In Sweden, municipal energy major Stockholm Exergi AB has announced that it has signed a contract with Microsoft covering 3.33 million tonnes of permanent carbon removals from bioenergy with carbon capture and storage (BECCS) at its Värtan biomass-fired combined heat and power (CHP) plant in Stockholm. The agreement represents one of the world’s largest permanent removals deal to date.
The deliveries of the carbon removal certificates to Microsoft are planned to start in 2028 and have a term of ten years.
The agreement with Microsoft is a huge step forward for our BECCS project, Stockholm Exergi as a company and the climate. It is the strongest possible recognition of the significance, quality, and sustainability of our project and takes us an important step closer to a final investment decision in Q4 2024. I believe the agreement will inspire corporations with ambitious climate objectives, and we target to announce more deals with other pioneering companies over the coming months, said Anders Egelrud, CEO of Stockholm Exergi.
The contract represents a milestone for climate change mitigation. While emissions reductions remain an overall priority, there is a consensus that global warming cannot be limited to 1.5 °C or well below 2 °C without permanent carbon removals.
By demonstrating commitment to ambitious, voluntary corporate climate objectives, Microsoft and Stockholm Exergi hope to contribute to the much-needed growth of the industry, and allow corporates to meet their net-zero targets and nations to meet the objectives of the Paris Agreement.
Timeline
Building on this announcement, Stockholm Exergi intends to seek complementary state aid and additional private carbon dioxide removal (CDR) deals, both of which are necessary to reach a financial close.
The permanent carbon removals are contingent on Stockholm Exergi’s final investment decision (FID, expected in Q4 2024.
To reach a FID, Stockholm Exergi targets to successfully participate in the Swedish aid program for BECCS, expected to be concluded before the end of the year, as well as closing other agreements on the voluntary carbon market (VCM).
The project funding relies also on already awarded means from the EU Innovation Fund. Notwithstanding government aid and EU funds, additional revenues from selling carbon removal units on the VCM are required for the project to reach a financial close.
This business model, which will combine the agreement with Microsoft (and other private buyers) with EU funding and state aid, is a strong validation of how public-private co-funding can maximize the number of permanent removals and removal projects that can be realized within a nation’s budget for climate action.
Carbon negative by 2030
Since 2020, Microsoft has pursued the goal of being carbon negative by 2030, with a reductions first strategy, complemented by building a portfolio of carbon removal offtake agreements.
It has publicly set out its criteria for high-quality removals, pursued financeable offtake agreements, communicated lessons learned, and reported its progress annually.
We are extremely proud to announce this carbon removal offtake with Stockholm Exergi from its pioneering Värtan BECCS project. Leveraging existing biomass power plants is a crucial first step to building worldwide carbon removal capacity. In this case, we are pleased with the efficiency of recovering heat from carbon capture and adding it to district heating networks. Finally, it is crucial to sustainably source the biomass for BECCS projects, and we were impressed with Stockholm Exergi’s commitment in this regard, said Brian Marrs, Senior Director, Energy & Carbon Removal.
Strict CDR requirements
When in operation, Stockholm Exergi’s plant will permanently remove up to 800,000 tonnes of carbon dioxide (CO2) from the atmosphere per annum.
The environmental permit for the project at the Stockholm site was obtained on March 28, 2024.
The construction of the carbon capture unit, liquefaction, and intermediate storage is planned to start in 2025, an addition to Stockholm Exergi’s existing biomass-based combined and heat power (CHP) plant in Stockholm, operational since 2016.
The biomass feedstock for the project will continue to be safeguarded to ensure sustainable management of forests, protection of sensitive areas, and stable carbon stocks, and not sourced from roundwood that would otherwise be used for long-lived wood products.
Permanent geological storage will take place in the Nordic region.
As confirmed in the agreement with Microsoft, Stockholm Exergi will deliver carbon removals following strict quality requirements.
This includes criteria for sustainable sourcing of forest biomass developed together with Microsoft, conservative quantification of net removals, and comprehensive monitoring, reporting, and verification (MRV).
In line with the policy of the Swedish government, the carbon removals exchanged in this agreement will be used by Microsoft to negate its emissions and be transparently reported as fitting under Sweden’s climate targets, similar to how corporate emission reductions contribute to national climate targets.
