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The Minister for Energy, E-Commerce and Postal Services (Mr. Stephen Timms):
I congratulate my hon. Friend the Member for Waveney (Mr. Blizzard) on securing this debate. He is an indefatigable campaigner on this topic, on which he secured an Adjournment debate in March, and as he said, he pressed me on it during Trade and Industry questions only last week. I am also grateful to him for his contribution to the
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debate on the Energy Bill, to which we have just given a Third Reading. His work as chairman of the all-party group on the offshore oil and gas industry is of course highly appreciated by the industry.
My hon. Friend works closely with the United Kingdom Offshore Operators Association, does a great deal of work on the issues facing the industry and puts a lot of effort into considering the offshore industry's long-term strategic opportunities. For example, he was active and vociferous—and from my point of view very helpful—on the question of offshore wind during consideration of the Energy Bill. He has also been an active campaigner for carbon capture and storage, which could also provide a big opportunity for the offshore industry.
We are well aware of the opportunities that CCS could provide in achieving our energy White Paper target to reduce carbon emissions by 60 per cent. by 2050. We certainly have not lost sight of its potential and the contribution that it could make to sustainable and secure energy supplies. I agree with my hon. Friend about the urgent need to move decisively in that direction.
We have investigated the feasibility of such technologies because we recognise their future potential and, more recently, we have undertaken two in-depth studies of CCS. The first investigated the feasibility of CCS as a means of disposing of the CO 2 emitted by power generation that uses fossil fuels such as coal and natural gas. The second looked at the possibility of using CO 2 to enhance the recovery of oil from our depleting oil fields, an idea to which my hon. Friend referred in particular. Both studies were undertaken in full consultation with the industry and others. We are building on that work and officials in my Department are developing a new carbon abatement technology strategy that will be of particular interest to him. It will begin to map out the work needed to help make these technologies commercially viable. Our aim is to publish the strategy at the turn of the year, but I hope that there will be an extensive public consultation beforehand to support it. We plan to publish the consultation document in the next few weeks to kick off the consultation.
The new strategy will replace the existing cleaner coal technology programme. The fourth and final call for proposed projects under that programme was made in February. Presently, 10 projects have been shortlisted for further consideration. The last call moved the emphasis of research and development into CO 2 reduction rather than the abatement of other emissions from coal-fired power generation. It is generally recognised that technologies to control emissions of acid gases—SOx and NOx—are now sufficiently developed that they no longer warrant Government support. A new carbon abatement technology research and development programme arising from the new strategy will focus specifically on CO 2 capture and improving efficiencies from traditional generating technologies.
We have started work on defining the new strategy in the context of the conclusion from the energy White Paper. As a first step, the industry-led advanced power generation technical forum has developed an industry view on what the new strategy should cover. A report from the consultancy, NERA, reviewing the old cleaner coal technology programme and making
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recommendations for a new carbon abatement technology strategy was produced in June. Those and other reports, together with the public consultation, will provide the basis for the development of the new strategy. That will be significant for the aims that my hon. Friend has set out.
From the work completed to date, our conclusion has been that, although carbon capture and storage technologies could well assist us in meeting our 2050 target, they are unlikely to be ready and commercially viable before 2020, so they can be deployed only in the longer term. My hon. Friend rightly referred to some of the caveats around that conclusion. His point was accurate, but it is the case that mainstream commercial viability is likely to be achievable in that time frame. As I set out in answering his oral question last week, there are a number of hurdles that need to be overcome before the technology can be brought successfully to market. Our judgment of the time scale is very much in line with the judgment made in other countries—in the USA, for example, where the dependence on coal is significantly greater and where work is already in hand to identify projects such as FutureGen that will take a considerable number of years to develop. As I pointed out last week, there is a substantial price tag.
In discussing the barriers to carbon capture and storage, it is important to split the technologies into two distinct areas of capture and storage because each has a very different set of hurdles to overcome. First, on capture, the costs of the CO 2 capture technologies have to be reduced so that they become commercially viable and competitive with other low carbon solutions. There is not only considerable R and D required beforehand to get those costs down, but we need to tackle the energy penalty in capturing the CO 2 because the capture process alone takes up considerable additional energy. No one has yet demonstrated a fully integrated carbon capture and storage process, although the components have been used separately in a number of industrial applications. That is why the USA is planning to spend $1 billion over the next decade on the FutureGen project. We will follow it with great interest and work with the USA on some of the issues raised by it. In the meantime, there are other low to zero carbon technologies, such as renewable energy, wind power and offshore wind, which my hon. Friend has particularly championed, that will assist us in meeting our targets up to 2020.
Secondly, there are the storage issues and we need to address the reliable and permanent storage of CO 2 . That is, when we store it underground, we have to be confident that it will stay there and will not leak back to the atmosphere. We are thinking along the same lines as my hon. Friend—that depleted oil and gas wells as well as saline aquifers beneath the North sea are likely to prove ideal repositories for CO 2 . The British Geological Survey has estimated that we could store the UK's current annual CO 2 emissions for well over 100 years. That would certainly give us more than ample time to develop new, reliable, fossil-free power generation technologies. If that is to be an effective means of disposing of CO 2 , we must be certain that we can safely and reliably store it in those locations.
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There are a number of important issues arising from that requirement. On the legal side, we must make sure that we do not contravene the OSPAR and London conventions on dumping waste at sea. When the conventions were drawn up nobody was thinking of geologically storing CO 2 beneath the seabed, so those conventions are not clear about the legality of that, although I noticed what my hon. Friend said about Norway in that respect. We will need to work with the international community to resolve that challenge, and that will take a little time.
There are also opportunities for the UK from storing CO 2 . The European Union emissions trading scheme that comes into effect in January could contribute towards the cost of capture and storage and could also earn credits from storing the carbon emitted by other countries. If we want to make sure that we can gain those benefits by earning carbon credits, a reliable monitoring and verification system will need to be established.
We must understand the risks around storage, the likelihood of leaks and the environmental impact on the ecosystem. Work to date by other countries—my hon. Friend mentioned two examples, Norway in the Sleipner gas field and Canada in the Weyburn oil field—indicates, as he said, that we can reliably store CO 2 , but more work will be needed before we can be entirely confident.
A regulatory regime would need to be established to make sure of best practice and to cover the ownership and responsibility for stored carbon in the medium and the very long term. We should be aware that there would be some public concern about the wisdom of storing carbon beneath the ground and how secure that would be. We will have to be able to demonstrate that what we are doing is responsible and safe.
None of those barriers is insurmountable, but there is a good deal of work still to be done to bring us to the point where the technologies could be deployed with confidence. If the difficulties can be overcome, it is my view and the Government's view that there are considerable gains to be had, as my hon. Friend pointed out.
We recognise that much of our effort will be in collaboration with other countries—for example, with Norway on resolving the storage issues, with the USA under the US/UK memorandum of understanding on cleaner fossil fuel technologies and on developing capture technologies, and with EU member states on the proposed fossil energy coalition, which is preparing a case for support.
What I have not mentioned so far, although it is important, is the potential for hydrogen production from these technologies. My hon. Friend raised the question of where the hydrogen will come from in future. It is generally considered that the first generation of hydrogen will come from fossil fuel, rather than from renewables. Using natural gas-fired power plant with carbon dioxide capture would enable hydrogen to be produced, which would have applications not only for electricity, but for transport and for fuel cells. That alone gives us a strong incentive to research and develop carbon capture and storage technologies for future exploitation.
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Our more recent report on the possibilities of using carbon dioxide for enhanced oil recovery was published in March. That work arose from the energy White Paper because we saw it as a possible first step to CO 2 storage, utilising the infrastructure already in place, as my hon. Friend pointed out, with the added benefit of the extra oil recovered and the commercial gain from that. From a good deal of consultation with the major oil companies operating in the North sea, it was clear that at present they do not see the technology as viable, due to the significant gap that exists between the revenue received for the additional oil recovered and the extra costs of adapting installations, as well as the cost of CO 2 capture.
However, we are maintaining a watching brief on this matter. The situation might change and my hon. Friend will be familiar with the pilot initiative on brown fields, which addresses the technical and commercial barriers to the further development of mature fields.
There has been some suggestion that we ought to be looking at a sustainable fossil fuel obligation comparable to the renewables obligation. I think that it is an interesting idea, although any such sustainable incentive would have policy, technical and financial implications that would require considerable study. A
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mechanism, similar to the renewables obligation, that was designed to promote the sustainable use of fossil fuels in electricity generation would be much more complicated to implement than that for renewables. Fossil fuel power plants emit a variety of noxious gases—such as the acid gases sulphur dioxide and nitrous oxide, as well as carbon dioxide—with varying degrees of intensity. In contrast, renewable technologies are carbon-free, or carbon-neutral.
I hope that I have been able to give my hon. Friend and the House some reassurance that the Government take carbon capture and storage very seriously as a way to make deep cuts in our emissions from 2020 onwards. We will be working on those and other matters in the new carbon abatement technology strategy that is being developed.
I warmly welcome the great interest that my hon. Friend has shown in this matter and the way in which he has drawn the House's attention to it again in this evening's debate. I look forward to working with him and others on this very important topic.
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