Capacity Allocation Debate for Prinos: Insights and Implications

Prinos Installation in Kavala - Greece

The market currently favours a capacity allocation "formula" similar to existing European practices for the underground CO2 storage facility in Prinos. This approach rejects the proposal from the Ministry of Energy and Mineral Resources, as outlined in the bill under consultation. The proposal suggested a regulatory allocation for one part and a tender based on price for the remainder.

Meeting Overview

This conclusion emerged from a meeting held on Friday at the Ministry of Environment and Energy. The meeting was led by Deputy Minister Nikolaos Tsafos and included representatives from key companies such as TITAN, AGET Heracles, HELLENiQ ENERGY, Motor Oil, Energean, DESFA, and ΗΕRΕΜΑ. These companies form the Greek "ecosystem" in carbon capture and storage (CCS), focusing on both the design and development of CCS projects and the perspective of emitters. The competent state body, EDEYEP, is responsible for overseeing the entire project.

The discussion was heavily focused on capacity allocation. Market representatives argued for adherence to European and global industry standards. They opposed the "originality" of the bill's provisions, advocating instead for a unified method of capacity allocation that avoids discrimination.

The Case for a Unified Method

A unified distribution method is essential for aligning with the Greek reality. The storage capacity of Prinos is limited to a maximum of 2.8 million tons of CO2 per year. In contrast, the needs of emitters are estimated at 4.3 million tons. This discrepancy necessitates a balanced approach to ensure the proper functioning of the infrastructure. It is crucial to avoid creating conditions of scarcity, which could adversely affect final price formation.

Market representatives have expressed strong support for a unified approach to developing storage space. This method should not fragment capacity and should align with European practices. The preferred methods include either a purely regulated regime or agreements reached through bilateral negotiations. They firmly oppose a hybrid model that combines regulated allocation with tender-based allocation, as proposed in the current bill.

The Importance of Tendering Processes

The Greek case is particularly relevant as the project is classified as a Project of Common European Interest. This classification necessitates a tendering process. However, it is vital that criteria beyond price are considered to prevent imbalances stemming from higher demand and lower supply.

Simultaneous implementation could serve as one of the criteria for the tender process. Market representatives have urged the Ministry of Energy and Infrastructure to ensure that all criteria are established transparently and objectively, safeguarding access to the infrastructure.

Pricing Method and CCfDs

The market's demands also encompass the pricing method and the establishment of a support regulation for Contracts for Difference (CCfDs). Market representatives have highlighted the need for a pricing regulation that incorporates a specific cost-orientation process. This approach aims to ensure the competitiveness of the supply chain, allowing for necessary adjustments to maintain stable and sustainable final prices.

As noted by competent sources, this task presents challenges due to the lack of previous experience in the Greek market regarding such burdens. The Waste, Energy and Water Regulatory Authority is expected to undertake this responsibility based on the bill's provisions.

Furthermore, the request for a CCfDs support regulation is rooted in the sustainability of projects. This request aligns with the broader European vision of supporting CCS projects during their initial stages until they achieve a level of maturity and sustainability that allows them to operate independently of CO2 price fluctuations.

Future Prospects for CO2 Pricing

The European Commission plans to launch the "Industrial Decarbonisation Bank" in April 2026. A significant portion of the available funds will be allocated to CO2 capture and storage projects. This initiative aims to mitigate price fluctuations in the Emissions Trading System (ETS).

It is noteworthy that these projects become viable at CO2 prices around €140 per ton, while current prices hover between €80 and €100 per ton. The anticipated rise in carbon dioxide prices over the next decade will likely facilitate the recovery of funds in favour of the state. This recovery will, in turn, support the projects currently being allocated funds.

Aid for Storage in Ravenna

The Ministry of Energy is reportedly receptive to market requests and intends to review the capacity allocation method, incorporating relevant European experiences. This review will extend to the CCfDs segment as well.

Additionally, the final plan will encompass the storage infrastructure in Ravenna. The legislative framework will include provisions to support the differential costs for quantities that must be redirected to storage due to the lack of available space in Prinos. This regulation is deemed essential for completing the relevant supply chain. Without it, the supply chain would remain incomplete until the storage capacity of Prinos is reached, resulting in excess CO2 ultimately being released back into the atmosphere.

In conclusion, the capacity allocation debate for the Prinos facility highlights the critical need for a unified and transparent approach. By aligning with European practices and ensuring fair access to infrastructure, the development of the CCS value chain can progress effectively.

Source: energypress.gr