3 Conclusion
72. CCS
is one of the only technologies available that has the potential
to decarbonise fossil fuel power plants and other industrial processes.
The capture, transport and storage technologies involved are considered
to be safe, the scientific and engineering challenges small and
the capacity to be deployed at scale promising. New and novel
CCS technologies, such as the NET Power cycle, have the potential
to improve CCS prospects. It is widely acknowledged that CCS could
play an important role in helping the UK to meet its carbon reduction
commitments. This role may change over time to take account of
global policy developments including the 21st Conference
of the Parties in 2015. Although CO2 emissions have
reduced in this country and the EU, the carbon footprint of both
has increased. If CCS was widely adopted abroad, it could help
to reduce the UK's embedded carbon emissions. Deploying CCS in
the UK could also increase UK plc's future share of the global
CCS market, create a North Sea "storage market" whereby
the service of permanently storing CO2 was sold to
other European countries, and protect jobs associated with the
UK's coal and energy intensive industries. The UK is considered
ideally suited to take advantage of CCS because of its combination
of geological, engineering, industrial and academic capabilities,
together with a stated policy commitment to reduce CO2
emissions and the foundational legislative framework required
for CO2 storage.
73. The combination
of high energy and-in the absence of an effective carbon market-financial
costs make CCS uneconomic. The high cost of CCS means that it
is likely to develop only in response to specific policy intervention,
likely to be subsidy from the public purse and/or the consumer.
The Government should be transparent about the costs of CCS and
how they will be met. The Government therefore needs to prioritise
designing a credible financial incentive framework most likely
centred on the Contracts for Difference which the Government is
introducing as part of its electricity market reforms. Progress
on CCS in the UK has been frustratingly slow. It has taken successive
governments the best part of a decade to provide a capital grant
to a large-scale full chain CCS project. As a result, the expected
start date of CCS has been pushed back from 2014 to potentially
after 2020 which has increased uncertainty and threatens to undermine
the credibility of Government policy. This lost decade is regrettable
given the importance of CCS to meeting future climate change targets.
74. In order
to ensure the successful deployment of CCS in the UK the Government
should aim to reach final investment decisions with the two projects
left in the competition by early 2015 (in line with the Government's
original competition timetable) to increase the chance that the
first CCS projects will be operational before 2020. This commitment
is welcome: it will help to bring down costs of CCS more quickly
and, therefore, help the development of a wider CCS industry in
the UK.
75. It is unclear
whether any financial advantage accrues to first movers, so there
is a case for limiting the amount of consumer support which is
allocated to the first CCS projects. Indeed, it is likely that
most benefits will be accrued by second movers, which may explain
why the big companies are reluctant to spend so much of their
own money at this early stage of CCS development. It would be
wise for the Government to direct its resources at the uniquely
British aspects of CCS deployment such as transport and storage
infrastructure and overcoming potential public opposition to ensure
the maximum benefits for UK consumers are realised.
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