How to fund the large-scale breakthrough wonders?
Go big or go home… This expression comes to my mind when comprehending that many decarbonisation technologies still need a first of its kind to make them a proven reality, and after that, to start building on their economies of scale. The truth is that these modern technological wonders need money, quite a substantial amount of it, to begin their journey, so how do we fund the large-scale breakthrough wonders?
Realizing breakthrough ideas takes research, proof-of-concept and piloting steps, but making the technology an operating reality requires to have gone beyond the demonstration and scale up phases. The good news is that nowadays there are already funding mechanism that aim to build and operate large-scale industrial assets with breakthrough technologies. In Europe, one of the world’s largest funding programmes, the Innovation Fund helps businesses invest in clean energy and industry.
Since the launch of the Innovation Fund, two calls for large-scale projects (with a capital expenditure above €7.5 million) have taken place. The Commission has pre-selected 21 projects to grant agreement preparation, 7 in the first call and 17 in the second one. For all programs, applications are submitted to the European Investment Bank (EIB), which performs an in-depth technical and financial assessment of the proposals, although the final selection lies with the Commission. Moreover, for the period 2020-2030, the Fund may amount to about €10 billion, depending on the carbon price.
Innovation Fund 1st Call
The first call for large-scale projects closed in October 2020. Overall, all these projects requested €21.7 billion with the promise to reduce 1.2 billion tons of CO2. Taking a closer look to the project proposals, 69% were submitted by energy-intensive industries.
Three main pathways are identified: (1) Hydrogen, (2) carbon capture utilization and storage (CCUS), and (3) bio-based proposals.
Hydrogen and CCUS are clearly representing the biggest project cluster, accounting for two thirds of the projects. On the other hand, the statistics show very limited momentum regarding project submissions linked to other technologies. Three out of three hundred and eleven submissions presented disruptive technologies to develop electrical furnaces and chemical recycling. This scarce initial inflow is concerning, because these two need to pass the demonstration phase as well to increase the decarbonisation and circularity of the chemical industry.
From these first call, 2 projects stand out against all others, the one based in Spain, ECOPLANTA and the one multi-coordinated in Belgium, Netherlands and Norway, Kairos-at-C.
ECOPLANTA aims to convert non-recyclable fractions of municipal solid waste to chemicals and biofuels. ECOPLANTA will produce 237 kt/y of methanol in a facility on a petrochemical complex near the port of Tarragona, Spain and thereby recover 70% of the carbon present in the municipal solid waste (MSW), achieving 3.5 Mt CO2eq of emissions reductions over the first 10 years of operation.
Kairos@C will develop a complete carbon, capture and storage (CCS) value chain that will avoid ca. 14.2 Mt CO2 over the first 10 years of operation. Kairos@C will initiate a crossborder CCS value chain and kick-start the Antwerp@C project, which is developing a multi-modal transport infrastructure for CO2 in the port of Antwerp. Kairos@C will deploy pioneering technologies in each building block of the CCS value chain.
Innovation Fund 2nd Call
Less projects were submitted to the second call for large-scale projects, nevertheless the selection rate has increased, from 2 to 12%, which demonstrates the better preparation of the coordinators and the quality of the submission this time around. Although the low selection rate points out the high standards and the rough cut to be granted funds.
In this second call, the presence of the energy intensive industries keeps increasing, as they are responsible for two thirds of the submissions.
In this category there are 25 proposals focussed on hydrogen, while the CCS/CCU projects are categorised in different sectors depending on the CO2 source, therefore, they are not shown in the statistics. Projects can be cross-sectoral, but still need to be classified under one sector.
From all the preselected projects, in my view, 3 stand out. And we need to travel north to discover these first of their kind future commercial plants.
It is encouraging to find a more diverse pull of preselected projects, including chemical recycling adding to the list of CCS projects and versatile chemicals production (like methanol), on top of more recurrent topics, such as, hydrogen and cement.
Additionally, the CCUS projects thriving is exceptional, considering the last decade funding development in this field. Under the first award decision by the Innovation Fund predecessor program, NER 300, in 2012, CCS projects put forward were not confirmed by the Member States concerned, and could therefore not be considered for funding awards. It was under the second call when the first CCS project was awarded to UK’s White Rose Project with €300 million.
Meanwhile, the influence of the hydrogen and CCUS breakthrough trend is confirmed in the amount of selected projects’ themes.
I am now curious to find out what the third call will bring along. The heat pump workshop topics announced in the web of the European Commission may lead to increase projects related to energy efficiency.
