House of Commons - Carbon capture and storage

Carbon capture and storage - Energy and Climate Change Contents

1 Introduction

1. The latest assessment of climate science published by the Intergovernmental Panel on Climate Change (IPCC) concluded that, "it is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century".[1] It is estimated that for it to remain "likely"[2] that global temperatures do not rise by more than 2°C (relative to pre-industrial times) the maximum carbon that can be released into the atmosphere is 1,000 gigatonnes of carbon (GtC) (3670 GtCO₂).[3] This is sometimes referred to as the global carbon budget. Between the start of the industrial revolution and 2011, 515 GtC (1890 GtCO₂) have been emitted to the atmosphere (roughly half the carbon budget), mainly as a result of burning fossil fuels.[4] According to the International Energy Agency (IEA) total potential emissions from fossil fuel reserves in 2012 amount to 780 GtC (2,860 GtCO₂).[5] As a result, there is more CO₂locked up in fossil fuels than can safely be emitted to stay within the global carbon budget. The IEA argued that without a significant deployment of carbon capture and storage (CCS) a substantial proportion of current proven fossil-fuel reserves cannot be commercialised in a 2°C world before 2050.

2. CCS enables CO₂ emitted from large sources to be permanently stored instead of released into the atmosphere. It is one of the only technologies available that has the potential to turn high carbon fossil fuels into genuinely low carbon sources of energy. There is also potentially significant storage available. In 2005, the IPCC estimated, for example, that there could be a technical potential of at least about 545 GtC (2,000 GtCO₂) of storage capacity in geological formations globally.[6] Without CCS there is a risk that the CO₂ locked in the remaining fossil fuels reserves will be released to the atmosphere.

3. The UK is well suited to take advantage of CCS and it could bring several benefits. Support for CCS is found at the highest levels of Government with the Prime Minister repeatedly emphasising the importance of CCS to meeting future climate change targets.[7] Despite this, progress on CCS in the UK has been frustratingly slow. We have an ongoing interest in the deployment of CCS because of its potential to help the UK meet its energy and climate change policy goals. It is an issue we have regularly touched on in oral evidence sessions and in past reports, as set out below.

4. In our 2011, report, The UK's Energy Supply: Security or Independence?, we concluded that if CCS was not commercially viable by 2020 that the UK could face an energy dilemma: either provide energy security but exceed carbon budgets by running new unabated fossil fuel plant; or, meet climate change obligations but risk energy security by shutting down (or using only very sparingly) unabated fossil fuel plant. We recommended that the Government should draw up plans for how the tension between climate and security goals would be dealt with if carbon capture and storage was not delivered by 2020.[8] The Government said it remained confident it would achieve its ambition for commercial deployment of CCS by the 2020s. It was "content" for fossil fuels with CCS to compete with other low-carbon and renewable generation. The challenge was to reduce the cost of CCS so that it could compete alongside these other forms of generation.[9]

5. In our 2013 report, The Impact of Shale Gas on Energy Markets, we highlighted our frustration at how long it was taking to develop CCS and establish whether it could play a meaningful role in the UK's energy mix. We recommended that the Government needed to conclude its CCS competition as soon as possible and bring forward CCS demonstration projects to allow it to be deployed in time to contribute towards meeting UK carbon budgets.[10] The Government responded saying that it had been "working at pace" to progress its competition. It argued the merits of the "detailed process" it had gone through which had "brought much value" by ensuring the projects that had been chosen would be deliverable and financeable and would provide good value for money for the UK tax payer. The Government suggested that final investment decisions (FID) would take place in early 2015, and that the projects were expected to be operational between 2016 and 2020.[11]

6. Frustrated by the Government's response to our recommendations we decided to look into CCS in more detail. We launched our inquiry in July 2013. The terms of reference can be found online.[12] We received 35 submissions of written evidence and held three oral evidence sessions, one of which was held at Sheffield University. We heard from many of the businesses and consortia seeking to develop full-scale CCS projects in the UK. A full list of witnesses can be found at the back of this report. As part of the inquiry we visited Imperial College and UK CCS Research Centre's Pilot-Scale Advanced CO₂-Capture Technology (PACT) facilities in the UK. We also visited two CCS projects in Canada and met a range of stakeholders. Details of this visit can be found in the Annex. We are extremely grateful to all those who gave evidence to this inquiry and especially to all those who gave up their time to speak to us on our visit to Canada.

7. In the rest of this chapter we look at what CCS is, its potential applications, what the Government has been doing on CCS up until now and what progress has been made internationally. In the next chapter we explore the benefits of CCS in the UK, the costs, and the barriers to deployment and how they can be overcome.

What is carbon capture, transport and storage?

8. CCS is a new and immature field.[13] It can be applied to fossil fuel power plants and industrial sectors. Much of the focus in the UK and the rest of the world has been on demonstrating full chain CCS on fossil fuel plants first.[14] Even though each element of the chain uses proven technologies that have been demonstrated independently in different industries, a full chain CCS project has yet to be demonstrated in the power sector (although some are in advanced construction).[15]

9. CCS is the only large-scale mitigation option available to make deep reductions in the emissions from industrial sectors such as cement, iron and steel, chemicals and refining.[16] A number of sectors (e.g. gas processing and ammonia production) already separate and capture CO₂ as part of the industrial process. Other sectors, however, (e.g. cement, iron and steel) need to develop carbon capture technologies further before they can be deployed at a commercial scale.[17]

10. Carbon capture technology is able to reduce CO₂ emissions to the atmosphere by approximately 80-90% when applied to a power plant.[18] There are three main capture technologies ready for application and proposed for early CCS projects in the UK. Post-combustion capture (PCC) technology is proposed at the Peterhead combined cycle gas turbine (CCGT) retrofit project in Scotland.[19] Oxy-fuel combustion technology is proposed for the White Rose project at Drax in Yorkshire.[20] Pre-combustion technology is proposed by three other UK projects: the Don Valley CCS project, Teesside Low Carbon Project and the Captain Clean Energy Project.[21] Further information about these carbon capture technologies can be found in the 2009 Parliamentary POSTnote on CO₂ Capture, Transport and Storage.[22]

11. New carbon capture technologies are also being invented. This includes, for example, membrane technologies, porous materials that operate by selectively allowing CO₂ to permeate through the membrane material separating it from other components of a gas stream; chemical looping, a variation on oxy-combustion capture technology; carbonate slurry and technologies to decarbonise the gas grid.[23]

12. We were particularly impressed with the 'radical' technology outlined by Mr Allam, Technical Director of NET Power which if successful could have a potentially profound effect on the energy industry.[24] The NET Power cycle burns fossil fuels in pure oxygen and uses the resultant CO₂ as a 'working fluid' to drive turbines rather than steam.[25] As such, carbon capture becomes an inherent feature of the process with no additional capture technology required because CO₂is produced naturally as a by-product.[26] Mr Allam explained that his system could produce electricity at a lower cost that any existing fossil fuel based power system.[27] He also reported that the Government had been very supportive of the technology.[28]

13. In the UK it is considered technically and economically preferable to transport the captured CO₂ by pipeline to be stored in the North Sea.[29] Compression and transport of CO₂are relatively mature technologies. They have been used in North America for over 40 years for enhanced oil recovery (EOR or Enhanced Gas Recovery). EOR involves injecting CO₂ into depleted reservoirs to assist in extracting some of the remaining oil or gas (see paragraph 44 for more discussion of enhanced oil recovery).[30]

14. CO₂can be stored onshore or offshore. In the UK, it is likely that offshore geological storage — in depleted oil and gas reservoirs and saline aquifers—will be the first large-scale option for CCS development at scales able to meet global climate change emissions reductions targets.[31] Long-term storage is less well developed than transport technologies with only a small number of reference sites in Norway, South East Australia, Algeria, and Canada.[32] Much of the storage to date has been used for EOR.[33] The sale of CO₂for EOR (prices in the US range from $15-30 per tonne) has also helped CCS by reducing the cost of demonstration projects.[34] Unlike North America, EOR in the UK would be offshore.

Government support for CCS

15. Successive governments made efforts to provide capital support to a large-scale full chain CCS project for the best part of a decade (see table 1).[35] The first competition, announced in 2007, was expected to deliver an operating CCS project by 2014. The competition ran for four years until 2011 when the Government ended negotiations with the last remaining bidder. The Government pulled out because it decided it could not fund the project within its agreed £1 billion capital limit. The National Audit Office (NAO) published a report in 2012 examining how the Department for Energy and Climate Change (DECC) and its predecessor, Department for Business, Enterprise and Regulatory Reform (BERR) managed the competition. The NAO highlighted numerous shortfalls in both departments throughout the competition.[36] The second competition (termed the CCS Commercialisation Programme) was announced in 2012. Front End Engineering Design (FEED)[37] contracts were awarded to two preferred bidders in 2013 and 2014. The two preferred bidders were Capture Power Limited and its White Rose project in Yorkshire and Shell and SSE and their Peterhead project in Aberdeenshire. The Government hopes these two projects will be operational some time in 2016-2020.

Table 1: Timeline of UK CCS competitions

Year Announcement/decision

2007 Competition to fund the UK's first CCS demonstration project launched by Government. Contract award was scheduled for 2009, with the expectation that the project would operate from 2014.

2010 Front-end engineering and design (FEED) contracts awarded to E.ON (Kingsnorth project in Kent) and ScottishPower (Longannet project in Fife) consortiums.

Government announces £1 billion will be made available to support CCS projects.

E.ON withdraws from the competition.

2011 The Government announces that CCS money for CCS demonstration projects would come from general taxation rather than a CCS levy.

Negotiations with ScottishPower consortium terminated by Government.

2012 The National Audit Office (NAO) published a report criticising the competition.

New competition for CCS demonstration projects announced along with a CCS Roadmap. Contract award was scheduled for early 2015, with the expectation that the projects would operate by 2016-2020.

2013 FEED contracts awarded to Capture Power Limited (White Rose project in Yorkshire).

2014 FEED contract awarded to Shell and SSE (Peterhead project in Aberdeenshire).

Source: compiled from the House of Commons Standard Note on Carbon Capture and Storage[38] and the National Audit Office Report on Carbon Capture and Storage[39].

16. Alongside the second competition, the Government launched a CCS Roadmap which set out, what it described as, "a comprehensive package of financial and regulatory support" which the Government believes is one of the most attractive CCS offerings in the world. The main components of the CCS Roadmap include:

· The CCS Commercialisation Programme ('the competition') with £1 billion in capital funding and additional operational support available through Contracts for Difference (CfD) to support the initial stages of commercialisation.

· A £125 million, 4-year, co-ordinated research and development (R&D) and innovation programme and a new UK CCS Research Centre.

· Development of a market for low carbon electricity through Electricity Market Reform, including availability of Feed-in Tariff CfD for low carbon electricity to bring forward investment in CCS beyond the initial projects.

· Commitments to working with industry to address other important areas including developing the CCS supply chain, storage and assisting the development of CCS infrastructure.

· International engagement focused on sharing knowledge generated through the UK programme and learning from other projects around the world.[40]

17. In the CCS Roadmap the Government asked industry to set up a CCS Cost Reduction Task Force. This was to work alongside the Department's Office of CCS (OCCS) to set out a path and action to reduce the costs of CCS. The Task Force published its findings (and then disbanded) in 2013 confirming that fossil fuel power generation with CCS will have the potential to compete cost effectively with other low-carbon forms of energy generation in the 2020s. It set out its recommendations on how to achieve cost reductions and develop the CCS industry in the UK. It also recommended that national leadership groups be created to take forward the recommendations. These included, the UK CO₂ Storage Development Group, the UK CCS Commercial Development Group and the UK CCS Knowledge Transfer Network.[41]These groups were set up and taken forward by specific companies and organisations. The UK CO₂ Storage Development Group, for example, was set up by the Crown Estate. Later in 2013 the Government provided an update on key policy developments since the publication of its CCS Roadmap, responded to the Task Force's major recommendations, and said it would engage closely with the leadership groups. The Government also decided to re-launch the CCS Development Forum (it originally met from 2010-2012), co-chaired by the Energy Minister, Michael Fallon, and Michael Gibbons OBE, Chair of the Carbon Capture and Storage Association (CCSA) which aims to accelerate commercial deployment.[42]

18. Since the publication of the CCS Roadmap and the launch of the second competition the Government has aimed to deliver 'first of a kind' demonstration projects as well as a strong and successful CCS industry.[43] Despite this activity, representatives from industry and academia expressed their frustration at how long it was taking the Government to award money to the first CCS demonstration projects and therefore kick start a CCS industry in the UK.[44] This has made some in the industry frustrated and weary calling into question the Government's commitment to CCS.[45] E3G, for example, stated that the competition process is, 'too slow, and the current approach is a recipe for the period 2010-2015 being seen to be five wasted years for CCS in the UK.'[46] This is something we have previously raised concerns about (see paragraph 5). The Minister of State for Energy, Michael Fallon, assured us that the Government was, "pressing ahead with CCS as fast as we can."[47]

19. The expected start date of CCS has been pushed back from 2014 to potentially after 2020. Given the widespread acknowledgement of the importance of CCS to meeting future climate change targets this lost decade is extremely disappointing. While we take note of recent efforts by Government to work more closely with industry to accelerate CCS deployment, it is essential that the Government is able to commit to a realistic but ambitious timeline for taking final investment decisions. The rest of this report will look at what more the Government needs to do to accelerate CCS deployment and support a wider CCS industry.

Global progress on CCS

20. There is expected to be a strong global demand for CCS. The International Energy Agency (IEA) estimates that CCS could contribute towards one sixth of CO₂ emissions reductions required by 2050.[48] Presently, however, there is very little CCS activity taking place around the world. While the CCS Global Institute has recently reported that the number of CCS projects is increasing, there were only 21 CCS projects around the globe in operation or under construction as of February 2014.[49] In addition, as previously mentioned, CCS has not been demonstrated on power generation at scale to date anywhere in the world. Some countries are, however, more advanced in terms of deploying CCS than others with practical progress being made in the US, China and Canada.

21. According to Scottish Carbon Capture and Storage (SCCS) the US has been most successful in progressing CCS from concept through research to commercial reality. The US Department of Energy had a multi-year strategic plan which involved basic research, small- and full-scale projects and proved to be effective. China is also expected to make rapid progress on CCS in the next few years. In April 2013, the Chinese Central Government requested, as part of its next five-year plan, that all provinces make plans for CCS enactment.[50]

22. Canada has also been successful in bringing forwards CCS. The Provinces of Alberta, Saskatchewan and British Columbia have all enacted targeted carbon taxes. The Federal Government has proposed an emissions performance standard on coal-fired plant. This will come into effect on 1^st July 2015. We visited two projects; Shell's Quest project in Alberta and SaskPower's Boundary Dam project in Saskatchewan (expected to be the world's first full-chain CCS project). We were struck by the simple but effective financial incentives implemented in Canada. The projects had been enabled by company partnerships with very large, and timely, provincial funding, with some federal support. The SCCS said:

We were concerned to see, however, that the two projects seemed to be a result of past policy decisions. The absence of continued support was demonstrated by the absence of future projects across the whole of Canada.

23. The Crown Estate told us that there were no obvious crossovers between the UK and other countries because the drivers for delivery were very different. Support tended to be provided in the form of grants and loan guarantees to projects using EOR.[52] If there are lessons to be learned, it is important that the UK is in a position to do so. We are pleased to see that the Government is taking a proactive approach to this by participating in a number of international initiatives such as the Carbon Sequestration Leadership Forum, the North Sea Basin Task Force, the Clean Energy Ministerial and the 4 Kingdoms CCS Initiative.[53] We also note that the Government has facilitated collaboration with SaskPower's Boundary Dam project in Canada.[54]

1 "Human influence on climate clear, IPCC report says", Intergovernmental Panel on Climate Change press release 2013/20/PR, 27 September 2013 Back

2 "Likely" means a 66% chance Back

3 Intergovernmental Panel on Climate Change, Summary for Policy Makers, Climate Change 2013: The Physical Science Basis (2013), p27 Back

4 As above, Uncertainty range: 445 to 585 GtC (1630 to 2150 GtCO₂) Back

5 International Energy Agency, World Energy Outlook (2012), p259 Back

6 Intergovernmental Panel on Climate Change, Special Report on Carbon Dioxide Capture and Storage (2005), p12 Back

7 Oral evidence taken before the Liaison Committee on 14 January 2014, HC (2013-14) HC 939, Q45 and Oral evidence taken before the Liaison Committee on 11 December 2012, HC (2012-13) 484-ii, Qq36-37 Back

8 Energy and Climate Change Committee, Eighth Report of Session 2010-12, The UK's Energy Supply: Security or Independence?, HC 1065, para 12-15 Back

9 Energy and Climate Change Committee, Tenth Special Report of Session 2010-12, The UK's Energy Supply: Security or Independence? Government Response to the Committee's Eighth Report of Session 2010-12, HC 1813, para 20-21 Back

10 Energy and Climate Change Committee, Seventh Report of Session 2012-13, The Impact of Shale Gas on Energy Markets, HC 785, para 81 Back

11 Energy and Climate Change Committee, Third Special Report of Session 2013-14, The Impact of Shale Gas on Energy Markets: Government Response to the Committee's Seventh Report of Session 2012-13, HC 609, para 16 Back

12 Energy and Climate Change Committee, Call for evidence on Carbon Capture and Storage, 17 July 2013 Back