Germany Delays Carbon-Storage Law

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Researched by Industrial Info Resources (Sugar Land, Texas)--Europe's ambitions to become a leader in the development of carbon capture and storage (CCS) solutions have been dealt a serious blow following the decision by the German government to postpone the introduction of a proposed CCS law. The current coalition government has decided to put off any plans to introduce a carbon-storage law until after the general elections in September. The law, which would create a legal framework for the rollout of CCS pilots and speed up the development of the technology, is seen as vital to helping Germany achieve its carbon-dioxide (CO2) emissions targets under European Union law.

In April, the government approved a draft law enabling CCS, allowing companies to set up facilities to trap, transport and store CO2 in unused gas or oil fields. For additional information, see related news item from April 16, 2009 - Coal-Based Power Units Get a Lifeline as Germany Approves Carbon Capture and Storage. Throughout June, the proposed law has been a source of in-fighting within the German government and a watered down version is thought to have been agreed upon recent weeks. Now, however, nothing is expected to progress until the latter part of the year. This leaves the U.K. leading the charge to get CCS up and running, as the government has already announced that there will be no more coal-fired power plants built in the country without a working CCS solution. For additional information, see related news item from April 29, 2009 - U.K. Cracks Down on Coal-Fired Plants. The country has also proposed the unique step of allowing utilities to partly fund the development and rollout of CCS by allowing a 2% increase in consumer electricity bills.

Germany derives 50% of its power from coal-fired plants and is the biggest emitter of CO2 in Europe. Without fully-functioning CCS operations by 2020, many of Germany's older coal plants will be forced to shut down, or the utilities running them will face massive fines on high CO2-emissions after 2020. Utilities such as E.ON AG (OTC:EONGY) (Dusseldorf, Germany), RWE AG (OTC:RWEOY) (Essen, Germany) and Vattenfall AB (Stockholm) have been relying on this CCS law in order to guarantee the massive investment they will have to make in making CCS a commercial reality. All three are involved in CCS pilots within Germany and elsewhere in Europe.

The issue is compounded by Germany's stated goal to exit the nuclear power sector by 2020, which is expected to impact the country's power generation capabilities. Tuomo Hatakka, CEO of Vattenfall Europe AG, reacted angrily to the German government's decision. "From our point of view, there's no objective reason why the law couldn't be passed in this legislative term," he said from a conference in Berlin. "So far we have invested around 100 million euros [$140 million] in a pilot CCS project, but we need planning reliability to continue with our investment."

There are three key CCS pilot projects under way in Germany right now. Vattenfall kicked off the world's first CCS project in September 2008 in Lausitz in eastern Germany. The pilot project has seen a 30-megawatt (MW) thermal unit constructed over a period of 15 months at the Schwarze Pumpe plant at a cost of $94 million. E.ON and Siemens AG (NYSE:SI) (Munich, Germany) are using the latter's post-combustion capture technology to wash flue gases with amino acid salt to capture CO2 at Unit 5 of the coal-based Staudinger power plant near Hanau. The third project under way belongs to RWE Power (Dortmund, Germany) and is located at the Coal Innovation Centre of the Niederaussem power plant in Bergheim, Germany.

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