COMMONS

Climate change targets at risk without CCS investment

10 February 2016

The Government’s decision to pull funding for carbon capture and storage (CCS) at the last minute will delay the development of the technology in the UK and could make it challenging for the UK to meet its climate change commitments agreed at the Paris COP21 summit, an Energy and Climate Change Committee report has warned.

Angus MacNeil MP, Energy and Climate Change Committee Chair:   

"If we don’t invest in the infrastructure needed for carbon capture and storage technology now, it could be much more expensive to meet our climate change targets in the future. Gas-fired power stations pump out less carbon dioxide than ones burning coal, but they are still too polluting. 
 
If the Government is committed to the climate change pledges made in Paris, it cannot afford to sit back and simply wait and see if CCS will be deployed when it is needed. Getting the infrastructure in place takes time and the Government needs to ensure that we can start fitting gas fired power stations with carbon capture and storage technology in the 2020s."

Lost confidence

CCS technology is ready to pilot on power stations at a large scale, but the transportation and storage infrastructure needed to carry the carbon dioxide requires large upfront investments.

The Government’s sudden decision to cancel its £1 billion commercialisation competition has led to the White Rose and the Peterhead projects being cancelled. As a result the opportunity to develop CCS infrastructure in the UK in the early 2020s is likely to have been missed. The momentum that had built up over recent years has suddenly come to a halt and the industry and investors are losing confidence.
 
Angus MacNeil MP:   

"The manner in which the Government pulled the plug on the CCS commercialisation competition was hugely disappointing. UK companies had been working towards this for years and were only weeks away from final proposals. The first hint one company had about the decision was when they read a news report the night before. This is the latest in a series of snap decisions that have damaged confidence in the Government’s energy policy."

Missed opportunity

The report also warns that the Government may have lost an opportunity to exploit existing oil and gas assets in the North Sea, which could have generated additional revenues. The inquiry was told that empty North Sea oil fields could potentially store European industrial emissions for the next 100 years.

The MPs are calling on the Department for Energy and Climate Change (DECC) to assess the financial and other benefits of using our existing North Sea oil and gas infrastructure to facilitate carbon capture and storage on a commercial scale. 

A new carbon capture and storage strategy

The Department must devise a new strategy for CCS in conjunction with a new gas strategy, the report recommends. The challenging infrastructure surrounding the transport and storage of carbon needs to be considered far in advance of it being utilised and investors need the confidence that the UK is committed to a domestic CCS market.

The Department should engage with the National Infrastructure Commission to explore options for the development of CO2 transport and storage. The Commission should consult on whether developing CCS infrastructure should be one if its priority areas.
 
Angus MacNeil MP concluded:   

"The Department must devise a strategy to ensure carbon capture and storage technology can start delivering carbon savings by the 2020s. Only last week Ministers rejected the need for such a strategy, but the industry and investors are crying out for this certainty. Ministers must set out exactly how much of their planned new gas capacity is to be retrofitted with CCS and by when. And the Government must let investors know when CCS projects will be able to apply for guaranteed-price contracts alongside other low-carbon energy schemes."

Background

The UK Government first promised support for CCS in 2007, aiming to deliver an operating CCS project at a coal-fired power station by 2014. However, the Coalition Government ended negotiations with the last remaining bidder in 2011 due to concerns that the project could not be funded within its agreed £1 billion capital limit.

The Government announced a replacement CCS commercialisation 'competition' in 2012, with contracts awarded in 2013-14 to two preferred bidders: Capture Power for its White Rose project in Yorkshire, and Shell and SSE for their Peterhead project in Aberdeenshire.
 
One billion pounds was to be made available in capital funding to support the initial stages of commercialisation. The Government expected "the projects to be operational between 2016 and 2020".  However, in November 2015, just weeks before the final bids were to be submitted in this process, the Government unexpectedly announced that the money was no longer available.

Further information

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