Memorandum submitted by GE Energy
GE Energy is a leading supplier of power generation
and energy delivery technologies.
The businesses that comprise GE Energy—GE
Power & Water, GE Energy Services and GE Oil & Gas—provide
integrated product and service solutions in all areas of the energy
industry including coal, oil, natural gas and nuclear energy;
renewable resources such as water, wind, solar and biogas; and
other alternative fuels. In the UK, our installed technology meets
18% of UK energy needs and we also supply to 13 of the 14 transmission
& distribution networks in Great Britain.
GE is a leader in the development, application
and design of Integrated Gasification Combined Cycle (IGCC) power
plants, which employ gasification as a key technology for pre-combustion
carbon capture. Through our IGCC technology, GE is playing an
active role to support IGCC demonstration projects and the development
of a regulatory framework governing the transportation and storage
of CO2. In Europe, GE also has its own European Cleaner
Coal "centre of excellence" in Warsaw, Poland—underscoring
its commitment to IGCC and carbon capture & storage (CCS)
technology.
In the UK GE Energy's installed technology includes
15GW of generation producing ~ 18% of UK energy needs. We also
provide network management systems to 80% of the Distribution
Network Operators in Great Britain.
GE Energy is part of General Electric, a global
infrastructure, finance and media company. GE employs 20,000 people
in the UK, has 25 manufacturing sites here and is the largest
sponsor of London Olympics.
SUMMARY
GE Energy is pleased to provide its recommendations
to the Energy and Climate Change Select Committee Inquiry into
Emissions Performance Standards (EPS). The UK's energy challenges
of security of supply, climate change and energy affordability
require a long-term approach and a policy framework that addresses
current investor uncertainty surrounding Carbon Capture Storage
(CCS) investments.
The demonstration of CCS is the only way to
prove CCS technologies at a commercial scale and, to this end,
GE supports the Government's current aim to fund demonstration
projects through a CCS levy; prohibiting the development of new
coal plants without a CCS demonstration; and the requirement for
all new fossil-fuelled power stations to be "Capture Ready".
We also support the Committee on Climate Change's recommendation
that the UK must have a largely decarbonised power sector by 2030
in order to meet its 2050 target of reducing emissions by 80%.
Whilst we recognise that policy-making is at
an early stage, GE views the concept of an Emission Performance
Standard (EPS) for coal plant as a viable regulatory supplement.
We recognise that the EU Emissions Trading Scheme (EU ETS) should
be regarded as the primary long-term mechanism for delivering
cuts in emissions. Any introduction of an emissions performance
standard should not imply a weakening of the importance of the
EU ETS, but rather can provide an early incentive for the electricity
market to switch to low-carbon technologies during a period until
the cost of CCS is sufficiently low to be supported by the EU
ETS price.
RESPONSE TO
QUESTIONS
What are the factors that ought to be considered
in setting the level for an Emissions Performance Standard (EPS)
and what would be an appropriate level for the UK?
Carbon emissions in the power sector are currently
determined by a cap under the EU Emissions Trading Scheme (EU
ETS). The EU ETS should remain the principal policy instrument
to deliver absolute reductions in carbon emissions, however due
to weak electricity market prices and uncertainty, it does not
currently incentivise investment in low carbon generation. In
order to address this other mechanisms will be required to drive
low carbon investments.
An emissions performance standard (EPS) sets
a maximum level of GHG emissions per unit of output and is designed
to raise emissions performance of power plants. This is a good
way of quantifying CO2 emission levels, setting consistent
goals across technologies and to deliver technological advancement
in low-carbon solutions within a certain timeframe.
Should the UK Government decide to implement an
Emissions Performance Standard policy, there are a variety of
issues that should be considered:
— The type of facility commitment that
should be subject to the EPS.
— Whether it applies to new construction
and/or new investments in existing facilities.
— Determining the facility threshold, ie
MW size or capacity factor.
— The timeframe for introducing a performance
standard in relation to full CCS demonstrations at commercial
scale.
— Derogations for certain types of plant
(for example flexible peaking technology).
Before an Emissions Performance Standard can
be introduced, the level and timing of an EPS policy must be carefully
considered in order to take account of differences in fuels and
technology options. Whilst policy-making remains at an early stage,
we would recommend that the design of EPS should seek to be consistent
with best available technology at the time of implementation.
For example, under the current Large Combustion Plant Directive
(LCPD), we would be opposed to an initial standard that goes beyond
the 360g CO2/kWh as any standard set higher risks penalizing
fuel advantages provided by natural gas by unnecessarily increasing
capital and operating expenditures.
We would also recommend that policymakers ensure
that certain considerations are incorporated into any standard.
For example, a more differentiated approach to EPS levels should
take into account different technologies, plant configurations,
and other requirements certain power plants have to fulfil along
the merit order (ie base load, load following/peaker).
Should the level be changed over time?
Once established, an Emissions Performance Standard
can be reviewed and made more stringent over the years as the
technology develops. However, in the first instance, it will be
important to ensure that CCS has been demonstrated at a commercial
scale.
As such GE urges the UK Government to proceed
to demonstrate CCS as quickly as possible, both to expedite cost-effective
emission reductions and to build the UK's competitive advantage.
In the UK GE is supporting the Hatfield project, a 900MW Integrated
Gasification Combined Cycle Power Station, by providing steam
turbines to enable a phased approach to CCS by 2015 with up to
90% carbon capture. Projects such as Hatfield are at an advanced
state of readiness and can serve to inform future energy policy
including consideration of an Emissions Performance Standard.
The ultimate emission limits for fossil fuel
power generation and other industries cannot be set until commercial
viability of the full CCS chain has been established. It is therefore
essential that industrial-scale projects begin as soon as possible
in order to ensure CCS becomes the best available technology.
In the long term it is to be expected that all
power plants could be able to comply with some form of emissions
standard.
What benefit would an EPS bring beyond the emissions
reductions already set to take place under the EU ETS?
Putting a price on GHG emissions will result
in investments in technologies and other actions that will reduce
emissions. However, some activities that reduce emissions cost-effectively
do not respond to this price signal: so-called market barriers
prevent or impede the penetration of cost-effective technologies
and practices that could mitigate GHG emissions.
If the Government were to develop an Emissions
Performance Standard then it must be supplementary to and complement
the EU ETS and should not be designed in a way that undermines
the carbon segment.
We recognise that the EU ETS should be regarded
as the primary long-term mechanism for delivering cuts in emissions.
Any introduction of an Emissions Performance Standard should not
imply a weakening of the importance of the EU ETS, but rather
can provide an early incentive for the sector to switch to low-carbon
technologies during the period until the cost of CCS is sufficiently
low to be supported by the ETS price.
Complementary policies achieve a variety of
objectives in addition to reducing GHG emissions and removing
segment barriers. They can achieve reductions outside (or below)
the cap, encourage investments in low-carbon technologies and
lower the cost of transitioning to a low carbon economy. As such,
an Emissions Performance Standard could therefore ensure that
other low carbon technologies are not undermined by the operation
of lower cost, non-CCS fitted carbon intensive plant.
How effective is an EPS likely to be in driving
forward the development of CCS technology? Should the UK's CCS
demonstration programme cover gas-fired as well as coal-fired
power stations?
The introduction of an Emissions Performance
Standard could provide vital support to the deployment of CCS
and increase diversity and security of supply by ensuring the
continued use of coal. However, it cannot be the main driver to
achieve a UK low-carbon economy nor, as a part of that, deployment
of CCS in its own right.
GE produces Integrated Gasification Combined
Cycle (IGCC) technology, which employs gasification as a key technology
for pre-combustion carbon capture and storage. This is technologically
proven and ready for deployment but full-scale demonstration is
required to integrate into an economic package.
An Emissions Performance Standard must therefore
be considered as part of the wider set of policy measures needed
to reform the electricity sector framework and provide sufficient
certainty and flexibility to deliver projects at the lowest cost
of abatement.
The most significant barriers to CCS at present
are upfront cost, technology and regulatory uncertainty surrounding
issues of planning, shared infrastructure and CO2 liability.
The introduction of policies without appropriate incentives to
address these risks will not encourage CCS development and won't
provide investors with confidence that the cost of their investment
can be recovered.
As such, an EPS could become necessary for new
coal stations if CCS remains technically but not economically
viable beyond 2020 and in circumstances where the carbon price
is insufficient to justify the investment in CCS.
Could the introduction of an EPS pose any risks
to the UK's long-term agendas on energy security and climate change?
GE recognises that careful consideration must
naturally be given to how a standard might be implemented in order
to avoid unintended or unwelcome consequences. An inappropriately
designed UK Emissions Performance Standard (as with all badly
implemented policies) could potentially increase operating costs,
encourage investment in less cost-effective technologies and thereby
reduce investor confidence.
However, claims that an EPS might ultimately
threaten security of supply or could ultimately result in a "dash
for gas" tend to be exaggerated. Security and diversity of
fuel supply remain a key strategic issue that can be addressed
by a variety of policy approaches and second, in the case of pre-combustion
CCS for coal, existing technologies such as GE's IGCC can already
achieve less than ~360g/Kwh CO2 today AND keep coal
in the energy mix.
What is the likely impact of an EPS on domestic
energy prices?
Inevitably, if an Emissions Performance Standard
were introduced the cost of operating CCS plant would be passed
through to the consumer. However, the EU ETS complemented with
a funding mechanism at an appropriate level in the initial demonstration
phase can provide the necessary incentives to enhance cost recovery
and thereby could save bill payers from funding new plant investment
that do not meet the UK's emissions targets.
Are any other European countries considering an
EPS? If so, should the standards be harmonized? Could unilateral
action by the UK to introduce an EPS contribute towards global
climate negotiations in Cancun in November 2010? Can greater use
of Emissions Performances Standards internationally help promote
agreement on global efforts to address climate change?
The UK Government has previously stated its
ambition to establish the UK as a "first choice for investment
in CCS" and therefore has a unique opportunity to lead the
way by promoting the development of this technology.
As a result, whilst harmonisation of policies
and standards across Europe remains unrealistic given the differences
in industrial structures that occur from one country to another,
leadership from certain member states could result in competitive
advantages that accrue to their low carbon economies. Whilst there
is no "silver bullet" solution, the implementation of
an Emissions Performance Standard and similar policy instruments
could go along way to support negotiations at the UN Climate Change
Summit in Cancun by demonstrating the UK's commitment to meeting
emissions targets.
CONCLUSION
— GE views the concept of an Emission Performance
Standard for coal plant as a viable regulatory supplement but
should only be considered as part of a suite of policies including
transitional incentives for CCS, electricity market reform and
infrastructure policy.
— An achievable emissions standard must
be within current technology capability to begin the deployment.
If introduced, the level and timing of an EPS policy must be carefully
considered, to take account of differences in fuels and technology
options, but could be considered in the context of establishing
CCS demonstration and the need to fully decarbonise the power
sector by 2030.
— Set at the right level and under the
prerequisite that the transport and storage part of the CCS chain
are available, an EPS can be instrumental in commercializing CCS
and compatible other instruments to promote low carbon investments.
— It is widely understood that further
policy interventions will be required to meet the UK's energy
targets. GE notes the forthcoming DECC consultation on Electricity
Market Reform, which will include consideration of an Emissions
Performance Standard policy together with a variety of regulatory
and financial measures. GE looks forward to responding to this
consultation in due course.
September 2010
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