Examination of Witnesses (Questions 60-79)
MR MALCOLM
WICKS MP, MR
MARTIN DEUTZ
AND MS
BRONWEN NORTHMORE
4 JUNE 2008
Q60 Dr Turner: I was told a year
ago by the CCS Association that there were at least 10 projects
ready to go but were being held in abeyance because the market
incentives and regulatory framework were not in place. What you
have not told me in your answer is what you are putting in place
so that these 10 projects, which include various forms of pre-combustion
and so on, can go ahead. They are ready as of now.
Ms Northmore: We have done a lot
of work on the regulatory framework. There is an EU directive
on carbon capture and storage, including carbon capture readiness,
which is relevant to Mr Lazarowicz's question about where we go
in terms of mandating. That regulatory framework is being applied
in the UK through the Energy Bill and the EU directive, so I honestly
believe that the UK is extremely well placed in terms of the regulatory
framework and is leading the world on it. We are better placed
to be able to store carbon dioxide.
Mr Wicks: A good chunk of the
Energy Bill currently before Parliament puts in place a regulatory
framework for the safe storage of carbon dioxide.
Q61 Dr Turner: But it contains no
measures to give market incentivisation towards its use.
Mr Wicks: That Bill does not.
I repeat the mantra about the ETS. That is one that does provide
incentives going forward. If there are 10 projects or so that
you argue the taxpayer should support—-
Q62 Dr Turner: I am not arguing that.
My argument is that if you have the right conditions in place
then, to quote a frequent government mantra, the market will provide.
Mr Wicks: This is where we are
all struggling at the moment. Prime facie, there is no profit
at the moment in storing carbon dioxide. Therefore, we have been
discussing how to incentivise it. I do not think I would use the
words "market failure"; it is not one of my favourite
terms, but there is no profit in stripping out CO2 very expensively,
transporting it through pipelines and storing it under the North
Sea, for example. Therefore, all of us are thinking through how
to incentivise it. I have stressed the carbon market, but meanwhile
we are spending a great deal of the taxpayer's money on this one
demonstration project.
Q63 Dr Turner: As we have already
discussed, so far the ETS has not delivered and will not deliver
the kind of market signals of the strength and reliability that
will be needed to incentivise this for a considerable time in
future. Has the government had any other thoughts? You have had
time to think about it.
Mr Wicks: We have had time to
think about it. I am rather conscious of how we now often express
frustrations over things that some of us at least had not heard
of four years ago. Of course we are all very wise about these
things after the event. I am not complacent, but I think we are
doing pretty well as a country. I am not convinced that even if
we found the money we could support 10 projects because we have
not demonstrated one yet. We have to learn how to walk before
we can run. If you are asking me, Dr Turner—you are not—why
the taxpayer does not support 10 projects, that is a bid of, say,
at least £5 billion.
Dr Turner: I was not saying that.
Q64 Mr Chaytor: What are the specific
reasons for the time it has taken to come to the view that competition
is the right way forward to bring CCS to reality, because the
technology in its separate components has been in existence for
a number of years? The 2003 White Paper contained considerable
discussion about the potential for CCS, but it was five years
before the competition was launched.
Mr Wicks: The decision to support
a demonstration project was not taken until May 2007. As I recall,
we were busy on one or two other things. The competition to select
a project was launched on schedule in November 2007. I think we
are sticking to quite a tight timetable.
Q65 Mr Chaytor: To explain, given
that the Intergovernmental Panel on Climate Change has been in
existence for the best part of 15 years, that the Kyoto protocol
was signed in 1997, that we have known about the increasing consumption
of coal in China and India for a number of years because of their
rates of economic growth and about the crisis in our own coal
industry, I just wonder why this was not on the government's agenda
sooner after 1997 than it turned out to be. I am just asking whether
there was a specific reason for the time taken by the relevant
departments.
Mr Wicks: To be honest, I think
it is because of the infancy of the science, technology and engineering.
I am as much aware as you are of the Sleipner project in the Norwegian
Sea which has successfully demonstrated that one can store CO2
in a depleted gas reservoir. That has been going on for 10 or
11 years and geologists are still studying it. Geologically, the
CO2 is behaving as one would expect, which in plain English means
it is still down there. Use has been made of CO2 for enhanced
oil recovery in different parts of the United States. I saw an
interesting demonstration of that recently when I had the good
fortune to visit Mississippi. There are a number of examples around
the world, but no one has yet done it on a fossil fuel power station.
Q66 Mr Chaytor: I understand that,
but why was not the decision to have a competition to decide if
somebody could do it taken earlier?
Mr Wicks: I suppose I would be
embarrassed now if you could tell me 12 countries that were ahead
of us, but I do not think you can. I wish the National Health
Service had been created in 1924. I am frustrated that things
take so long.
Q67 Mr Chaytor: Is there a relationship
between the likely timescale of CCS implementation and the closing
down of oil fields in the North Sea because clearly the enhanced
oil recovery is part of the economic equation to make CCS viable?
Given we do not have certainty about whether CCS can come on stream
by 2020 presumably at that stage some of the oil fields will start
to close down. What is the relationship between those two timescales?
Mr Wicks: I do not mean to be
in any way patronising but that is a very important question.
Just as we are beginning to look forward and have interesting
discussions about how to fund all of this stuff in future, another
more technical discussion is about what kind of grid infrastructure
we need. If we are right—we have to be right—that
the obvious place is the North Sea then, given there is a grid
infrastructure out there, we need to think through, as we are
beginning to, the implications of the closure of certain oil rigs
and the infrastructure out there. To some extent we are beginning
to run before we can walk, but my guess is that for the next 40
or so years there will be a good deal of oil and gas extraction
from the North Sea. There is a lot of life in the old dog yet
in our own back yard, but we can well see the beginning of new
industries and business around what we are discussing today, namely
CCS.
Q68 Mr Chaytor: Does the department
have a set of forward projections in terms of the timescales for
closure of the different oil fields within the North Sea? Is the
geology that certain?
Mr Wicks: Obviously, we keep very
closely in touch with the North Sea; we have a good Pilot partnership
with the industry. This is a matter that we are thinking through.
Q69 Mr Chaytor: But is there a risk
that the time taken to bring CCS to fruition will go beyond the
time at which a large number of oil fields will already have closed
and, therefore, the enhanced oil recovery part of the equation
will not be an option?
Mr Wicks: It is a risk that we
have to avoid. It is not as if the North Sea will close down within
the next 10 years; it will not.
Q70 Mr Chaytor: It will be in the
next 20 years?
Mr Wicks: There will be a lot
of activity over there for the next 30 or 40 years, but when it
comes to specific oil rigs that is an important question to which
we are paying attention.
Q71 Martin Horwood: You say that
the North Sea is not closing down now, but as I understand it
that is precisely the situation. At Peterhead and elsewhere the
combination of market forces, your competition and the fact that
ETS do not provide sufficient incentive to keep these geological
storage facilities accessible means that they are now being closed
and capped. Are you aware how many of these facilities will be
lost?
Mr Wicks: Some will be, yes.
Q72 Martin Horwood: Do you know how
many?
Mr Wicks: Two things are true
of the North Sea when it comes to oil and gas. One is that it
is passed its peak; it is in decline, but our estimate is that
25 billion barrels of oil equivalent are left in the North Sea.
Someone today said it was 30 billion. No one can be certain. New
fields are being opened up. We are doing a lot of work west of
Shetland with four major companies and if it works, as we think
it will, it will be a whole new oil and gas field. It is a very
dynamic process. Some close down and some open up.
Q73 Martin Horwood: But the geological
storage facility for carbon in future is being lost now.
Mr Deutz: It is not lost simply
because it ceases to be a viable gas or oil reservoir; it can
be reopened.
Q74 Martin Horwood: My understanding
from BP is that it is much less economic once it has been capped.
Mr Deutz: It would not then be
used for EOR, so to that extent it would be less economic, but
it would not be lost to storage which was your question.
Q75 Martin Horwood: It would be much
more expensive to exploit, would it not?
Mr Wicks: I acknowledge that these
are very serious issues which confront the department and the
industry. I cannot be precise. I am not sure it would be sensible
for me to say that every oil and gas field will be maintained
open for ever with all the costs involved in that. These are critical
issues. But the North Sea is a dynamic place and oil and gas are
found on a regular basis.
Q76 Mr Chaytor: It would help our
Committee's report if the department could produce a note setting
out what is already known about the closure dates of oil wells
in the North Sea, because their capacity for EOR seems to me to
be absolutely crucial to the economics of CCS.9[12]
If we have some information about whether the cost of reopening
an oil well in order to pump the gas in is far greater than using
an existing oil well where perhaps 10 per cent of its reserves
is still waiting to be pumped up and the gas will make it possible
to recover that additional oil it may be helpful to us in writing
our report.
Mr Wicks: We will do our best
to give you that information.
Q77 Colin Challen: As an addendum
perhaps we can have an analysis from the department about what
might happen with another Grangemouth-style situation10[13]
where it seems that we have so few access routes to the North
Sea currently with the inward flow of oil, but if we are to use
the same pipes for the outward flow of carbon—I do not know
whether we are—the capacity needs to be looked at. I should
like to ask one or two questions about the bigger picture. Listening
to this afternoon's occasional debate I am just wondering how
seriously BERR takes the issue of climate change and whether it
would perhaps use the word "crisis" to characterise
it. The IPCC said that globally we have to peak and commence to
reduce emissions by 2015. Nick Stern says that we cannot rely
on the market to set a price for carbon. Every time anybody asks
a question about the future mix of fuel and generation the government
says it is not up to the government; it is the market that must
decide what the mix is and that will depend on price and other
things. It seems to me that that kind of approach completely sidesteps
the question of climate change. We do not know what number of
new coal-fired power plants we will have. If they achieve 90 per
cent carbon capture and storage their efficiency drops to 50 per
cent. Does that mean we have twice as many coal-fired power plants?
We heard today that E.ON does not believe there will be more than
one new nuclear power plant built before 2020 and yet those Members
of the Committee who were written to by EDF early this year were
told there would be four by 2017. Why does the government not
become a bit more interventionist, demonstrate that it believes
some kind of crisis is taking place with climate change and start
to tell people what to do, or is there some example from history,
perhaps the Battle of Britain, where market forces have won the
day for our side? It has never happened; we have to intervene—please!
Is that a possibility?
Mr Wicks: Perhaps I may say as
politely as I can that I do not think it helps by trying to say,
"I am greener than you", which is the sort of debate
going on now. You are accusing my department of not taking climate
change seriously.
Q78 Colin Challen: Yes, I am.
Mr Wicks: As we say on these occasions,
with respect that is total balderdash. We take it extremely seriously.
The government works together on this. The Climate Change Bill
is before Parliament. We have said we will reduce carbon emissions
by 60 per cent by 2050; and it could go up to 80 per cent. We
have made the difficult decision, which I know you do not agree
with, Mr Challen—we think it is sensible for climate change—that
in future there should be new nuclear power stations which provide
a clean and a green source of energy. I know that some put their
hatred of nuclear above their hatred of global warming, but that
is not our position. We have said that 15 per cent of all energy
should come from renewables by 2020. We have also said that we
will look at the Severn barrage and the environmental assessment
to see if that major project should be supported. We will put
a considerable amount of resources into carbon capture and storage.
It seems to me that that shows the government that is pretty interventionist
in the market.
Q79 Colin Challen: I mentioned to
your predecessor in your seat this afternoon that the chief executive
of E.ON had said this morning in the press that if we are to meet
the EU targets on renewables there was a need for 50 gigawatts
of renewable electricity generation and that would require 90
per cent back up from coal and gas to ensure supply during intermittency.
I have asked them to provide us with their analysis because I
think that overstates what is required, but if all of these variables
are left to the market in my view they will not add up to a solution.
When we are promised new nuclear, we find that two of the major
potential providers, E.ON and EDF, are at odds with each as to
what it will contribute and the government says it is not its
business. That is the government's response to my Parliamentary
Questions. That is not the basis of a sound policy.
Mr Wicks: As to nuclear, we have
been criticised for a number of things by anti-nuclear interests
but not because government has said it is none of its business.
We have been criticised because government has said that nuclear
is its business which is why we are authorising it in future.
12 9 See Ev 27 Back
13
10 See Ev 27 Back
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