A couple of interesting events relating to CCS policy in the UK took place in London over the last few weeks, and although short on major revelations, they provided some invaluable insight into the ongoing technical and political debate surrounding this nascent industry. Last month, the Carbon Capture and Storage Association (CCSA) held their annual reception at the House of Lords, featuring an appearance by newly-appointed Energy Secretary Amber Rudd, while this week a Westminster Forum on CCS policy hosted a range of key speakers from both government and industry. With many of the same faces attending both events, it was unsurprising to hear some common themes; in particular, strong calls for the government to outline how it plans to proceed with a ‘second phase’ of CCS after an initial demonstration, as investment for follow-on projects needs to be made as soon as possible. In this regard, the incoming cabinet minister could only ask for more patience, whilst pledging firm support towards keeping CCS a part of the UK’s energy plans.
Those plans have led the UK’s CCS policy to become widely regarded as one of the most supportive in the world, encompassing £1 billion of capital funding to demonstration projects, operational subsidies through the Contracts for Difference mechanism, and £130 million of R&D funding. The demonstration funding is to be allocated to winners of the CCS commercialisation competition, narrowed down last year to the White Rose coal project at Drax Power Station in Yorkshire and Shell’s gas turbine project at Peterhead in northern Scotland – both designed to provide around 300 MW of net capacity with 90% carbon capture. Updates from these projects at the Westminster Forum showed that they are well on schedule with their engineering studies and permitting applications. Peterhead has already put out a call for contractor bids, and the government is due to make a final investment decision early next year.
It remains unclear whether only one or both of the demonstration projects could receive the competition funds, and the CCSA is adamant that both must go ahead for the UK’s CCS industry to be commercially viable. If the competition does turn out to be a fight to the last, it is certainly a tough one to call, as each of the projects offers some rather unique benefits. White Rose has made much of its location in a highly industrialised part of the country, where several power plants and other major emitters could easily link up their emissions to the oversized CO2 ‘trunkline’ which the project will build out to its offshore saline aquifer storage site. Drawing on Drax’s extensive biomass infrastructure, there is the possibility of achieving negative carbon emissions by cofiring the coal with up to 10% biomass. Following the recent demise of FutureGen 2.0 in the US, White Rose also represents the only oxyfuel-based CCS demonstration on the cards worldwide, and could therefore be a unique showcase for this capture technology. On the other hand, Peterhead’s use of an amine-based capture process on a gas turbine would also be a first, and is able to draw on related experience gained by Shell’s subsidiary Cansolv at the pioneering Boundary Dam coal plant in Canada. Using an existing gas pipeline out to the depleted ‘Goldeneye’ gas reservoir, Peterhead offers the rather elegant prospect of simply reversing the historical flow of carbon and returning it to the reservoir. An existing onshore gas pipeline could also be co-opted to connect up to the more industrialised regions of southern Scotland.
The CCS demonstrations and their successors will be able to draw on the Contracts for Difference scheme introduced in 2013, which reimburses low carbon emitters the difference between market energy costs and a ‘strike price’ which reflects their true costs. Importantly for the first CCS plants, this price will be determined by negotiation with the providers and consideration of their significant ‘first-of-a-kind’ costs, as opposed to the competitive auction process which will be held for more established renewable technologies. Yet to be announced, the initial CCS strike price is likely to approach 200 £/MWh, lying somewhere between that of offshore wind (155 £/MWh) and a demonstration of a tidal lagoon plant (>300 £/MWh). However, several studies have projected rapidly falling costs for any CCS projects which follow the first demonstrations, due in large part to the potential to simply connect to already-established transport and storage infrastructure. A much-quoted recent report from the Energy Technology Institute (ETI, http://www.eti.co.uk/wp-content/uploads/2015/03/CCS-Building-the-UK-carbon-capture-and-storage-sector-by-2013.pdf) projects a significantly more competitive strike price of 100 £/MWh by 2030 or after 2.5 GW of CCS capacity is installed, comparing rather favourably with the 15 GW the offshore wind industry claims to need to reach the same price. Several speakers were quick to point out that this is all without taking into account the key advantages CCS offer over its renewable rivals, namely despatchable, backup generation and grid balancing.
Industrial CCS was another key theme at the Forum, and one which probably doesn’t normally get the attention it deserves. Not only is carbon capture often much easier from chemical, steel, and cement plant than it is from power plants, it is also the only realistic means of decarbonising these industries, and therefore seems a much easier sell to the general public. The Teeside Collective is a proposed industrial CCS project in the highly industrialised Tees Valley region outside Middlesbrough, initially encompassing four emitters producing steel, hydrogen, ammonia, and PET. Having narrowly missed out in the commercialisation competition, the project has nevertheless secured £1m in government funding to develop its business case, and could form part of the crucial second phase of CCS. The Collective aims to sequester 5 Mt of CO2 by the early 2020s in either of the storage sites established for the competition winners, though its distance from both hubs may pose a problem. Much debate centred around the lack of any government mechanism to reward investment in industrial CCS, as the Contracts for Difference are wholly unsuitable in a market for material goods. Nonetheless, there was general agreement that decarbonising these industries in the UK is the only alternative to seeing them chased offshore by rising carbon prices, losing thousands of jobs and merely displacing their carbon emissions elsewhere.
Whilst the storage sites studied for Peterhead and White Rose could take up to 240 Mt of CO2, the government was urged to encourage investment in assessing other North Sea sites, as this process can take up to ten years. More geological studies are also needed to establish the potential for using the CO2 for enhanced oil recovery, which has proved such a crucial impetus for CCS deployment in North America and is a real possibility in the North Sea oil fields near the current Peterhead storage site. The difficulty of relying on the private sector to develop a CO2 transport and storage infrastructure was highlighted, with some speakers suggesting the government should set up a corporation for establishing the infrastructure and the new business of CO2 storage which could later be privatised. Despite the clear technical expertise of oil and gas companies in this area, their high-risk, high-return business model may make them less suitable candidates for managing what is essentially more akin to waste disposal.
Although progress in the CCS world often seems painfully slow, a few speakers highlighted how much has been achieved in the last ten years, most apparent in the change in tone of the discussion from one of technical feasibility to matters of financing and regulation. However, there was also a warning from consultants Pale Blue Dot Energy that much of the early momentum and industry confidence has been lost, notably inducing all big six energy suppliers (excluding Shell) to ‘step back and see what happens’. This dip in interest has left a gap in the number of CCS demonstration projects in the pipeline, prompting concerns that the projected numbers of plant may be slow to materialise after a first wave of competition winners and runners-up. As always, a clear, long-term government commitment is needed to reignite investor interest, and the current parliament will be faced with some crucial decisions for the future of CCS.
As with many UK CCS meetings, my own feeling is that public acceptance may be the elephant in the room, and any illusion that large CCS projects will not meet opposition stems largely from the technology’s relative obscurity outside these circles. Unfortunately, no matter how good the technical and economic arguments are, CCS will have to deal with accusations that it is merely a desperate ploy of the fossil fuel industry to maintain business as usual, so I was surprised to even hear a suggestion that the burgeoning fossil fuel divestment campaign could be brought onside. Amber Rudd’s brief mention of the need to increase public awareness was therefore an encouraging sign, and with building on White Rose or Peterhead starting as soon as next year, I hope politicians will begin to engage more with the public on the prospect of their energy bills subsidising these plants. Given that the aforementioned ETI study estimates a 32 billion pound saving if the UK can draw on CCS as part of its decarbonisation strategy, the arguments are certainly there to be made.
Toby attended the CCSA annual reception at the House of Lords on 24 June and the Westminster Energy, Environment and Transport Forum on CCS in the UK: policy priorities, collaboration and long-term confidence, in London on 7 July.