Memorandum submitted by the Carbon Capture
and Storage Association
INTRODUCTION
The Carbon Capture and Storage Association welcomes
this opportunity to respond to the Committee's inquiry into the
2007 Pre-Budget Report and Comprehensive Spending Review. We welcome
the release of the 2007 Pre-Budget Report and its associated documents,
in particular the simultaneous BERR announcement on further details
of the UK CCS Competition to build a demonstration CCS project,
and we would like to express our views on this aspect of the Committee's
Inquiry.
The CCSA brings together a wide range of specialist
companies across the spectrum of CCS technology, as well as a
variety of support services to the energy sector. The Association
exists to represent the interests of its members in promoting
the business of CCS and to assist policy developments in the UK
and the EU towards a long term regulatory framework for CCS, as
a means of abating carbon dioxide emissions.
The Association benefits from a good relationship
with UK Government in developing regulation for CCS and we are
pleased with the current rate of progress in this area. That the
Government has advanced the Competition to build a UK demonstration
project should be applauded. However, in the view of the CCSA
progress needs to quicken if we are to meet the emissions reductions
targets specified by the UK Government. The UK has taken bold
steps in terms of CCS policy development and this presents an
opportunity for the UK to lead in a CCS world market, similar
to the current UK lead on emissions trading.
2007 PRE-BUDGET
REPORT: GOVERNMENT
ANNOUNCEMENT ON
THE COMPETITION
TO DESIGN
AND BUILD
A PILOT
CARBON CAPTURE
AND STORAGE
PROJECT
CCS is a process which enables CO2
emissions to be unambiguously reduced through capture from large
scale energy conversion and industrial processes, transported
and injected into geological structures for secure storage. CCS
can remove approximately 90% of the carbon dioxide associated
with burning fossil fuels and is suited to all fossil energy conversion
including coal, gas and petroleum coke, as well as a range of
industrial sectors.
CCS is urgently needed as the world will continue
to be dependent on reliable fossil energy for the foreseeable
future and demand for energy is forecast to increase significantly
through a combination of economic development and escalating energy
consumption in some of the populous nations of the developing
world, as well as a need for new and replacement generation capacity
throughout the world. Both the European Commission in the 2007
Spring Council[1]
and the UK Government[2]
have committed to, at least, a target of 60% reduction of targeted
GHG emissions from the 1990 base by 2050 with commensurate interim
targets. The UK target refers to a reduction of between 26 and
32% by 2020. This means that UK emissions in 2020 must be between
84 and 131mtpa less than 2005 emissions and in 2050 must be 346mtpa
less than 2005 emissions. This translates to an annual successive
reduction of 8mtpa. The CCSA believes that this cannot be achieved
without decarbonisation of the entire UK power generation fleet
partially achieved through CCS. While there is a vision that over
the next decades, the use of carbon intensive fossil fuels will
be phased out as new clean and sustainable energy technologies
are developed, it is clear that in the meantime, CCS remains the
only viable option for meeting the energy needs of UK and Europe
whilst ensuring the associated CO2 emissions are not
released to the atmosphere. This was emphasised in the UK Governments
Stern Review; The Economics of Climate Change, published
in October 2006.
In contrast with many other low-carbon technology
options, CCS technologies are well developed and ready to be demonstrated
and deployed. The different types of capture technology; pre-
and post-combustion as well as oxyfuel have each been proven to
differing degrees. As with all new technologies, early CCS projects
will suffer from "first mover" disadvantages, such as
disproportionately high costs and risks, as well as the necessity
to build new infrastructure to enable deployment at scale. Developers
are unlikely to invest in these early projects without some significant
incentive. The CCSA recognises that early incentives will differ
from the appropriate incentives once CCS costs are reduced through
the learning from the early stage projects. However the incentive
required for each project to move forward must be of a long term
and stable nature to enable and ensure roll-out of CCS on a much
wider scale. The CCSA would like to caution against the introduction
of support mechanisms that fall short of minimum investment thresholds
with consequent delays in tackling emissions reduction.
The CCS community has been encouraged by the
leadership taken by the UK Government in the matter of CCS and
in particular recognising the need to support early commercial
scale demonstrations of the technology. While the CCS community
was heartened by plans to provide policy support, the rate of
progress of defining the policy in the UK has been slower than
envisaged and seems disproportionately slow compared to the urgent
need to reduce GHG emissions and the ability and willingness of
industry to act. Nevertheless, industry has responded very positively
over the past 18 months by proposing 11 power projects that could
incorporate CCS. Five of these projects would use pre-combustion
capture technology, the other six are new proposals for conventional
coal fired power plant likely to be needed to maintain UK electricity
supply. These six plants could potentially fit post-combustion
capture.
In the Government's announcement, it was specified
that the project should "demonstrate post-combustion CCS
on a coal-fired power station, with CO2 stored offshore"
and that this project should capture 90% of "the CO2
emitted by the equivalent of 300 MW generating capacity".[3]
This technology has been chosen because of its relevance to the
coal fired power stations being built around the world, particularly
in China and India. The Government has hereby pre-selected a specific
technology, precluding the alternatives from taking part in the
Competition, and severely jeopardising the ability of these projects
to move forward. This eliminates the ability of the market to
identify the most cost-effective and relevant technology closest
to deployment. It will also limit the potential of UK industry
in a potentially valuable near term world market for new plant
that the industry is well placed to deliver.
The Government also specified that "the
full CCS chain" should be demonstrated by 2014 or as soon
as possible thereafter.[4]
This pace is too slow and represents an unnecessary further delay
in the deployment of CCS.
The announcement has also given no indication
that the Government is committed to more than one demonstration
project and by selecting a project size of 300 MW, the project
will commit a relatively small amount of CO2 for storage
in relation to a full scale power plant, and will be faced with
a comparatively high cost burden in terms of new transport and
storage infrastructure.
A commitment towards one modestly sized project
is not proportionate to the UK's domestic climate change goal
to reduce CO2 by 60% by 2050. In addition portfolio
generators will need to build new and replacement coal capacity
for the benefit of their business as well as for the benefit of
the UK's security of supply (the UK will need to build replacement
capacity of around 20 GW by 2020).[5]
Without further support, these coal plants will be built capture
ready, but none the less unabated and will represent a serious
risk of further increases to UK CO2 emissions. The
alternative is increasing dependence on gas with associated security
of supply issues. It is therefore imperative that the Government
sets a clear path towards incentivising a deployment programme
of commercial-scale CCS projects.
A UK demonstration of a CCS project must also
be seen in the context of international progress on this technology.
The EU Flagship Programme aims to build 10-12 CCS projects by
2015,[6]
and at present, few countries aside from the UK have come forward
with proposals for projects or policy development in line with
the EU ambition. Indeed, other EU Member States may not be in
as fortunate a position as the UK in terms of storage capacity,
and building early CCS projects in these countries will therefore
not be practical. It would seem logical that the UK should be
in a position to fulfil a proportion of the EU aspiration; however
with the announcement of only one demonstration project to be
built by 2014, it is unlikely that additional projects will be
able to meet the 2015 EU target. The UK, due to the large storage
capacity under the North Sea, has an opportunity and a responsibility
to take a strong leadership role, as this potential CO2
storage capacity is of great importance to Europe in helping to
meet its emissions reduction target. The UK Government should
work closely with the EU to drive the EU Flagship Programme and
encourage other member states to support and build CCS power projects
as part of the Flagship Programme. The Northern and Southern North
Sea has the potential to store much of the emissions from Europe.
When also considering that the aim of this Competition
is to be complementary to other demonstration programmes around
the world and to show leadership to developing countries, it must
be seriously questioned whether this Competition is ambitious
enough in terms of scope, size and timescale. However, out of
all the EU Member States the UK is the only one to currently offer
support for CCS and this must be commended.
CONCLUSION
As the developed and developing countries show
little sign of reducing their dependence on fossil fuels and continue
to emit greenhouse gases into the atmosphere, CCS offers an available,
reliable and relatively simple solution to the UK, with the potential
to be exported elsewhere to make deep reductions in CO2
emissions over the next few decades allied to international business
opportunities. Although the UK has shown tremendous leadership
in developing CCS policy, progress on incentives to encourage
investment in early CCS projects has so far not followed at the
same pace. To retain a leadership role, the UK urgently needs
to develop such incentives, allied to a CCS deployment programme
that engages European support and enables economies of scale for
UK CO2 reduction.
The view expressed in this paper cannot be
taken to represent the views of all members of the CCSA. However,
they do reflect a general consensus within the Association.
23 November 2007
1 Presidency Conclusions from the Brussels European
Council 8-9 March 2007, Council of the European Union, Brussels,
May 2007. Back
2
UK Government Climate Change [HL] Bill-2007-08. Back
3
CCS demonstrator will put UK ahead in global race for clean coal,
BERR News Release, 9 October 2007. Back
4
CCS demonstrator will put UK ahead in global race for clean
coal, BERR News Release, 9 October 2007. Back
5
Meeting the Energy Challenge-A White Paper on Energy, DTI May
2007. Back
6
Presidency Conclusions from the Brussels European Council 8-9
March 2007, Council of the European Union, Brussels, May 2007
and The EU Flagship Programme-The key to making CO2
Capture and Storage (CCS) commercially viable by 2020, European
Technology Platform for Zero Emission Fossil Fuel Power Plants
(ZEP), October 2007. Back
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