Select Committee on Science and Technology Written Evidence


Memorandum from Progressive Energy Ltd

  1.  Progressive Energy is a UK based clean energy project development company which has been working on power generation with CCS for the past seven years. It has major projects under active development in England and Wales at the current time.

2.  The physical elements in successful deployment of CCS are:

    (a)  Cost effective capture of CO2

    (b)  A suitable long term storage site

    (c)  A means of transporting the CO2 from the point of capture to the disposal site

    Generally the capture step is the most expensive of these.

  3.  The Progressive Energy projects are based on Integrated Gasification Combined Cycle (IGCC) and this technology is capable of capturing CO2 at a lower price than any alternative available today.

  4.  The Progressive IGCC project under development at Teesside is around 850MWe, will produce around 6 TWh per annum of electricity and is designed to capture 5Mte per annum of CO2.  The cost attributable to CO2 capture is around £10/te for CO2 at a pressure of 110bar at the station gate.

  5.  An IGCC is basically a gas CCGT plant that makes its own gas on site from coal or other carbonaceous substance rather than using natural gas. The plant technology is available today: the main elements are:

    —  a gas turbine that can operate on the synthetic gas produced by the gasification process

    —  a gasification reactor that can successfully gasify the chosen feedstock, an air separation unit to provide oxygen

    —  a shift reactor to convert the carbon monoxide produced into hydrogen and carbon dioxide

    —  a physical wash system to remove sulphur compounds and carbon dioxide.

  Hence hydrogen is used as the energy carrier, minimising the carbon emissions of the plant. All of this equipment can be seen operating at a commercial scale and is available from manufacturers with normal performance guarantees and warranties.

  6.  Hence the answer to the question what is the projected timescale for producing market ready scalable technologies is "Now" as far as the carbon capture is concerned. However there are real implementation challenges associated with securing the finance for the plant, as discussed later.

  7.  CO2 can be stored in a number of geological formations; oil fields, gas fields and saline aquifers. Storage is achieved by injecting CO2 into one such formation where it displaces oil, gas or water accordingly. Provided the CO2 is at a depth of 700 metres or more it is retained as a supercritical fluid. It will be retained long term if the storage location is capped by an impervious layer. This is demonstrably the case in oil and gas fields and is also the case for many saline aquifers.

  8.  The North Sea area in particular provides a vast storage resource. The storage in the UK sector alone would allow a tranche of coal fired generation equivalent to 25% of current UK generation to be operated for 200years and the CO2 put into long term storage.

  9.  The technology for CO2 transport from the capture point via pipelines and for injection into a target geological formation is already established. Worldwide more than 25Mte pa of CO2 is already injected annually into geological formations. Attention is drawn to two applications in particular:

    (a)  Sleipner. Since 1996 1Mte pa of CO2 extracted from a nearby gas field has been injected into a saline aquifer in the North Sea. Its subsequent behaviour has been monitored and successfully modelled

    (b)  USA; CO2 injection for enhanced oil recovery has been taking place regularly in Texas oil fields for over 20 years

    (c)  Canada; 1.75Mte pa of CO2 is captured from a coal gasification plant, transported 200 miles by pipeline, and used for EOR in the Weyburn oilfield.

  10.  Hence there are no insurmountable technical barriers to prevent investment in IGCC with CCS now.

  11.  The use of the CO2 for enhanced oil recovery has the potential to both extend the life of the UK's oil reserves and significantly increase the amount of those reserves that will ultimately be recovered. Based on USA experience, some 20% additional oil can be recovered through tertiary recovery with CO2-EOR.

  12.  IGCC with CO2 capture for EOR also represents one of the few remaining opportunities for the UK to deliver substantial additional carbon emissions reductions by the end of the decade.

  13.  It therefore represents an opportunity for the UK to take leadership in the exploitation of this technology and in overall emissions reductions in a way which is very easily transferred to emerging economies such as India and China who have significant coal-based power station construction programmes.

  14.  This opportunity is presented to the UK by the dynamics of its own energy market: the need for new, low-emission power generation and the rapid maturing of the UK oil province.

  15.  In order to seize this opportunity however, any commercial barriers to the large-scale deployment of the technology in the UK market must be quickly overcome.

  The need for urgency in the deployment of this technology in the UK comes from three main drivers:

    —  The need for replacement power station investment in the UK which retains coal in the energy mix in an environmentally acceptable manner.

    —  The need to find new ways of reducing CO2 emissions in order for the UK to meet its targets for emissions reductions by the end of the decade.

    —  The declining production of oil from the UK oil province, which will increasingly lead to field closures and decommissioning. Once fields are decommissioned it will probably be too expensive to re-open them for the purposes of EOR and therefore the potential for the use of CO2 in EOR is lost forever.

  16.  High quality CHP is supported by being given enhanced capital allowances and eligibility for Levy Exemption Certificates under the Climate Change Levy (CCL). Giving IGCC the same treatment as CHP has the same rationale (reduced emissions per MWh of electricity). Such a level of support is likely to overcome any barriers associated with perceived technology risk by investors. Investors' confidence in investing in IGCC supported by the CCL would also be much enhanced by some form of guarantee of eligibility to an equivalent level of support if the CCL is removed.

  17.  The EU Emissions Trading Scheme provides an incentive for the reduction of CO2 intensity in the power generation process. This is both a new scheme and one for which there is no regulatory clarity beyond 2012.  Hence while it provides an incentive for low capital, high variable cost carbon abatement such as fuel switching in the existing generation base, it is unlikely to support the financing of capital-intensive emissions abatement such as the sequestration of CO2.  This is often referred to as the problem of EU Emissions Trading not being a "bankable" system in the long-term.

  18.  It is very important that IGCC with CCS is guaranteed to get full allowances under EU ETS for the lifetime of the plant, and that competition is not distorted through different treatment of new entrants and existing incumbents. The ability to obtain certain value from the allowances associated with a CO2 capture plant is a significant part of the economics of the decision to capture and use the CO2 for EOR, or other geological storage.


  IGCC with the separation of CO2 for EOR has the potential to be a major supplier of cheap low-carbon electricity to the UK market, and enhance the value of the UK's remaining hydrocarbon reserves.

  IGCC can be also used to prime the hydrogen economy, and has development potential to ultimately be used in conjunction with high efficiency fuel cells.

  IGCC and EOR use established technologies which can produce market ready scalable technologies now, and under the right incentive regime, can attract private finance.

  This opportunity will be missed by the UK unless it acts quickly to incentivise appropriate project and infrastructure developments over the coming years.

  Government can make it happen. The keys are:

    (a)  For the promotion of IGCC, or more correctly the production and use of hydrogen rich fuels in power generation, we recommend that IGCC be given the same incentives as a combined heat and power plant in the UK market:

    —  Enhanced capital allowances should apply for all invested capital.

    —  The electrical output should be eligible for Levy Exemption Certificates under the Climate Change Levy.

    (b)  For the promotion of Carbon Dioxide Capture:

    —  The plant should be guaranteed a full allocation of emissions allowances under the EU Emissions Trading scheme as if it were emitting all of its CO2.

    —  Investors should be provided with confidence in the long term cash flow benefits of CO2 capture and storage, through provision of bankable value in emissions trading.

    (c)  For the promotion of EOR, it is vital that Government provides sufficient incentives to the oil industry to ensure that the major oilfields are not abandoned prematurely, and realises the very significant opportunity associated with tertiary oil recovery with CO2-EOR. Under an appropriate fiscal regime, tertiary CO2-EOR is routinely performed in the USA at a delivered CO2 price which is consistent with the CO2 capture cost from a new IGCC plant.

September 2005

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