House of Commons - Environmental Audit

Select Committee on Environmental Audit Written Evidence

Memorandum submitted by the Environment Agency

SUMMARY

Carbon Capture and Storage (CCS) has the potential to play a key part in the global battle against climate change. The Environment Agency believes that significant work is still necessary to prove CCS and the government should hedge against any risk that a failure to deploy CCS prevents us meeting our climate change targets.

Specifically our submission highlights:

— CCS is the only option that, at present, may bridge the gap between projections of global fossil fuel burning and the need to reduce global emissions.

— CCS is not the solution to climate change. CCS can only be used at large point sources and, even here, the greatest and most cost effective mitigation option remains cutting energy demand.

— CCS is not yet technically proven at a commercial scale. The new Kingsnorth power station would not be built if CCS was made a requirement.

— Kingsnorth and any other new fossil fuel power stations should be built carbon capture and storage ready and this should be required under Section 36 of the Electricity Act 1989.

— The Government's proposed CCS demonstration is an important contribution to deploying CCS. The Kingsnorth project, if approved, seems to offer the earliest opportunity to proceed with the demonstration.

— There remain a series of barriers to deploying CCS where more action should be taken and encouraged by government. In particular around:

— developing a framework for funding and building CO2 pipeline networks;

— further work to map and prove the suitability of prospective storage locations;

— work to understand the health and safety risks associated with CCS; and

— work to gain public confidence in CCS.

1. INTRODUCTION

We have a range of statutory responsibilities for protecting resources and limiting and adapting to climate change in England and Wales.

We are responsible for the regulation of the major CO2 point sources in England and Wales under the Environmental Permitting Regulations[3] and the EU Emissions Trading Scheme. These would apply to the proposed new coal fired power station at Kingsnorth.

2. CARBON CAPTURE AND STORAGE

2.1 Background

CCS is a potential mitigation option to achieve the greenhouse gas stabilization pathways that would prevent the most catastrophic impacts of climate change.

Coal fired power stations are the largest CO2 point sources combining long operating life (30-50 years) and the highest relative CO2 emissions per unit of electricity generated. In the UK, CCS is intrinsically linked to new coal build with E.ON's proposals at Kingsnorth the forerunner.

We believe that whilst the decision on regulating CCS at Kingsnorth is important, it needs to be considered in the larger national and international context of climate change mitigation.

2.2 The potential benefits and limitations of CCS

CCS has the potential to reduce CO2 emissions from coal plants by up to 90% although it does increase the fuel needs of the plant by between 10-40%.[4]

Coal will probably continue to meet a significant and growing proportion of global energy demand until at least 2050. The International Energy Agency (IEA) suggests that coal demand could as much as double in the 50 years from 2000 to 2050 exceeding 7,000 million tonnes of coal equivalent. In particular, rapidly developing countries such as India and China are exploiting abundant coal reserves. In 2006 alone, 89% of 102 gigawatts of new electricity generation capacity in China came from coal fired plants.[5]

CCS is the only technology that can bridge these demand projections with the general scientific consensus that we need to reduce global emissions by 50% from the 1990 level by mid-century in order to avoid dangerous climate change.

However, CCS can only be used at large point sources which are today responsible for 20-40% of global emissions and roughly 35% of UK emissions and where there are suitable storage sites. It can only ever be one option in a portfolio of ways to reduce emissions.

The debate on CCS cannot be allowed to divert attention from efforts to improve our energy efficiency and develop renewable energy supplies.

2.3 The technological maturity of CCS

CCS consists of three distinct components: carbon dioxide (CO2) capture where fossil fuels are burnt, transporting CO2 most likely by pipelines, and safe, permanent CO2 storage in geological formations.

CCS is not technically proven at a commercial scale. Each of the elements has been shown to work, however the full chain is not yet proven. The Table below is a summary of the deployment of each stage in the CCS chain for coal fired power stations.

Stage State of Development

Capture A number of small scale (few Megawatts) post combustion pulverised fuel trial plants have been established. No large scale capture plant exists worldwide.
The components for an IGCC[6] capture plant have been proven in applications in the chemical and refinery industries. No IGCC power station fitted with CCS has been constructed worldwide.

Transport Transport can be via pipeline or ship. Both technologies are relatively mature. Several thousands kilometres of pressurised CO2 pipelines exist in USA and Canada. Ship transport would be similar to liquefied natural gas.

Storage Storage in oil and gas fields is understood fairly well as it has been going on for 30 years to increase the oil yield by Enhanced Oil Recovery (EOR).
Other storage including saline aquifers which are common offshore from the UK are much less well understood. Large scale projects using the Sleipner aquifer in the North Sea have shown that it is possible to store CO2 safely and monitor its movement reliably. Extensive monitoring over a longer period will be necessary to demonstrate its long term success.

The absence of experience with fully integrated commercial projects means that cost estimates for CCS differ considerably and have significant uncertainty attached to them (see figure 1).

In addition to this and despite the European Commission's recent proposal for a Directive on geological storage of CO2[7] (the draft CCS Directive) the future regulatory framework remains uncertain.

Figure 1

COST RANGES PER TONNE OF CO2 ABATED AT £2008 PRICES.

Source: Environment Agency using IEA,[8] Poyry,[9] IPCC[10] and EC[11].

For all these reasons we believe that no developer would currently risk building a new coal power plant that deployed CCS in the UK.

For the same reasons the government must ensure that new fossil fuel plants do not prevent us achieving the UK's medium and long term targets to cut greenhouse gas emissions. There are a number of ways the government can hedge against this risk. We believe the principle ways are:

— Ensuring that any new fossil fuel plant is built so that CCS can be retrofitted in the future ie it is carbon capture and storage ready (CCR).

— Taking steps that move CCS forward so that it can be deployed at the earliest opportunity. This includes, but is not limited, to the UK's announced CCS demonstration project.

— Providing the long term certainty that the UK will not accept carbon "lock in" should CCS prove to be either technically or economically unattractive. CCS will either need to be deployed or new fossil fuel stations will face the need to buy potentially expensive emission permits, or face domestic regulation forcing restrictive operation or premature closure if the EU ETS does not provide sufficient price signals.

The consideration of CCS on new natural gas plants is less mature than for coal. It is expected that CCS can also be applied to such plants in the future.

2.4 Carbon Capture and Storage Readiness (CCR)

We believe that CCR is an essential requirement for any new coal fired power station. We support the recommendations of the IEA study on CCR[12] which has also been adopted by the draft CCS Directive.

This sets out four factors to define CCR for coal as:

— sufficient space and access requirements on the original plant to allow capture related equipment to be retrofitted;

— feasibility assessments of the retrofitting of capture equipment;

— feasibility assessments of suitable storage locations; and

— feasibility assessments of suitable transport routes to storage.

The "state of the art" for these factors will develop rapidly in the next few years. It is important that potential developments are subject to detailed verification to ensure they have gone as far as is reasonable.

We estimate that the cost of making a plant CCR based upon the above definition is modest and certainly less than 0.5% of the overall capital costs.[13]

The draft CCS Directive proposes mandatory CCR for plants above 300 megawatts electrical (MWe). This will not be enacted until at least 2012 and will be too late to apply to the significant new capacity that may receive planning consent in the UK within the next few years.

In light of this, we believe that CCR must be made a requirement for new fossil fuel plants in the UK by an amendment to Section 36 of the Electricity Act 1989.[14]

Section 36 consents have already been used to require CCR conditions on new gas fired power stations.[15]

2.5 The UK CCS Demonstration Project

It is unlikely that CCS will be deployed before commercial and technical viability has been proven through a number of demonstration projects. The European Commission has called for twelve demonstration projects to be built by 2015 but so far only three countries in the world, including the UK, have committed to funding such projects.

Therefore, the UK demonstration project is an essential step on the path to proving and deploying CCS globally. We believe there is an urgent need to accelerate this deployment. Wide-scale CCS deployment by 2030 is likely to be too late. We must act to bring CCS deployment forward to 2020 at the latest. This would create an argument for the UK demonstration project to be sited at Kingsnorth, as it appears this is the most advanced proposal.

There remains a need for the European Commission to determine a funding mechanism for additional CCS demonstration projects. They could for instance be funded through the proceeds of EU Emissions Trading Scheme (ETS) permit auction or from the EU budget. The UK has approximately ten gigawatts electrical of new coal proposals which have been developed to replace the nuclear and coal generating capacity that will close between now and 2015. With the right funding mechanism this could be a significant opportunity for the UK to play a major leadership role in climate change.

2.6 Support for deployment of CCS

There remains a series of difficulties to the deployment of CCS that go beyond the CCS demonstration project where the Government can either take or encourage action.

These include:

— promoting a stronger carbon market that will incentive CCS through the EU ETS price mechanism;

— developing a framework for funding and building CO2 pipeline networks;

— further work to map and prove the suitability of prospective storage locations;

— work to understand the health and safety risks associated with CCS; and

— work to gain public confidence in CCS.

3. RECOMMENDATIONS

CCS has the potential to be a key component in the global battle against climate change. However it remains technically unproven and has significant economic and regulatory uncertainty.

Our key policy recommendations are:

— The UK's CCS demonstration project is a critical global step. There is an argument to proceed with whichever proposal can be developed most quickly. This seems to be the Kingsnorth project.

— The CCS demonstration project should be part of a bigger strategy to support CCS deployment. More work is needed from government and others in a range of areas in particular around pipelines and storage locaions.

— The government must ensure that any new fossil fuel power station is built carbon capture and storage ready under Section 36 of the Electriticy Act 1989.

— The government must protect the achievement of our domestic greenhouse gas targets by hedging against the failure of CCS to be commercially deployed within an acceptable timescale.

June 2008