A number of start-ups targeting the CCS sector are attracting the interest of financial investors. Carbon Collectors is the latest of these, securing the backing of PGGM as the Dutch manager bets on the use of disused gas fields for storing carbon.

Across Europe some major carbon capture and storage (CCS) projects are underway, largely with state backing, as governments look to move towards their net-zero targets.

Meanwhile, on a smaller scale, a growing number of start-ups seeking to play a part in the growing sector are attracting investment from energy and infrastructure investors keen to position themselves in this nascent segment of the energy transition.

Among these is Dutch pension manager PGGM, which recently backed Carbon Collectors, a Groningen-headquartered startup that is developing a novel method of storing carbon in depleted gas fields in the North Sea

The manager, which oversees the investment mandate of Dutch healthcare pension scheme PFZW among others, predicts there will be significant growth in CCS over the next few years, with the technology expected to play a big role in the race for net zero.

“We think there will be a market which is hardly in existence today”, PGGM investment director Simon Nicolaas tells Infralogic. “For us this this is a very promising market where we think we can make good investments”.

Earlier this month the investor acquired a 49% stake in Carbon Collectors, also agreeing the exclusive right to invest up to EUR 200m of equity in the firm’s project pipeline.

PGGM’s investment in Carbon Collectors means that the company now has enough capital to reach a final investment decision on its first portfolio of projects. “From that point on, we expect that the company will be self-sustainable,” Nicolaas says.

The further EUR 200m will be structured across different project SPVs, which are expected to be financed with debt and equity, he says, adding that it’s too early to know what those projects will look like.

The investment was made under a new EUR 1bn mandate known as climate and energy transition solutions (CETS), launched last year, which targets investments with a smaller value but with potentially greater risk and better returns.

“This is higher risk than the typical infrastructure deals that we are doing for our infrastructure fund, but there’s also a much higher expected return and we think it’s very important to do this kind of investment,” Nicolaas says.

CETS last year invested EUR 25m in Dutch carbon capture specialist SCW, which is also involved in direct air capture and waste processing via gasification.

The vehicle, which also targets adjacent sectors including electrification, smart cities and sustainable fuels, also invested in SAF producer Elyse and Eindhoven-based renewable energy firm RIFT.

Although in the Netherlands there are various solutions to how and where carbon can be stored, PGGM views offshore gas fields in the North Sea as “a very logical solution,” Nicolaas says.

Founded in 2020, Carbon Collectors aims to offer a “flexible” carbon collection, transport and storage solution for hard-to-abate industries, using a marine vessel that has been developed with a combination of technologies from the oil and gas and shipping industries, he says.

Rather than being reliant on transporting the gas through existing offshore pipelines, the company “can go anywhere…to any empty gas field and pump it in basically,” he says.

The vessel design utilises high pressure transport and storage technology, and because the carbon dioxide (CO2) is injected under high pressure, it doesn’t need cooling. That removes the need to heat it up when pumped into the gas field.

This both reduces power consumption as well as the amount of infrastructure needed onshore, Nicolaas says, making it “very promising.”

The first vessels are due to enter the water in a couple of years and PGGM expects to exhaust its initial EUR 200m commitment around two more years after that, Nicolaas says.

In the Netherlands, like elsewhere in Europe, there is a strong regulatory push on carbon emitters to come up with a solution and there are certain hard-to-abate sectors which can get support schemes from the government to contract CCS solutions.

This is why the concept developed by Carbon Collectors, which makes CCS more accessible to a wide array of industries, is timely, Nicolaas says.

Should the partnership with Carbon Collectors go well, PGGM have not ruled out increasing their investment.

“I think that’s still quite far away for now,” Nicolaas says. “It’s hard to say where this will ultimately lead to.”

Elsewhere in the Dutch energy sector, PGGM also owns stakes in Evolution Terminals, district heating business ELES, gas pipeline operator Nogat and LBC Tank Terminals – in which it is preparing to divest its interest, alongside fellow shareholders Ardian Infrastructure and APG.

Nicolaas says PGGM is not focusing on integrating or combining any of that infrastructure with the new technology being developed by Carbon Collectors. “We are making this investment purely on a standalone basis,” he says, although adds that there is potential for cooperation in the future.

PGGM was advised on the investment by law firm De Roos Advocaten en Notariaat and technical advisor DNV.

A handful of other investments have already been made in this space by infrastructure funds in Europe, including SWEN Capital Partners’ investment last March in German startup Novocarbo and AXA Investment Managers’ backing in 2022 of UK company Carbon Clean.

Novocarbo builds and operates so-called carbon removal parks, including pyrolysis plants that remove CO2 from the atmosphere while producing a sustainable carbon material called biochar. Carbon Clean on the other hand has a development pipeline of carbon capture facilities used by heavy industry, with clients such as Veolia, Chevron and building material company CEMEX.

Iona Capital, the manager acquired recently by Swiss energy-from-waste business Kanadevia Inova, in 2023 invested in Carbon Capture Scotland, which captures carbon dioxide for distillers and energy-from-waste firms as well as biomethane plants in the UK. Mirova has also entered the space, having invested in Paris-based Tallano Technologie, a cleantech company developing technology to reduce emissions on road and rail transport.

Meanwhile oil majors across Europe are leading the charge in the development of large-scale carbon capture schemes. Last December UK oil giant bp and Norwegian counterpart Equinor raised GBP 3.8bn of debt from around 20 lenders to finance two major carbon capture and storage projects in England’s Teesside region, the first kind of its project in the world.

A similar project is set to follow in the Netherlands, with Shell teaming up with TotalEnergies and Dutch gas company Gasunie to build Aramis, a major CCS project at the Maasvlakte in the Port of Rotterdam.