Select Committee on Environmental Audit Written Evidence


Memorandum submitted by E. ON UK

INTRODUCTION

  1.  E.ON UK would like to comment on the Carbon Capture and Storage (CCS) aspects of the Committee's inquiry into the 2007 Pre-Budget Report and Spending Review.

CONTEXT AND NEED FOR CCS

  2.  The UK electricity industry requires substantial capital investment over the coming decade to deliver reductions in carbon dioxide emissions, ensure security of energy supply and deliver affordable prices. By 2015 we are expecting that about 5GW of nuclear and 14GW of coal and oil-fired plant will need to be replaced. Much of the new plant will need to be, or become, low or zero carbon if the UK is to make effective progress towards its 2020 and 2050 CO2 emission reduction targets. While some further investment in combined cycle gas turbine (CCGT) power plant is required to maintain security of supply in the near term, replacement of all retiring plant with CCGTs alone would not be the most effective means of meeting the UK's energy policy objectives, as it would lead to high levels of UK dependence on natural gas. It is important that UK energy companies have access to a range of other investment options, including renewable, coal and nuclear plant.

  3.  CCS enables CO2 to be captured from power generation and large scale industrial processes, transported and injected into geological structures for secure, permanent storage. CCS is a crucial technology in that it enables the continued use of coal for power generation in a carbon constrained world, whilst enhancing security of energy supply, as coal is available in large quantities, with substantial remaining reserves, is freely traded on world markets and can be easily stored. CCS technology can capture in excess of 90% of the CO2 emitted from fossil fuel plant and could further reduce CO2 emissions when combined with co-firing of coal and biomass.

GOVERNMENT SUPPORT FOR CCS AND THE DEMONSTRATION COMPETITION

  4.  E.ON UK welcomes the Government's continued support for CCS over the last few years and in particular the decision to support a full scale CCS demonstration here in the UK. The Government's decision to support post-combustion technology only in the competition announced at the time of the pre-budget report and CSR has attracted some comment. Prior to this announcement, E.ON had been pursuing the development of an integrated gasification combined cycle (IGCC) project with pre-combustion CCS at Killingholme on the Humber, on the basis that this could represent the most economic technology choice for new coal-fired plant incorporating CCS.

  5.  Nevertheless, given that funds are only likely to be available to support a single project in the UK, we believe that the Government's decision to support demonstration of post combustion demonstration technology fitted to conventional coal plant is rational given the Government's stated policy objective of encouraging China and other countries to retrofit CCS to the coal-fired plant built or to be built over the next decade or so, which will be overwhelmingly conventional in design. Making the technology choice now will enable developers to focus effort and expenditure on projects which will best meet those policy goals and avoid further expenditure on those it does not. We therefore support the Government's decision.

  6.  The details of the competition released by BERR, including the Project Information Memorandum and the Preliminary Qualifying Questionnaire have been helpful to developers. We believe it was sensible to delay the competition finishing date until summer 2009, as this gives E.ON and other bidders adequate time to formulate cohesive bids.

  7.  E.ON is evaluating post-combustion options to enter into the CCS competition. We hope to announce formally our participation in the competition and outline our bid in the New Year.

  8.  It is important that pre-combustion CCS technology is also available to the market as this may prove to be the preferred economic option when CCS is incorporated in new plant. For this reason E.ON is one of the industrial supporters of the pre-combustion FutureGen project in the United States, but future pre-combustion projects should also be supported in demonstration programmes within the European Union. We would therefore welcome a further competition, or other measures funded by HMG or the EU, to support demonstration of CCS technologies in the UK, encompassing pre-combustion CCS.

  9.  E.ON UK believes that CCS, when commercially demonstrated, and other low carbon investment options are most economically incentivised by the EU emissions trading scheme which allows participants a range of low carbon investment options to reduce CO2 emissions in response to a carbon price. The development of the next phases of the EUETS after 2012 will be crucial for providing a robust long-term framework to incentivise investment in CCS and other low carbon technologies in the power sector.

December 2007





 
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