Abby L. Harvey
GHG Monitor
5/23/2014
The United Kingdom must not stall any longer in developing carbon capture and storage projects, says a report released this week by the House of Commons Energy and Climate Change Committee. The report notes that while the UK has stated its intentions to pursue CCS as a means to address climate change, little progress has been made and schedules continue to be pushed back. CCS, the report says, “could be a game changer in efforts to tackle climate change, but high energy and financial costs currently make CCS uneconomic without specific policy interventions to support it. These are likely to be subsidies from the public purse and/or the consumer. As a result, progress on CCS has been extraordinarily slow with only a handful of projects in operation around the globe and none fitted to power stations at full scale. In the UK the expected start date has been repeatedly pushed back from 2014 to potentially after 2020. This delay has called into question the credibility of Government CCS policy and has resulted in a lost decade for this vital fledgling industry.”
In 2012, the British government launched a £1 billion carbon capture and storage commercialization competition with a goal to offer financial support to projects that could contribute to reducing the costs of CCS technology. In March 2013, two preferred projects were chosen. Shell’s Peterhead Project in Aberdeenshire, Scotland involves capturing CO2 from part of the existing gas-fired power plant at Peterhead and storing it in a depleted gas reservoir beneath the North Sea. The White Rose Project, a project involving Alstom and Drax, located in Yorkshire, England involves capturing CO2 from a new super-efficient coal-fired power station at the Drax site in North Yorkshire and storing it in a saline aquifer also beneath the southern North Sea. However, more is needed, according to the report. “To ensure CCS can start helping us cut power sector emissions by the 2020s, the Government needs to prioritize designing a credible financial incentive framework using guaranteed-price ‘Contracts for Difference’ (CfD) and commit to a realistic but ambitious timeline for awarding support to projects both inside and outside its CCS commercialization competition,” the report says.
It goes on to state, “Viable projects outside the competition, in particular, could be at risk of collapsing unless they get a clear signal from Government that they can negotiate for a CfD in parallel with competition projects. CfDs need to be tailored for all these projects to suit the unique characteristics of CCS.” The report further calls for the government to make final investment decisions on the Peterhead and White Rose projects by 2015, stating “too much time has already been wasted by badly designed bureaucratic policies.”
Government Support Key, Report Finds
Without financial support from the government, new CCS projects are unlikely to take off, as first generation technologies may not be likely to see a return on their investment, the report warns. “Getting the first CCS projects built will be key to reducing the cost of future CCS projects. It is unclear whether any financial advantage accrues to first movers, so there is a case for limiting the amount of consumer support which is allocated to the first CCS projects. It is likely that most benefits will be accrued by second movers, which may explain why the big companies are reluctant to spend so much of their own money at this early stage of CCS development,” the report says.
