The British government has dealt a body blow to hopes of mitigating global warming by capturing greenhouse gases. But is it fatal?
An opinion article for NewScientist on carbon capture and storage in the UK by Stuart Haszeldine the world’s first professor of CCS and head of the Scottish Carbon Capture and Storage centre. He provides advice to both the British and the Scottish governments and is a fellow of the Royal Society of Edinburgh, UK. He was awarded the 2011 William Smith medal of the Geological Society of London.

After months of speculation, the British government has set back the development of one of the most promising weapons in the war on climate change.

The government had a plan to build the world’s first industrial-sized carbon capture and storage (CCS) system on a coal-fired power plant. In CCS, carbon dioxide is removed from power-plant emissions and injected into the microscopic pores of geological storage reservoirs deep below ground. But Chris Huhne, the British secretary of state for energy, has said that the government has failed to reach agreement with its private-sector partners in the project.

Electricity producer ScottishPower and its consortium partners National Grid and Shell UK were to have built a system to decarbonise one-sixth of the output at Longannet, the UK’s second-largest coal power plant and at 2.4 gigawatts the third largest in Europe. Now it joins a number of deferred, redesigned or cancelled CCS projects around the world.

The UK has become a global leader in all the peripherals that might enable CCS to happen. There are legal greenhouse gas reduction targets, and the European Union’s CCS directive has been transferred into UK law; there is a government office of CCS; there are rules, regulations and permits for storage; and there are even plans (still in draft) to provide premium prices for decarbonised electricity and so encourage commercial funding for CCS power plants.

However, all new industries require the first project to be built, and that central piece of the UK jigsaw is still missing. If CCS is to take its place as one of the pillars of UK energy policy – as Huhne has said it will – where do recent events leave a country that likes to provide global leadership on such issues?

Plan comes together

Longannet would have seen a large new capture plant built. Two million tonnes of pure CO2 gas each year would have been slightly compressed and transported via existing pipelines to St Fergus on the north-east coast of Scotland. Here it would have been compressed into a liquid that would have travelled in existing offshore pipes to Shell’s Goldeneye gas field, where up to 30 million tonnes of CO2 storage has been planned.

With this plan, the UK has the world’s most detailed design for a commercial CCS operation. It is technically clear that each part of the CCS chain could work: the storage site is outstanding; the pipeline transport is safe, secure and agreeable to the public; the capture units can be built; they can be operated flexibly; and they can work and to the required environmental and purity standards. There is no doubt that CCS can be built, and that CCS can operate. What went wrong?

Money was the problem. The competition to establish the UK’s first CCS scheme has been running since 2007, and the policy and business worlds have moved on since then. ScottishPower is now owned by the Spanish company Iberdrola, which is globally focused on wind and hydro power. There have been three UK prime ministers, a Climate Change Act, threeEnergyActs and three potential mechanisms to fund CCS. It takes corporate stamina to run that marathon.

The home straight for Iberdrola was the introduction of electricity market reform in the UK. This has the entirely correct objective of providing long-term certainty in electricity prices, to enable investment in low-carbon technologies. However, only the first part of this reform is currently visible – a new tax on emissions that starts at £15.70 per tonne of CO2 in 2013, rising to £30 per tonne by 2020 and £70 by 2030. However, the plans to charge more for decarbonised electricity and so encourage CCS investments have not yet emerged from the discussion stage.

Risk wrangling

A second part of the problem lies in the way the UK government finances projects. In a £1 billion endeavour it is important to control costs, which means setting a budget. However, this is difficult if no similar project has been done before, anywhere. ScottishPower submitted detailed cost estimates that said that with good management and good luck the cost could be £1 billion, but with bad management or bad luck it could be £1.52 billion.

Who was to carry that £520 million risk? In the view of the Treasury – the UK’s finance ministry – it lies with the developer, and only £1 billion was made available. That is what led to the failure to agree: the company wanted the government to provide a £500 million contingency fund, the government wanted the company to keep to a firm price.

There are four points to make. Firstly, the UK is set for another clarification of policy. Gas is now producing about 50 per cent of UK electricity, and with most UK coal generation expected to close before 2022, it is inevitable that much more gas generation will be built. Although cleaner than coal, gas is still a dirty fuel: CCS will still be needed, and proof of its viability is needed well before CO2 reduction targets start to bite in 2020.

Europe, not China

Secondly, the UK could consider where the true value in CCS lies. This now looks less like exports of hardware to China and more like meeting domestic legal targets for low carbon emissions. It might also allow the UK to generate income by becoming the offshore geological storage destination for CO2 from all of north-west Europe. Such storage needs to be tested soon with real injection, allowing 10 years for the results to emerge. ScottishPower would have achieved that at Longannet.

Thirdly, we should use the knowledge gained from Longannet evaluations to make subsequent projects happen faster.

Fourthly, the funding for big CCS projects needs to be reconsidered. The premium electricity price for decarbonised power, which is in the pipeline, will encourage commercial investment, but any government that wants to be a leader in CCS will also have to underwrite more of the financial risk that is inevitable in such pioneering projects.

In the UK, such factors point to Peterhead gas plant being the next CCS candidate: it would be much cheaper, quicker and easier to develop. After that, there is a strong case for looking to Yorkshire, where the Don Valley coal gasification power plant could send CO2 to offshore oil fields with pipes that can geographically link up with the large Drax coal-fired power plant – which supplies 5 per cent of the UK’s electricity.

So CCS may be bruised, but it is not dead. No Plan B has emerged to help mitigate climate change. There is still time for CCS to make a big, unique reduction in global CO2 emission rates. The UK should be part of that.

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