Denmark puts wind in carbon capture and storage industry’s sails with tendering plans of nearly $4 billion
While climate change wreaks havoc around the globe with heatwaves beating down upon the world unabated, Denmark is taking steps to curb greenhouse gas emissions (GHG) by turning to carbon capture and storage (CCS) to step up its decarbonisation game with a new proposal for the next round of CCS tenders of almost DKK 27 billion (around $3.96 billion). As it reaffirms its position as a trailblazer and stronghold for renewable energy, the country hopes this will help pave the way for a carbon-free world.
The CO2 capture and storage industry is gaining ground in Denmark. With the first CCUS tender out of the way, three large-scale storage permits have been granted and the first international agreement on storage has been signed. The Danish Energy Agency granted the first-ever permit for a CO2 storage project in Denmark at the end of 2022 to INEOS and Wintershall Dea for the Greensand pilot injection project.
Come February 2023, the partners received the first full-scale CO2 storage permit for the Danish North Sea. When 8 March 2023 rolled in, INEOS and Wintershall Dea marked a major milestone and a world first with the first-ever injection of CO2 in the North Sea as part of Project Greensand.
However, Denmark put on hold the second tender round for the award of offshore CO2 storage licenses in the North Sea until the decision is made on whether the state participation share of future licenses should be set higher after the first tender round in the North Sea.
To reap the benefits of CCS, Denmark’s Minister for Climate, Energy and Utilities, together with the country’s Minister for Industry, Business and Financial Affairs, and Thomas Danielsen, Minister for Transport, presented on Monday, 21 August 2023, the government’s new proposal on CO2 capture and storage, which is perceived to be one of several necessary tools to achieve climate goals in Denmark, Europe and the rest of the world.
As reductions of at least 3.2 million tonnes of CO2 need to be achieved by 2030, the Danish government decided to present this proposal to ensure clarity, speed up the development of the industry for capture and storage of CO2 in Denmark and set the requirement for projects to be fully operational a year earlier than previously planned.
Morten Bødskov, Minister for Industry, Business and Financial Affairs, remarked: “With this initiative, we are setting the stage for our talented Danish companies. By pooling resources and creating clear framework conditions for CO2 capture and storage, we pave the way for a strong Danish industry that not only reduces our climate footprint but also creates growth and jobs. We aim to use our competencies and innovation to lead the green transition.”
Denmark’s new proposal contains a plan to combine the funds from the CCUS and the Green Tax Reform pools for the next CCS tenders of approximately DKK 26.8 billion (about $3.93 billion), which instead of several smaller drips will be combined into two large tender rounds of at least 0.9 million and 1.4 million tons of CO2 annually, respectively.
In line with this, around DKK 10.5 billion (almost $1.54 billion) and approximately DKK 16.3 billion (close to $2.4 billion), will be allocated over 15 years. While there will be a requirement for projects to be fully operational as early as 2029 instead of 2030, there is also a possibility of capture and storage from 2028. The first of these two CCS tenders is expected to start in June 2024 and the second a year later.
Lars Aagaard, Minister for Climate, Energy and Utilities, commented: “The fight against climate change in Denmark, Europe, and the rest of the world requires us to take action in many areas – and CO2 capture and storage is one of the main pillars when we are to build all the way to the climate goals.
“Therefore, we are also moving the requirement for full capture from 2030 to 2029, so that we get more CO2 from the air and in the underground faster. The initiative will also ensure a clearer framework for the emerging industry and in this way get the Danish CCS industry to go up in scale and down in price.”
Furthermore, this will mean that more actors can bid and thus create greater certainty that carbon capture and storage can deliver its share to meet the CO2 reduction targets. The Danish government also proposes to continue the model of 20 per cent state ownership for future carbon storage licences, which already applies to the three existing licenses.
In addition, the initiative aims to ensure clear framework conditions for the industry on ownership and regulation for the transport of CO2 via pipes. The Danish government also intends to expand the existing rules for the transport of CO2 to cover all forms of transport, which is especially important for the transport of carbon dioxide for use in PtX plants and for CO2 to be shipped via ports for storage offshore.