CCS developers clinging on despite lack of policy support, MPs hear

Carbon capture and storage developers are struggling to keep their projects alive in the face of a lack of government ambition, MPs heard on Tuesday.

Industry experts told how three projects have been “cast adrift” by the Department of Energy and Climate Change (Decc). Speaking at a hearing of the Energy and Climate Change Committee, they warned failing to maintain momentum on CCS development could push up the long term cost of cutting carbon dioxide emissions.

Don Valley, Captain Clean Energy and Teesside commercial scale demonstration plans did not make the grade for a £1 billion government funding pot.

Stuart Haszeldine, professor at Edinburgh University and director of Scottish CCS, said he was “very, very surprised” at the lack of engagement with those projects from Decc. “Those projects have been cast adrift and left floating.”

The developers behind Don Valley and Captain are attempting to make the investment case without a capital grant. They are seeking to negotiate a guaranteed power price with Decc under the contract for difference (CfD) framework.

Sam Gomersall, founding director of CO2Deepstore, which is working with Summit Power on the Captain project, said “there seems to be a certain lack of ambition in the engagement process with Decc”.

Captain will have to wait in line behind White Rose and Peterhead, which were named the preferred bidders in the £1 billion competition. Its turn “looks to be several years away,” said Gomersall. The consortium is nonetheless in discussions with an overseas investor interested in the project.

Don Valley was the only one of the five shortlisted schemes not even to make the reserve list for the £1 billion competition. However, it previously won €180 million (£153 million) of funding from the European Energy Programme for Recovery and expects to get income from selling carbon dioxide for enhanced oil recovery to upstream company Talisman. It could also benefit from lower transport and storage costs by piggy-backing on infrastructure built for the nearby White Rose project.

Jane Paxman, policy and communications director at 2Co Energy, which is behind the Don Valley project, said: “We are making a go of it on our own. We now have to find a way to go ahead with the project without access to the capital grants available in the competition. We are optimistic – otherwise we would have packed up and gone home – that it is possible to do it with the CfD.”

White Rose appears to be the strongest-placed scheme, having been shortlisted for support under the European NER300 programme as well as the UK government pot. Head of finance Richard Simon-Lewis said talks on NER300 support were “going well”, adding: “To the extent that we are successful, it will of course reduce the level we need from the CfD.”