APPENDIX 29
Memorandum from Carbon Trust
The Carbon Trust is an independent company funded
by government. It was set-up by Government with support from the
private sector in 2001. Its aim is to accelerate the transition
to a low carbon economy by helping organisations reduce their
carbon emissions and develop commercial low carbon technologies.
We welcome the opportunity to contribute to the House of Commons
Science and Technology Committee's inquiry into carbon capture
and storage (CCS) technology.
CCS is a wide-ranging subject covering, for example,
the technologies needed for carbon dioxide separation and capture,
geological considerations relating to long term (i.e. on geological
rather than human timescales) storage, and public, attitudinal
and legal aspects associated with long term storage of carbon
dioxide. As part of its Low Carbon Technology Assessment study,
published in 2003, the Carbon Trust considered carbon capture
and storage. We concluded that although the carbon abatement potential
of carbon sequestration was high the Carbon Trust is not material
to its development. We have therefore not engaged deeply in carbon
capture and storage and therefore others are better able to contribute
detailed material on the technological, geological, attitudinal
etc. aspects of capture and long term storage. Our comments therefore
focus on the development and deployment of CCS and the role of
Government funding for R&D and technology transfer.
We note that the scope of the Committee's inquiry
is descried as looking into "the viability of CCS as a
carbon abatement technology for the UK". We think there
are two dimensions to this:
(i) CCS as a technology option for the UK
to run alongside continued used of coal (and gas) combustion for
point source bulk power generation; and
(ii) the extent of and opportunity for the UK
to win commercial returns in the global market for CCS through
the exploitation of a competitive advantage in this area.
Each dimension requires a different approach to equipping
the UK with the necessary capabilities to deliver successful policy
and commercial outcomes; and although some individual activities
will underpin both outcomes it is important to be clear which
one is being supported by which Government support instrument
and why.
CCS TECHNOLOGIES
The science and engineering needed to underpin current
generation CCS is pretty well known. Of course, more research
needs to be done on as yet unproven concepts (such as ocean storage)
but compared with some new and emerging low carbon technologies,
CCS does not present any particular technological challenges—though
there are significant uncertainties about the long term storage
of carbon dioxide.
Carbon dioxide capture processes from point source
power production fall into three general categories: (i) post-combustion
separation of flue gas—currently operated at around a dozen
facilities worldwide; (ii) pre-combustion separation—capturing
carbon dioxide before fossil fuel combustion thereby offering
scope to use more efficient separation methods; and (iii) oxy-fuel
combustion in power plants—burning the fossil fuel in pure
or enriched oxygen and thereby creating easier to capture carbon
dioxide rich streams.
Each of these technologies carries both an energy
and economic penalty—anything from 15-25% and 1-2p/Wh are
widely quoted by experts. Some commentators argue that without
technology cost reductions going forward, carbon prices would
have to be of the order
100/tC for CCS technologies to be adopted by the
power industry on a significant scale.
Following the capture process, carbon dioxide needs
to be stored, so that it will not be emitted into the atmosphere.
Geological sinks for carbon dioxide include depleted oil and gas
reservoirs, enhanced oil recovery, unminable coal seams, and deep
saline formations. Together, these can hold thousands of gigatonnes
of carbon (GtC)—the scale needed if CCS is to make a global
contribution to reducing carbon dioxide emissions from fossil
fuelled power generation. The technology to inject carbon dioxide
into the ground is well established. Deep saline formations, both
subterranean and sub-sea bed, may have the greatest carbon dioxide
storage potential. These reservoirs are the most widespread and
have the largest volumes. Research is currently underway to understand
what percentage of these deep saline formations could be suitable
for carbon dioxide storage.
Annex 1 gives some further details of CCS technologies
drawing from Carbon Trust technology fact bases.
THE UK GOVERNMENT'S
ROLE IN
FUNDING CCS R&D
Having decided what the desired policy and commercial
outcomes are (and that is not a matter for the Carbon Trust),
the Government's role and mechanisms to facilitate their achievement
can be considered further. Without a conscious determination to
do otherwise, there can be a knee-jerk reaction to see "Government
support" for technology solely in terms of support for R&D.
We acknowledge that there may well be a role for publicly supported
R&D but mainly in partnership with commercial players—not
just because of the sheer scale of CCS projects but also, and
more importantly some would argue, it encourages shared ownership
with the private sector of the challenges, the desired outcomes
and rewards.
Currently, the main players in CCS are the multi-national
oil and gas companies. Their efforts dwarf public RD&D funding
in this area. Therefore, the targeting of Government funding—is
crucial. It requires decision-makers to consider and be clear
about:
(i) the objective(s) and desired outcomes of
UK involvement;
(ii) the nature and magnitude of the risks/barriers which
Government intervention is seeking to overcome;
(iii) the stage and scale of technological development; and
(iv) who else is active in this field, what they are doing
and why.
In the Government's strategy document on carbon abatement
technologies published in June this year the objective was described
as:
"To ensure the UK takes a leading role
in the development and commercialisation of Carbon Abatement Technologies
that can make a significant and affordable reduction in carbon
dioxide emissions from fossil fuel use."
Whilst perfectly adequate as a general objective,
there would be merit, we think, in introducing greater clarity
of purpose along the lines of the above. We believe that there
are two strategic questions that need to be answered to help to
develop the Government's approach to CCS. The first of these questions
is around the strength of the UK's competitive or potential competitive
position in relation to this technology. If the UK position is
relatively weak then an appropriate strategy may be to focus on
dimension (i) above and use CCS as a technology to reduce carbon
dioxide emissions from coal (and gas) fired power generation.
Under that scenario, it would make more sense to develop our [odq]informed
buyer[cdq] understanding of CCS technology, research geological
storage options and import the technology once costs have reduced.
If, however, the UK has a potentially strong competitive position
in the supply/value chain then an appropriate response may be
for material Government investment in RD&D to leverage this
strength for its commercial and environmental benefits. Given
that Government resources for energy supply RD&D are limited
the Carbon Trust believes that the UK should prioritise its support
for the development of low carbon technology options where the
UK has or can develop a competitive advantage. Understanding the
UK's actual or prospective competitive position should, we think,
be one of the focal points for this inquiry. (Our report entitled
"Building Options for UK Renewable Power" discusses
and expands on this view of the rationale for low carbon technology
investment. We have attached a copy of the report to this note.)
The second strategic question is around the quantum
of resource that the UK Government would need to put on the table
in order for the UK to become a credible and material global player
in this area.
At present, CCS is technically feasible but not commercially
viable. There is currently no operational experience of CCS at
scale in the UK and comparatively little experience worldwide.
Demonstration projects are expensive and sparse. Consequently,
there are few opportunities for "learning by doing"
and little opportunity of gaining a better understanding of costs
and the scope for cost reduction. CCS is at the stage where full
scale demonstrations and trials would improve understanding and
enable a better assessment to be made of the prospects for commercial
and technical viability both for new and retrofit applications.
A "learning by doing" demonstration project with the
private sector (perhaps as part of the EU Framework programme
given the high costs involved) would provide valuable information
and operational data which would not only help inform project
participants but also Government in terms of understand the competitive
position of the UK and the quantum of Government support that
might be required to develop a UK leadership position in this
area. At the same time, a successful UK CCS demonstration project
would provide an export promotional platform for UK skills and
know-how. However, to enable the UK to take a strong international
position it would require significantly more funding than the
£40 million over four years currently be announced in the
Government's carbon abatement strategy document.
The export aspect should not be under-estimated.
Globally, fossil fuel power generation (and in particular coal)
is growing—significantly in the rapidly industrialising
developing countries such as China and India. Hanging on to the
coat-tails of the rising trend in global carbon dioxide emissions
resulting from more coal burn will require big-scale technologies
deployed sooner rather than later. CCS, potentially, has an important
role to play to mitigate carbon dioxide emissions from fossil
fuel power generation and, if the market for CCS takes off, the
UK undoubtedly has skills and services it can sell. Now whether
there is a need for R&D support, or whether R&D is the
right Government instrument to achieve the desired outcomes, needs
consideration. An analysis of the CCS value chain would show whereabouts
the UK had particular strengths and where, therefore, support
should be provided to convert those strengths into competitive
advantage. The Carbon Trust recommends that, if this analysis
has not been carried out, it should be as a precursor to determining
the nature and extent of Government intervention/support. Annex
1 (Figure 2) contains an illustrative schematic of the CCS supply
chain.
November 2005
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