Finance Sector To Fund CSS Projects On Public Fund Condition

The finance sector is willing to fund carbon capture and storage (CCS) projects - but only if the technology can demonstrate its viability without public funding, a new report has found.

The report, entitled Carbon Capture and Storage: Mobilising Private Sector Finance, saw NGO The Climate Group and Ecofin Research Foundation survey more than 30 private sector capital providers to gauge their views on CCS technology.

The potential investors were asked for their views on the risks and returns associated with a hypothetical new-build, coal-fired power station fitted with technology to capture carbon emissions. They confirmed that they would be interested in investing if CCS technology can demonstrate that it can be built without direct government funding.

The Climate Group and Ecofin Research Foundation said they were "surprised" by the willingness of financial institutions to consider funding CCS, despite high costs and returns far below anything that would typically interest private equity firms.

But Chris Rowland, director at Ecofin, admitted there were still "some difficult issues that need to be addressed to turn this readiness [to invest] into willingness".

Most notably, the proviso that lending would only go ahead if CCS can become competitive without direct public funding means the private sector will take some convincing before making financing available to CCS projects.

Currently CCS projects are highly reliant on government handouts. For example, only last month, the US government pledged almost $1bn (£643m) to retrofit the technology to a plant in Illinois.

The financiers surveyed also insisted that they would only lend to projects backed by companies with a strong track record which could provide a performance guarantee for all the systems used to capture, transport and store carbon emissions.

Dale Seymour, senior vice president at the Global CCS Institute, which sponsored the report, said improved understanding between the CCS industry and lenders could herald an expansion in the technology.

"This report gives important insights into how the financial community views the risks associated with early-mover, first-of-a-kind CCS projects," he said. "These kinds of learnings are critical to addressing challenges to CCS demonstration projects."

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