Dr Vivian Scott, Policy Research Associate, SCCS: Now the dust has settled on the UK election, what does its result suggest for the future of Carbon Capture and Storage (CCS), both in the UK and further afield?
Against the expectation of a hung parliament, the election has returned a (slim) Conservative majority government, with an all but complete victory (56 of 59 seats) for the Scottish National Party in Scotland seeing them take over from the decimated Liberal Democrats as the third party in the UK House of Commons.
Starting with the G8 presidency in 2005, and subsequent allocation of £1 billion towards CCS demonstration projects, the UK has been a strong advocate of the need to develop and deploy CCS. This agenda has received strong cross-party support, both in Westminster and in the devolved Scottish Government.
Currently, the UK has two CCS demonstration projects undergoing government financed Front End Engineering and Design (FEED) studies through the UK CCS commercialisation programme. These are Peterhead – a gas power project in NE Scotland, and White Rose, a coal power project in Yorkshire. Their FEED studies are due to complete in late 2015, after which negotiations to fund one or both of these projects through government capital grants and a "Contract-for-Difference" premium electricity price are supposed to take place to enable project investment decisions within 2016.
Urgent clarity, commitment and action is needed from the new UK Government and its opposition to make good on UK plc's promise to deliver CCS
In addition, along with considerable research funding, the UK government is funding a pre-feasibility study into the potential for a CCS cluster on industrial sources in Teesside, and the UK and Scottish Governments are jointly funding a feasibility study for a CCS coal power plant in Grangemouth, Scotland. Lastly, the UK government has been a strong advocate of CCS in both the EU – securing EU funding for CCS research and demonstration projects – and internationally, supporting CCS capacity building in, amongst other countries, China and South Africa.
On Monday, the UK Prime Minister promoted the former Climate Change Minister, Amber Rudd MP, to new Secretary of State for Energy and Climate Change. Andrea Leadsom MP has been appointed Minister of State for Energy. They arrive tasked to "deliver in full" the Conservative party election manifesto.
What does the manifesto say? The overall picture is one of general continuity – continuing to support the UK Climate Change Act, seeking a strong global climate deal, and as part of a pre-election cross-party agreement ending the use of unabated coal power generation. This is presented within a framework of "achieving decarbonisation at least cost" with a "market-led approach" replacing "distorting and expensive power sector targets". More specifically, support is given to developing shale gas, a "significant expansion of new nuclear", and "halting the spread of onshore wind". CCS receives mention, but only as a description of the Coalition Government's prior activities – there is no mention of future intentions.
So what future does this suggest for CCS in the UK and, by influence, elsewhere? While it's very early days for the new government, I suggest that the following areas and questions can be expected to frame how CCS is seen, and its prospects for successful delivery.
1) New nuclear:
The new Conservative government continues the Coalition's strong support for a new generation of nuclear power plant in England and Wales (the Scottish Government is opposed to new nuclear in Scotland). The first of these is intended to be Hinkley C, a new 3.2 GW plant with two European Pressurised Reactors developed by a consortium led by EDF. Permits have been awarded and a strike price (subsidy) for generated electricity agreed, but funding issues and potential legal challenges keep the final investment decision elusive.
At present Hinkley C is supposed to start generating in 2023, with follow-on projects, such as that planned at Sizewell, shortly after. Further delay or failure to secure Hinkley will seriously impact the UK's generation supply and, if old thermal generation is retained to make up the shortfall, its ability to deliver the UK's 4th carbon budget. Assuming the commitment to the Climate Change Act is upheld, CCS remains the only other bulk low-carbon electricity generation option. If delivering new nuclear build continues to look shaky then delivering CCS could receive greater attention and urgency.
2) Government budget and electricity market:
The incoming government has committed to substantial further cuts in government spending – we can expect energy spending to be included. Will the £1 billion allocated under the Labour government and retained by the Coalition to co-fund CCS demonstration projects survive? Alongside, the forthcoming comprehensive spending review will probably set the next Levy Cap Framework (LCF) – the total subsidy available to low-carbon electricity from consumer bills, which currently runs to 2020. As with the current LCF, much of its successor running from 2020 to around 2030 will be prior allocated to existing low-carbon generators, a large chunk will need to be reserved for new nuclear (see above), with the remainder for new renewables and any CCS. How will the new ministers want to see this allocated? Will they opt for a generic Contract-for-Difference subsidy open to all bidders, or will they allocate proportions and designs to support delivery of particular technologies such as CCS?
Two parties won the UK election: the Conservatives may hold the majority in the UK Parliament, but the SNP swept the board across Scotland. Two of the proposed CCS projects – Peterhead and Caledonia Clean Energy (Grangemouth) – are located in Scotland, along with the vast majority of the UK's subsurface industry and CO₂ storage potential. Pre-election, the SNP Scottish Government and Coalition UK Government were strongly collaborative on CCS, including through the closely fought 2014 Scottish independence referendum. Will this cooperation be continued, or will the expected to be hotly contested negotiations over further Scottish devolution either formally or informally reduce UK Government interest in committing to substantial project investment north of the border? Alternatively, might CCS project investment and/or market incentives be secured as part of the deal? Further, subject to the outcome of the EU referendum (see below) the prospect of a follow-on Scottish referendum looms large.
The UK is now committed to a referendum on EU membership in or before 2017. How exactly the question will be set, who will be eligible to vote, and what concessions the new Conservative Government will get from the rest of the EU in the run-up remain to be seen. For CCS, the referendum can be expected to affect both domestic and wider EU activities.
Domestically, how will the risk of "Brexit" – the term now coined for the UK's possible exit from the EU – be seen, and what would happen in its event? Among many CCS relevant issues: would the UK remain in the EU Emissions Trading Scheme (ETS)? A Brexit might seek to replace full membership with European Economic Area membership whose members are covered by the EU-ETS but nothing is guaranteed. Related to this, would the UK lose EU CCS funding? The White Rose project has been allocated 300 million Euros from the EU NER300 innovation fund. And would the UK itself subsequently break apart following another Scottish referendum?
Within the EU, the prospect of Brexit could also have consequences for CCS. To date, the UK has been by far the strongest (and sometimes sole) advocate for EU action on CCS. More broadly, the UK has co-led calls for ambitious EU emissions reduction targets and strengthening of the EU-ETS. Will a Brexit referendum and, in its run-up, efforts to re-negotiate EU treaties and principals, such as free movement, damage the UK's voice on climate and energy in the EU? And if Brexit were to happen, would CCS effectively all but disappear from the EU agenda?
5) Climate and Energy:
Sitting above all these factors, what direction will the UK take on addressing climate change? Amber Rudd, the new Secretary of State, comes with a strong record on the need to tackle climate change both domestically and internationally, but her government and its party could well be less green than its predecessors. Will it continue to push for and actively support a globally ambitious position on both overall targets and low-carbon technology development and deployment (CCS included)? Perhaps the test of this will be shale gas. Should the UK's sizeable shale gas resources prove technically and politically extractable, CCS is a necessity for coherence with achieving decarbonisation. To address this perhaps the expected tax revenues from this new hydrocarbon bounty should be hypothecated to funding CCS deployment on power plant and industrial sources?
Overall, the UK's new political landscape holds numerous uncertainties for CCS. Some hints can be expected over the coming weeks, but it remains to be seen how project developers and potential investors assess the multiple policy risks, and how governments (UK, Scotland and the EU) set out to address these concerns. The delivery of CCS is critical to successfully decarbonising the global economy, but actual progress continues to fall far behind what's required.
The UK remains one of the few active proponents of CCS, with well-developed projects, superb geology and experience for secure CO₂ storage, accompanying regulation, and in the Contract-for-Difference a model for investment and delivery. Loss of this leadership would damage not only the UK's low-carbon future but the rapidly disappearing global opportunity to successfully minimise climate change and its impacts. To prevent this, urgent clarity, commitment and action is needed from the new UK Government and its opposition to make good on UK plc's promise to deliver CCS.
RT @Haszeldine: Negative emissions meeting in Gothenburg stats with James Hansen. Live feed https://t.co/2PLQP31cMw @chalmersEnergy #negCO2…
CCS jobs! @HWU_RCCS has two exciting new Assistant Professor posts in low-carbon processes. Closing date 20 June.… https://t.co/kiofNhxjP0