Abby L. Harvey
GHG Daily
1/21/2016
The developers of the projects that remained in the U.K.’s Carbon Capture and Storage Commercialization Competition had the rug pulled out from under them when the program was canceled last year with little warning, a panel of experts said Wednesday during a hearing of the House of Commons Energy and Climate Change Committee. “The treatment of the projects was shabby. It reflects very badly on the U.K. government’s relationship with business and their ability to drive long-term investment,” said Chris Littlecott, program leader for CCS technology with environmental group E3G.
The U.K. announced on Nov. 25 the official cancellation of the competition, in which two projects remained in the running for £1 billion in funding. “This decision means that the CCS Competition cannot proceed on its current basis. We will engage closely with the bidders on the implications of this decision for them,” the government said in a prepared statement.
“Overall, this was a fundamental change of government policy masquerading as a spending decision,” Littlecott said of the decision. “The gravity of the situation here is that the government now appears to not believe in its own energy policy.”
The U.K. launched the competition in 2012, and a funding decision was expected in coming months. Two projects had been in the running for the award: Royal Dutch Shell’s Peterhead project in Aberdeenshire, Scotland; and the White Rose CCS Project in Yorkshire, managed by the Capture Power consortium, which would be a new-build coal-fired power plant with CCS. A week before the CCS competition termination announcement, the U.K. government announced plans to close all unabated coal-fired power plants by 2025, signaling a move to lower-carbon forms of energy.
The cancellation decision came at the last possible moment, the panelists said, noting that bids were due to be submitted within four weeks at the time. Richard Simon-Lewis, financing director for Capture Power, said the first inkling that something might be amiss regarding the government’s funding of CCS was a Nov. 24 article in the Financial Times. “I think it’s fair to say that it was very unexpected from our standpoint. It was not something that we were given a huge amount of visibility around,” Simon-Lewis said at the hearing.
Following the cancellation announcement, Simon-Lewis said, the White Rose project is not likely to advance. “In terms of the options, clearly the premature cancellation of the process has meant that we no longer have access to the grant funding and we no longer have access to the customized [Contracts for Difference] so I think, regrettably, our sponsors have had to make the decision to wind the business down,” he said. Shell has also indicated that its project is not likely to survive the government’s decision.
Expense-Based Arguments Hold Little Water, Experts Say
British Prime Minister David Cameron stood by his government’s move to nix the competition during a Jan. 12 meeting of the parliamentary Liaison Committee. When the program came across the table during a spending review, Cameron said, the government Cabinet collectively decided it was time to pull support. “It seemed to me that carbon capture and storage, while I completely believe in the idea … the economics at the moment, you know, really aren’t working,” Cameron said at the meeting.
The experts testifying at yesterday’s session challenged this assertion, arguing that the economics of the projects in the competition were not necessarily meant to be workable. “They weren’t supposed to be cost-competitive at this point in time; they were supposed to be providing the initial infrastructure and business models and funding expertise for future projects to be cost-competitive,” Littlecott said.
Much of the U.K.’s carbon capture and storage deployment plans revolve around the development of CCS hubs or clusters, which would be comprised of several projects feeding into a shared transportation and storage network. Both Littlecott and Simon-Lewis explained that as first-of-a-kind projects, White Rose and Peterhead were destined to be much costlier than future projects because they would bear the burden of initiating these infrastructure networks.
“You look at what our project was going to provide and basically a significant part of the cost of our [estimated] price attached to the transportation and storage network that was going to come as part of the full chain project,” Simon-Lewis said.
Delaying investment in CCS won’t lower the cost of the needed infrastructure, Littlecott said. “There seems to be a view going around within parts of [the] government that we can afford to wait and we can afford to buy CCS in the future when other people have made it cheaper. But … all of the significant pieces of cost reduction in the U.K. are around the access to transport and storage,” he said. “Having cheaper and better CO2 capture technologies would be great … but we can’t afford to wait until the 2030s and then start to think about CO2 infrastructure, we have to start now.”