Government company needed to deliver CCS, report finds

A government-owned company should be set up to coordinate the deployment of carbon capture and storage (CCS) in the UK, a new report has found.

A CCS obligation system – similar in nature to the renewables obligation scheme – is also needed to create a market for the storage of carbon dioxide.

The technology is “essential for lowest cost decarbonisation”, according to the independent report, which was commissioned by the government and led by Lord Oxburgh.

It highlighted a “policy disconnect” between the government’s scrapping of a £1 billion commercialisation competition in November and the advice it received from “a number of independent policy bodies” about the importance of the technology for reducing emissions affordably.

The study said the high cost estimate used to justify the cancellation, reflected the design of the competition, rather than underlying costs of the technology. Contrary to the “widespread view”, CCS is not expensive and “even the first CCS projects can compete on price with other forms of clean electricity.”

A government-owned company, “tasked with delivering full-chain CCS for power at strategic hubs around the UK”, could deliver CCS enabled power at or below £85/MWh. The company would be formed of two “linked but separately regulated companies”: ‘PowerCo’ to deliver the power stations and ‘T&SCo’ to deliver the transport and storage infrastructure. It would need a total of £200-£300 million of funding over the next four to five years.

The report outlined a total of six recommendations, which Lord Oxburgh said were “unconventional” but “absolutely focused on the delivery of least cost solutions”. It said a system economic regulation is needed, including a CCS power contract based on the existing Contracts for Difference and capacity market mechanisms. A government funded ‘Industrial Capture Contract’ should be created to encourage the involvement of industry.

A ‘Heat Transformation Group’, should assess the lowest cost option for the decarburisation of heating. In particular it should look at the potential for a hydrogen based network, which could initially use hydrogen produced from hydrocarbons. CCS could be used to dispose of the CO2 which is created during the process.

A CCS certification system should be implemented to certify the safe, long term storage of CO2. A CCS obligation scheme should be put in place from the late 2020s onwards, to give “a long-term trajectory to the fossil fuel and CCS industries”. It would require suppliers to prove they have stored carbon dioxide (or bought CCS certificates from others) equivalent to a set proportion of the emissions from the fuel they have used. Those which failed to meet their obligation would face a financial penalty.

Recommended timetable for the development of CCS:

Source: Parliamentary Advisory Group on CCS

The report said the government should act now as there is “no reason for delay”. It said the technology “works and can be deployed quickly at scale”, although the long lead times mean “early decisions are needed”. “Continued failure to enact an effective CCS policy” would impose “heavy costs” on current and future consumers.

Director of Scottish Carbon Capture and Storage and report co-author Stuart Haszeldine said: “What has been missing until now is the method for making CCS happen… Through a delivery company, with regulated and reliable profits, the government can attract investors to provide the necessary infrastructure, and there are sites in the UK’s industrial heartlands, such as Grangemouth, Teesside and Mersey, where CO2 resulting from industrial processes could be easily captured and transported by existing pipelines or shipping to offshore storage sites.

He continued: “A new CCS Obligation system will create a market for CO2 storage and ensure a long-term trajectory for decarbonising the UK economy. Trading CO2 certificates linked to power or industry would not achieve the required reductions fast enough or have any longevity. By mandating a quantity of CO2 to be stored each year, this creates a predictable and controllable pathway to ‘net-zero’ carbon by mid-century, which business can rely on.”

Energy Technologies Institute chief executive David Clarke commented: “Our unequivocal view is that to deliver an affordable low carbon energy transition the UK needs to deploy CCS on both power and industrial sites.”

“We welcome the publication of Lord Oxburgh’s report and support its findings. It reinforces the benefits of CCS with a clear call – that we agree with – to implement projects now to deliver maximum financial benefits,” he added. “Delays to implementation increases any energy system transition costs.” 

Director of business investment at the Tees Valley Combined Authority Neil Kenley said: “Lord Oxburgh’s report captures the importance of pursuing CCS now, not later. The focus it gives to incentivising industrial CCS and the recognition of Teesside’s role as a potential CCS ‘hub’ to drive down cost and boost economic regeneration tally with Teesside Collective’s own analyses.

“The report’s assertion that CCS on energy intensive industries represents some of the cheapest available carbon abatement in the UK economy underscores the need for it to be front and centre in the government’s emerging CCS policy.”