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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