30 September 2015
|Graphic courtesy of Capture Power|
The decision by Drax to publicly withdraw from long-term continuation in the White Rose Carbon Capture & Storage (CCS) Project is certainly not helpful to the cause of CCS in the UK or worldwide, but their choice of timing must mean that other factors are high in their decision process.
We can consider their share price and the consequences of wider UK Government actions – on power price support, for example – to see that reduced sale prices for power from onshore wind and biomass have had a severe impact. Drax have clearly stated that they are still supportive of CCS and would like to undertake projects. However, the finances simply don’t provide the confidence for CCS to be high enough up their priority list.
Inevitably, there must be doubt and uncertainty about the UK Government changing future CCS funding contracts. So this is not just about CCS; it is also about a government trait of trying to invent new technologies while failing to fund their deployment confidently, or reliably. Political risk within the diverse parts of UK Government is the biggest challenge for energy investors in the UK.
Drax’s announcement does not mean that CCS is dead in the UK. The White Rose project may or may not continue after the FEED study has been submitted. The remaining partners clearly state that they want to continue, and they have access to the site in order to do so. However, because this is a commercialisation competition (funded by the UK’s Department of Energy and Climate Change) it must be a full-chain project that includes an electricity producer and a vendor. In our opinion, this is a crucial part of the equation for the remaining partners to resolve as soon as possible. We know that plant design and pipeline planning have been completed, and offshore geological storage evaluation is well under way, so relocating the project would be difficult. Given a viable consortium with internal funds it is quite possible to continue this development.
Consider the UK’s prior history on CCS: the first Peterhead project as part of the initial CCS competition cancelled in 2007; the Longannet project submitting a technically viable design and timescale but failing to reach agreement with government in 2011 on electricity price; at the same time, Kingsnorth becoming a “zombie” project going through contractual obligation but with no ambition for future life.
There is a real risk that this could happen with White Rose in 2016, but the UK must avoid that at all cost. We need to develop a series of CCS projects in order to engender a sense of momentum and continuity. These are large-scale developments that will lead the way, but getting them off the ground is a major challenge. We don’t want White Rose to follow a similar pathway to zombie status.
If the submission of White Rose’s FEED study is delayed, that could cause problems in claiming promised funding from the EU’s NER300 innovation fund. It is also important that the Peterhead CCS Project, the second of the two project finalists in the DECC competition, is not held up by any delay with White Rose, or Shell may lose patience in maintaining a project team and keeping the Goldeneye field on standby – just as BP lost patience with government indecision on the first Peterhead CCS proposal back in 2007. The two current projects have been conceived independently, so there is no reason why they cannot be developed separately.
Should the UK also consider what happens if White Rose cannot put together a commercial bid, which includes a power producer and vendor? It is important for CCS to proceed rapidly if the government is to meet its 2027 carbon budget. DECC has already started planning a second phase of CCS, so perhaps this should be accelerated to allow a seamless switch, if necessary, in April 2016. And it may be possible to retain half of the £1 billion commercialisation fund for a different UK project (but that is not guaranteed).
Perhaps now the UK or Scottish governments should consider working with the two project proposals, which became reserve bidders in the competition – namely, the Caledonia Clean Energy project developed by Summit Power for Grangemouth, and the Teesside industry consortium. Both bids got far enough to be seriously considered and have good records.
Caledonia has recently received UK funding of £4.5 million to proceed with research and development on their design and build. A pipeline is ready and waiting both on and offshore, and SCCS has recently predicted that the offshore storage destination is highly credible – and is certainly large enough in capacity. Teesside is being developed by a dynamic industry consortium, although market difficulties being experienced by SSI Steel (one of the members) show the challenges being faced by UK industry. To re-invent sustainable industrial processes in the UK, we need to move to premium value products rather than low-cost, mass-produced processes.
The White Rose consortium say they will submit their bid, but will quite possibly need to change members and find replacement funds. Although, if media reports are accurate, Alstom appear to be providing the lion’s share of funding. It is of utmost importance that CCS develops in the UK without hiatus, and that government steps up to address any risk of non-continuation. What we don’t want is just one “winner”. We need to develop multiple technologies (which is why there is more than one project in the UK competition) and multiple storage sites.
The best outcome, for the UK and for CCS globally, is for White Rose to reconfigure rapidly. In the short term, this is particularly important in terms of how CCS is perceived as we head towards the UNFCCC climate talks in Paris this December. Here, CCS could and should be one of the UK’s strong and unique offers, to be developed without delay.