Carbon capture and hydrogen projects selected for funding

Dozens of carbon capture and hydrogen production projects have been selected to receive government funding alongside the launch of its new Energy Security Plan.

The projects include a new gas-fired power station and several ‘blue’ hydrogen production facilities that are planning to connect to the carbon capture and storage (CCS) networks being developed as part of the East Coast and HyNet industrial clusters.

The East Coast and HyNet schemes were chosen by the government in 2021 as the first two net zero industrial clusters it is aiming to get up and running by the mid-2020s. As such, the clusters are first in line to receive funding for the construction of CCS infrastructure through track 1 of the government’s cluster sequencing programme.

Following the selection of the clusters in first phase of track 1, the government invited applications from individual projects in the second phase. From a shortlist of 20, the government has now selected eight hydrogen production, power and industrial CCS projects – three from the East Coast cluster and five from the HyNet cluster – to proceed to negotiations for funding through the corresponding business models it is developing.

East Coast cluster

• Net Zero Teesside Power
• bpH2Teesside
• Teesside Hydrogen CO2 Capture

HyNet cluster

• Hanson Padeswood Cement Works Carbon Capture and Storage Project
• Viridor Runcorn Industrial CCS
• Protos Energy Recovery Facility
• Buxton Lime Net Zero
• HyNet Hydrogen Production Plant 1 (HPP1)

DESNZ said these projects do not represent the full extent of its ambitions for the clusters and it will launch a process later this year to enable their expansion. The department said it will identify projects that could be potential alternatives to any of the initial track 1 projects if they are unable to agree contracts within the necessary criteria and timelines.

The Net Zero Teesside (NZT) Power project is aiming to build the world’s first commercial scale gas-fired power station with CCS. Its managing director Ian Hunter said: “The selection of NZT Power is a hugely positive step forward for Teesside and the UK…

“NZT Power is designed to provide flexible low-carbon power – an essential back up to intermittent forms of renewable power – enabling the further deployment of wind and solar power nationally.”

Also vying for this title is the 910MW Keadby 3 gas power station being developed by SSE Thermal in partnership with Equinor. Along with Equinor’s H2H Saltend blue hydrogen production facility, which will extract hydrogen from methane, Keadby 3 is part of the Humber portion of the East Coast cluster – an amalgamation of the originally separate Zero Carbon Humber and Net Zero Teesside schemes.

Despite being shortlisted for phase 2, neither Keadby 3 nor H2H Saltend have been approved to proceed to funding negotiations.

Another notable absence is the Drax power station in North Yorkshire, which is seeking to become the world’s first “negative emissions” bioenergy with CCS (BECCS) plant. Like Keadby 3 and H2H Saltend, Drax has been positioned as one of the anchor projects for the Humber CCS network.

Although they were unable take part in phase 2 selection due to their relatively immaturity, both Drax and the Lynemouth biomass power station made submissions to the government’s assessment process for BECCS power projects that aims to enable their participation in track 1 of the cluster sequencing programme.

The government has now completed the assessments and said both projects met the minimum criteria for deliverability by 2027.

Drax said it has been invited by the government to begin formal bilateral negotiations on progressing the project. Drax Group chief executive Will Gardiner commented: “Delivery of BECCS at Drax power station will help the UK achieve its net zero targets, create thousands of jobs across the north and help ensure the UK’s long-term energy security.

“We note confirmation that our project has met the government’s deliverability criteria and government remains committed to achieve 5Mtpa of engineered greenhouse gas removals by 2030 – a goal that cannot be achieved without BECCS at Drax power station.”

DESNZ said it will imminently publish a response to its consultation on business models for BECCS power. The department said it is also now launching track 2 of its cluster sequencing process, which will identify the two additional net zero industrial clusters it is aiming to building by 2030.

Hydrogen

Meanwhile, the winners have been revealed for the first competition window for strands 1 and 2 of the government’s £240 million Net Zero Hydrogen Fund. The two strands offer funding for development and capital expenditure respectively. The 15 projects to secure funding are:

The government has also announced the shortlist for its first electrolytic hydrogen production allocation round (HAR1), which allows projects to apply for funding for capital expenditure through the Net Zero Hydrogen Fund and then ongoing revenue support through the hydrogen business production business model it is developing. The latter will be provided directly by the government until its hydrogen levy on energy bills comes into effect in 2025.

The 20 projects to be shortlisted for HAR1 are:

The government is planning to award contracts for 250MW of hydrogen production capacity in HAR1, with contracts being awarded in Q4 2023 and the first projects becoming operational in 2025. It is also planning to launch a second allocation round in Q4 2023, awarding contracts for another 750MW of hydrogen production capacity in 2025.