REPORTS: CCS ON CHOPPING BLOCK AT MEETING OF U.K. MINISTERS

Tamar Hallerman
GHG Monitor
10/19/12

Some government funding for carbon capture and storage projects appears to be in question as top U.K. ministers met this week to discuss a long-term energy policy, according to media reports. The group known as the “Quad”—Prime Minister David Cameron, Deputy Prime Minister Nick Clegg, Chancellor George Osborne and Chief Secretary to the Treasury Danny Alexander—met with Secretary of State for Energy and Climate Change Ed Davey Oct. 17 in a closed-door meeting to find ways to boost the country’s stalling energy investment program via a comprehensive energy bill to be proposed in Parliament next month. However, reports indicated that disagreements between the Conservative-run Treasury and Liberal Democrat-operated Department of Energy and Climate Change (DECC) have some in the U.K. worried that support for CCS could be cut as part of a political deal to help pay for renewable energy subsidies and other measures.

Reuters reported that Davey recommended that two full value-chain CCS projects be funded under the country’s demonstration program. But others, such as the Guardian, reported that CCS funding is being used as a “negotiating chip” in the discussions. While few details of the talks were released publically following the meeting, pro-CCS groups released pleas to maintain current levels of CCS funding. A group of British engineers warned that the U.K. government’s “hesitation and indecisiveness” has put the country at risk of falling behind in the development of CCS projects. “The U.K. is at risk of going from a world leader to an also-ran in the race towards carbon capture and storage technology,” Tim Fox, head of Energy and Environment at the Institution of Mechanical Engineers said in a statement ahead of the meeting. “Projects in Canada, Norway and China are now moving those countries ahead of the U.K., while we are swiftly losing momentum.”

Negotiations Could Undo Comprehensive CCS Program

The U.K. currently has plans for one of the world’s most robust CCS development programs, set up only six months ago. After the country’s only remaining project in its CCS competition, ScottishPower’s Longannet, dropped out last fall due to funding concerns, the country went back to the drawing board to set up a new development scheme. In April, the U.K.’s Department of Energy and Climate Change relaunched its £1 billion ($1.6 billion) competition for demonstration projects. The government also announced £125 million ($196 million) for smaller applied R&D projects and introduced an electricity market reform package in Parliament that would establish a feed-in tariff with contracts for difference for CCS projects meant to provide developers with stronger longer-term operational support. That legislation aims to create an emissions performance standard for new coal plants, a carbon floor price and a requirement that all new fossil fuel plants be carbon capture ready, among other reforms meant to further incentivize CCS. Davey estimated this spring that U.K.-based firms could stand to earn £3.5 billion-£6 billion ($5.6 billion to $9.6 billion) annually—and create roughly 100,000 new jobs—if the country is quick to embrace CCS technology.

The revitalized program has been widely applauded by CCS advocates worldwide since its inception. “It creates an opportunity for the U.K. to take a leading role in world markets whilst cost-effectively reducing emissions, creating employment and generating prosperity,” CEO of the Carbon Capture and Storage Association Jeff Chapman said in April. During the launch of the Global CCS Institute’s most recent edition of its “Global Status of CCS” report last week, CEO Brad Page cited the U.K.’s program as a particularly “sensible” policy approach for developing CCS.

NER 300 Participation Discussed

The Quad also reportedly discussed the U.K.’s participation in the European Commission’s (EC) New Entrants Reserve competition (NER 300). The EC reportedly gave the U.K. government until the end of the month to decide whether it would help fund U.K. CCS projects that could be selected under the competition. A new-build 650 MW integrated gasification combined cycle project in eastern England, the Don Valley Power Project, tops the list of projects that have priority for funding under the scheme, but the U.K. government must agree to help fund the balance of project costs beyond the EC’s contribution. Recent estimates indicate, though, that the EC will be able to provide a smaller sum of money to individual projects than initially anticipated, likely €337 million ($442 million) at most. Given that some estimates for Don Valley’s price tag are as high as £5 billion ($8 billion), that could be a hefty tab for the U.K. government. Three other U.K.-based projects were also listed as eligible projects under NER, however those are lower on the list of rankings.