COMMONS

Fast-track carbon capture and storage pilot projects after 'lost decade' of delay

21 May 2014

MPs have urged the Government to fast-track final funding decisions on two pilot Carbon capture and storage (CCS) projects at Peterhead and Drax by early 2015, after years of delay in the ‘competition’ launched to provide capital support for the industry.

The technology – which can be fitted to coal and gas power stations - is vital to limit climate change, according to the Energy and Climate Change Committee, because there is more CO2 locked up in fossil fuel reserves than can be safely burnt without pushing global temperatures beyond 2 degrees Celsius – a dangerous threshold according to scientists.

Energy and Climate Change Committee Chair, Tim Yeo MP:

"Fitting power stations with technology to capture and store carbon is absolutely vital if we are to avoid dangerously destabilizing the climate. After nearly a decade of delay DECC has finally got near to delivering two pilot Carbon Capture and Storage projects in the UK. It must now fast-track these projects and reach final investment decisions before the election to ensure this technology can start delivering carbon savings by the 2020s. These two demonstration projects will not be enough to kick-start the industry or have a significant impact on our carbon budgets, however. Ministers must also ensure that viable CCS projects not involved in the competition are able to apply for guaranteed-price contracts alongside other low-carbon energy schemes."

CCS competition

The Government launched a ‘competition’ in 2007 to kick-start CCS in the UK by offering capital support to winning pilot projects. Seven years on, however, it has only delivered initial FEED funding to two projects and the expected start date of CCS has been pushed back from 2014 to 2020. This delay has called into question the credibility of Government policy designed to support CCS deployment in the UK, according to the MPs. 

Committee Chair Tim Yeo MP added:

"The 'competition' the Government launched to award capital support to CCS has turned out to be a model example of how not to support a fledgling industry, taking successive governments the best part of 10 years to complete."

To ensure CCS can start helping us cut power sector emissions by the 2020s – when it will be needed to meet our climate targets – the Government must reach final investment decisions with the two projects left in its competition (at Peterhead in Scotland and Drax in Yorkshire) by 2015 and commit to a timeline for awarding guaranteed price contracts to projects outside its CCS commercialisation competition.

Costs of CCS

The higher costs associated with fitting and running CCS means that it is likely to develop only in response to specific policy intervention and will need subsidy. The Government should be transparent about the costs of CCS and how they will be met. Guaranteed price tariffs for low carbon energy – called ‘Contracts for Difference’ (CfD) – will be essential to incentivise CCS projects and provide a route to market for non-competition projects. Non-competition projects which do not have the benefit of being eligible for capital support, but are still viable projects are at risk of collapsing unless they get a clear signal from Government that they can negotiate for a CfD in parallel with competition projects.

Economic benefits

Deploying CCS in the UK early could also deliver significant economic benefits. The report points out that it could increase UK plc’s future share of the global CCS market and open up a potential “storage market” using the UK’s offshore geological storage capacity – thought to amount to 70 billion tonnes of CO2 or over a century of UK emissions – while protecting jobs associated with the UK’s coal and energy intensive industries.

Committee Chair Tim Yeo MP:

"The UK is incredibly well placed in regards to CCS with the engineering and academic expertise, suitable geological sites and cross-party commitment to cut CO2. With the right support the UK could become a world leader in this technology, which will be needed across the world when a global deal on tackling climate change is reached. The UK has so far attracted 50% of the proposals for CCS projects in Europe and with the right Government support it could be feasible to create a ‘storage market’ where other countries pay to permanently store CO2 in the UK’s disused offshore geological sites in the North Sea. It could also enable enhanced oil recovery which would help us maximise output from our remaining North Sea oil and gas reserves.

Some CCS technologies may even be able to produce electricity more cheaply than conventional fossil fuel power stations. We were particularly impressed with the ‘radical’ technology outlined by NET Power, which makes carbon capture an inherent feature of the process of power generation by burning fossil fuels in pure oxygen and using the resultant CO2 as a ‘working fluid’ to drive turbines rather than steam."

The latest climate science assessment by the Intergovernmental Panel on Climate Change (IPCC) estimated that to keep the global temperature rise below 2°C, the maximum carbon budget that can be released into the atmosphere is 1,000 gigatons of carbon (GtC) . With roughly 515 GtC already emitted worldwide, a substantial proportion of current proven fossil fuel reserves – which contain 780 GtC - cannot be burnt safely unless CCS is used.

Infographic showing role of Carbon Capture and Storage

Further information

Image: iStockphoto /Infographic: Parliamentary Copyright

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