The U.K.’s on/off relationship with carbon capture and storage (CCS) took a new twist on September 12 with the publication of a report by the Parliamentary Advisory Group.
The 70-page report, “Lowest cost decarbonization for the UK: the critical role of the CCS,” makes numerous recommendations, at the heart of which is a call for the formation of a new and — initially — state-owned company tasked with delivering full-chain CCS for power at strategic hubs around the U.K. at or below £85/MWh on a baseload CfD (contracts for difference) equivalent basis.
This company would consist of two linked but separately regulated organizations: “PowerCo” to deliver the power stations and “T&SCo” to deliver the transport and storage infrastructure. This would require £200–300 million ($266–398 million) of seed funding over the coming 4–5 years, notes the report.
For such a strategy to succeed, this would need to happen within a new economic regulatory framework for CCS, based on a regulated return approach. Important here, notes the report, is the introduction of an industrial capture contract which will be funded by the U.K. government and remunerate industry for the capture and storage of its carbon dioxide. The idea here is that industry will have access to transport and storage through short-term contracts.
The government will also have to establish a CCS certificate system for the certification of captured and stored carbon dioxide, together with a CCS obligation from the late 2020s to give long-term trajectory to the fossil fuel and CCS industries. This, in turn, will put an obligation on fossil fuel suppliers to the U.K. to sequester a growing percentage of the carbon dioxide associated with that supply; CCS certificates will provide proof of storage and hence fulfillment of the obligation.
While this work is ongoing, a new Heat Transformation Group (HTG) will assess the least costly route to the decarbonization of heat in the U.K. and complete the work needed to assess the chosen approach in detail. The HTG has a likely funding need of £70–90 million ($93–120 million).
Speaking at the report’s launch, lead author Lord Ron Oxburgh said that money spent now will be money saved later.
“CCS is a priority for Britain if our 2050 climate goals are to be achieved at least expense. There were a number of people in our group that were skeptical that this really was the least-cost way forward, but even our hard-nosed bankers and businessmen agreed,” he added.
Oxburgh was formerly chairman of Shell Transport and Trading and oversaw the merger with Royal Dutch Petroleum to form Royal Dutch Shell. He has chaired the U.K. government’s select committee on science and technology since 1999.
He believes that the initial £200–300 million of government seed funding would be enough to encourage private investors to get involved. The power plants themselves could be privatized with the transport and storage side run as a regulated utility with capped prices.
According to the report, CCS could capture 40% of the U.K.’s emissions by 2050 — with savings of up to £5 billion/yr ($6.6 billion/yr) compared to alternative strategies. The country’s climate change committee has already reported that inaction on CCS will cost consumers £1–2 billion/yr ($1.3–2.6 billion/ yr) in the 2020s, rising to £4–5 billion/yr ($5.3–6.6 billion/yr) in the 2040s.
However, last November, former chancellor George Osborne cancelled a long-running £1-billion ($1.3-billion) government-sponsored competition to develop a demonstration plant for CCS.
The report notes that this added to a widespread view that CCS has to be expensive: “On the contrary, the high costs revealed by the earlier U.K. approaches reflected the design of these competitions, rather than the underlying costs of CCS itself. This poor design led to the lack of true competition and the imposition of risks on the private sector that it cannot take at reasonable cost for early full-chain projects.”
It goes on: “Current CCS technology and its supply chain are fit for purpose. There is no reason to wait for international projects or for technological progress in either the components or overall system of CCS. Because lead times are long — planning, regulatory and construction — early decisions are needed.”
The report also points out that safe and secure carbon dioxide storage capacity is available offshore in the rocks deep beneath U.K. territorial waters; this represents the least-cost form of storage at the scale required. However, it emphasizes that the state will need to take an enhanced role in managing storage risk if costs are to be minimized.