsors likelyto have sufficient profile.Unclear, and dependent onprofile and track records ofproject sponsor in addition tolevel of government supportJV consortiumSignificant withoutgovernment involvement,project guarantees andsupport.„First of kind‟ technical riskremains overriding barrier toattracting commercial debt.Non-supply and demand riskscan be addressed throughdesign of suitable contractualarrangementsEffectively addressed, asequity involvement ensurescommitment of partners withinterest in underlying assetsi.e. direct link to networkusers.Likely to be promising, subjectto developing a strongcorporate „coalition of thewilling‟ with good track recordsand credit ratingsDependent on level of equityinvolvement and ability to deriskcounterparty commerciallinkages.Proven track record onTeesside in buildinginvestment consortia andfacilities-sharing.60
Additional sources finance own capture plantThe case for a Tees CCS networkFinal ReportOn the basis of the discussion outlined, we consider the JV model using a project financeapproach to be the most promising method for near-term promotion of a CCS network onTeesside. Some observations on how the SPV could function are discussed below.6.3 A joint venture development in practiceA JV approach using an SPV and project finance model offers the greatest means toinsulate risks across the CCS value chain that could emerge in the Tees Valley. It alsooffers the most effective means to potentially leverage private capital (debt) into the projectthough the presence of well-capitalised, creditworthy counterparties.In practice, the options to structure the networks operation under this model include:1. Anchor project led only.2. Anchor projects plus large emitter led.3. Anchor projects plus large emitter led, plus smaller entrants.This concept is shown graphically below (Figure 18).Carbon prices (EU ETS)Guarantees, CCS Levy,carbon price floors etcEU / UK demo fundingAnchor project(s)INTEGRATED MIDSTREAM OPERATORCO 2 storageonshore SPVoffshore SPVAdditional sources(large emitters)onshorepipelinenetworkoversizedoffshorepipelineEOR operator(s)Additional sources(small & mediumemitters)offshore equityoffshore and/or onshore equityEquityCommercial lenders(debt)Figure 18 Potential ownership structure of the assets across the Tees Valley CCSnetwork chain.61
Page 1 and 2:
Project NameDocument NameDeveloping
Page 3 and 4:
The case for a Tees CCS networkFina
Page 5 and 6:
Page 7 and 8:
Page 9:
Page 12 and 13:
Page 14 and 15:
Page 16 and 17:
Page 18 and 19:
Page 20 and 21: Annual emissions (MtCO2/yr)The case
Page 22 and 23: The case for a Tees CCS networkFina
Page 46 and 47: Commercial risk profileThe case for
Page 56 and 57: POLICY & REGULATORYTECHNICAL & OPER
Page 58 and 59: 5 Financing a Tees Valley CCS netwo
Page 74 and 75: 6.6 The role of the EU and UK Gover
show all

Final report for One North East And NEPIC 21/12/10 - The Carbon ...

Create successful ePaper yourself

Delete template?

Save as template?