By Prof Stuart Haszeldine, SCCS Director and co-author on Oxburgh report
Prof Haszeldine, one of the co-authors of the Oxburgh report
In November 2015 the UK’s long-running Carbon Capture and Storage (CCS) Commercialisation Programme, to develop clean electricity from gas, biomass or coal-fuelled power plant, was abruptly cancelled by Chancellor Osborne.
Although £1 billion had been on offer since 2007, and was even a Conservative party manifesto pledge, the cost of electricity was stated to be too high at £180 per MW hour. CCS was labelled “expensive”.
The Oxburgh Report was requested by the UK Secretary of State for Energy in 2015, and has been delivered by a small independent committee of individuals with experience in business, finance and science together with politicians from all parties. In brief, what we concluded was this:
Why is CCS essential? For the UK’s low-carbon ambitions. If Britain is to remain amongst the “high ambition” global groupings after CoP21 and ratify the climate protection commitment, then CCS is unavoidable.
Why start now? Because everything is ready, technology, transport and storage. And CCS will be part of the least-cost method of changing the UK energy system rapidly and reliably.
Why here? Because the UK has a carbon-intensive system of electricity and home and business heating. The businesses, skills and organisation are well within UK capability. And because porous rocks beneath the UK offshore have lots of CO₂ storage – about one third of European CO₂ storage capacity, enough to take the UK to the year 2200 and beyond. That storage is known to be available now at a cost of £10-20 per tonne of CO₂. This is a good time to develop, as offshore oil and gas employment falters. There are also many opportunities for re-using existing pipes, and we have world-leading engineering skills and geological knowledge.
CCS is essential for the UK to decarbonise its economy. The CCS Competition was an expensive and inefficient way to deliver that, but a new method must commence immediately to gain huge financial savings and employment benefits.
What has been missing is a method of making projects happen. There is no company in the world whose business is solely about delivering CCS. Yet the UK competition asked businesses to design and build it. Unsurprisingly, the quotes from the chosen developers – who were asked to deliver the full-chain from capture through transport to offshore storage – were expensive. Our advisory group calculated that, for electricity, CCS costs £85 per MW/hr, which is 15-20% less than the Hinkley nuclear project and just 60% of the current price of offshore wind. That makes CCS, a low-carbon option, commercially very competitive.
To make this huge cost reduction requires a way of organising, which is very different from the CCS competition approach. It requires the UK Government to start building networks of infrastructure. Just like a gas or water or broadband supply network, the value is in having a network, where businesses can buy transportation space, be it natural gas, telecommunications or, in this case, CO₂.
There are sites in the UK’s industrial heartlands – Grangemouth, Teesside or Mersey where CO₂ is emitted today, and this could be readily directed into existing pipes and taken to offshore storage. These are natural start-up places to grow the first small-scale CCS projects.
Once operating, a CCS system has value and can be added to incrementally. The infrastructure network itself has bankable value and can be added to incrementally. Such networks are well understood by financiers in the UK and are regulated to reset prices at three to six-year intervals – which provides a reliable financial return prized by investors. No new legislation or government intervention is needed.
The UK needs this CO₂ “takeway” service for the electricity, industry and heat sectors in order to fulfil legally binding emissions reduction targets as part of climate action. Infrastructure, which includes pipelines and shipping, from CO₂ sources to storage sites is the key to developing CCS. A new government company can deliver this.
So the challenge is how to plant the seeds of the first investable networks. Again, there are operating UK precedents. To start up or deliver large-scale engineering projects, the UK Government takes a co-ordinating procurement role. The national gas distribution network started with a national spine pipeline from SE England to Leeds and grew from there. Modern examples include the 2012 Olympics delivery company and Crossrail.
Government does not make a novel request of business and construction companies, but instead creates and co-ordinates competitively-bid contracts so that reliable delivery and low prices are obtained. Once the projects are built and operating, they can be privatised to recover the initial government investment.
For CCS, our committee proposes creating a “CCS Delivery Company”, which will purchase CO₂ from power plant or industry and sell it to a CCS transport infrastructure. They in turn will sell that CO₂ to a storage company. Thus, the Government will spend very little money – we estimate just £100-300 million to undertake FEED engineering design on the first networks.
The Government will take on the co-ordination role and counterparty risk – which have both been major problems in previous CCS developments. Similar companies already exist, in the Low Carbon Contract Company, which purchases the Contract for Difference in the electricity market, and bears the counterparty risk to ensure low priced electricity.
CCS is not just about electricity. The Advisory Group points out that the supply of methane gas to domestic, business, and industrial premises has no real future beyond 2030 if climate targets are to be met. The peak supply in winter of heat energy is six times that of electricity. This can be cleaned up using electricity produced by renewable power. Or the existing pipe networks can be converted to transport carbon-free hydrogen. That hydrogen is most cheaply made today by splitting gas (or coal) into hydrogen alongside CCS. The resulting CO₂ would be transported and stored using the same networks serving the power and industry sectors.
How do we ensure a reliable demand for CO₂ collection and storage that will underpin long-term investment? We propose a focus of attention directly on CO₂ storage. Firstly, that CO₂ storage is regulated and assured by awarding a CCS Certificate for each tonne securely stored. This will require high quality, reliable CO₂ disposal over geological timescales of more than 10,000 years.
Secondly, the Advisory Group recognised that simply trading CO₂ certificates linked to electricity or industry emissions would not achieve the required reductions fast enough, or have enough longevity. Instead, the UK can mandate a quantity of CO₂ to be stored each year. This amount would be linked to independent analysis of climate change globally, thereby creating a predictable long-term pathway towards “net-zero” carbon, which business can rely on.
The amount of storage would start small, at just 0.25% of the UK’s annual CO₂ emissions, or 1 million tonnes, and gradually increase to encourage a CCS industry develop commercially. The system is both simple and robust. Combined with regulated infrastructure, this give assurance of long-term direction while retaining flexibility on rate of CCS delivery.
What happens next? Our government needs to decide that the UK needs CCS for best priced carbon reduction across the electricity, heat and industry sectors. They must create the agencies that will deliver this, with ambition for climate action and business competitiveness over the next 35 years.
More urgently, we must take action to retain essential infrastructure – for example, two of the offshore pipelines most likely to be used first are in north-east Scotland, from St Fergus to the Atlantic field and from St Fergus to the Goldeneye field. Using these, we could begin to store CO₂ by the early 2020s. Both pipelines are in imminent danger of being removed by normal offshore procedures of abandonment. These need to be retained, by temporary public ownership if necessary, for five to ten years until the necessary CCS industry emerges from the present energy review.
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