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Publish date: October 30, 2024
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From a pool of 337 applications, 85 projects from 18 European countries have been selected, including, for the first time, a contribution from Slovakia. This constitutes the largest round since the launch of the Fund in 2020. To date, the Fund has committed a total of €7.2 billion in over 120 projects. But what are their climate impacts, and are we ensuring the best possible use of funds?
The project categories include 19 general decarbonisation projects on a large scale each receiving over €100 million, 16 medium-scale projects awarded between €20 million and €100 million, and 8 small-scale projects funded between €2.5 million and €20 million. The Fund has also set aside resources for 25 cleantech manufacturing projects that focus on producing components for renewable energy, energy storage, heat pumps, and hydrogen production, as well as for 17 pilot projects aimed at exploring approaches to deep decarbonisation.
The urgent need to expand CO2 transport and storage capacities rapidly has been recognised. Bellona welcomes the selection of five CO2 storage projects, three of them in the large-scale category, with funding of up to €225 million per project. Storages comprising 6.6 million tons of CO2 are funded under this call, which constitutes 13% of the EU’s 2030 injection capacity target under the NZIA.
Bellona is pleased to see that several projects focusing on CO2 capture have been selected from sectors where decarbonisation will remain challenging without CCS, such as cement production or waste incineration. When it comes to waste, measures of reduction, reuse, and recycling are naturally to be prioritised. For the remaining waste that is inevitably incinerated, CCS is the preferred method to abate emissions from the incinerator (see our position paper here).
Bellona welcomes the great increase in projects dealing with electrification of industries and transport, renewable energy production, and especially energy storage, which is key to developing robust and future-fit electricity grids. A positive example is Decarbomalt Croatia 2 by thermal energy start-up Newheat – a project combining a solar thermal plant, energy storage, heat recovery facilities, as well as heat pumps, used for malt production at a Boortmalt plant. The synergetic approach decarbonises malt production by 80% while also minimising energy consumption.
The Fund’s selection includes several projects focused on hydrogen production and the integration of hydrogen into existing processes. The assessment of these projects largely depends on their specific applications and the contexts in which they operate. For instance, the H2BE project, a collaboration between French energy company Engie and Norwegian oil company Equinor, is set to produce 210 kilotons of blue hydrogen annually through autothermal reforming. This method allows for exceptionally high CO2 capture rates and can offer a climate benefit if it replaces existing grey hydrogen production without CO2 capture. It presents a less energy-intensive alternative to hydrogen production via electrolysis, which is pursued by most of the other hydrogen-related projects. Due to the high energy demands of electrolysis, it should be tied to applications with few to no viable alternatives. This is the case for large-scale projects like ENHANCE from Belgium and Gaia from Spain, which aim to produce hydrogen for ammonia, as well as the medium-scale HydroGreen project by Solvay Chemicals, concerned with hydrogen peroxide production.
However, the ultimate application of the hydrogen remains unspecified in many projects, and some even foresee its use in road transport, such as the German large-scale hydrogen production project H2HubEmden or the pilot project HSS-Gen2, developing hydrogen storage for trucks. Given that direct electrification of transport would require significantly less energy, these choices should be considered a misallocation of resources. Utilising hydrogen in this sector would divert scarce energy supply from more impactful uses, thus slowing down decarbonisation efforts on a broader scale. A similar concern persists for the Köping Hydrogen Park: the Swedish waste incineration project aims to produce hydrogen through plasma gasification, heating waste to 3,000°C and capturing the resulting CO2. While this method may sound intriguing on paper, the immense energy demands cast doubts on the project’s practicality.
It is particularly troubling to see the fund allocating resources to projects that focus on producing synthetic hydrocarbons – an incredibly wasteful process, that, depending on the source of carbon, may not reduce atmospheric CO2 even by one bit (see our publication here). The Finnish large-scale project eNRG Kotka for instance aims to produce e-methane for transport and heating — sectors where significantly more energy-efficient decarbonisation alternatives than switching to synthetic fuels are available. Similarly, the medium-scale project INDIGO by Italian company Princess Cruises plans to retrofit passenger cruise ships to run on e-methanol.
With the Swap2Zero pilot, another project focuses on passenger cruise ships, while the large-scale HERMES project (Hybrid Electric Regional Aircraft Manufactured in Europe for Sustainable aviation) seeks to decarbonise small aircraft for single passengers. Such projects may be technologically innovative but cater to niche markets for the time being. Thus, it is essential to have a long-term vision for how these technologies could be scaled to achieve broader benefits. As private jets are not covered by the ETS carbon pricing, Bellona also questions whether they should be eligible for the Innovation Fund and if it is the best use of limited resources. While potentially interesting, Bellona views the inclusion of such projects and their alignment with broader decarbonisation of the European economy with great scrutiny.
In conclusion, this year’s pre-selection highlights a much-needed ramp-up of CO2 storage projects, continued investments in decarbonising the cement industry, and a stronger focus on direct electrification. At the same time, it should not go unmentioned that some of the choices raise serious questions over their climate benefit, and the allocation of the limited and oversubscribed resources of the Innovation Fund. Bellona is a member of the Innovation Fund Expert Group and will continue to provide input to the design of the selection criteria.
Link to Bellona’s analysis of the previous call: https://bellona.org/news/ccs-campaign/2023-07-innovation-funds-3rd-large-scale-call-pace-gathers-for-decarbonisation-of-cement-but-handful-of-wasteful-projects-pre-selected
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