Summary
Meeting the UK’s climate change commitments will be challenging if we do not apply carbon capture and storage (CCS) to new gas-fired power stations and to our energy intensive industries. Building the transport and storage infrastructure needed for CCS requires large upfront investments, but costs of later projects are expected to fall rapidly once this primary infrastructure is in place. Without CCS it may be necessary to find large and potentially more expensive carbon savings to meet the legally binding targets set out in the Climate Change Act as well as the more recent challenging ambitions set out at the Paris climate summit.
The UK Government first promised support for CCS in 2007, and in 2012 launched a commercialisation ‘competition’, with the aim to see CCS projects developed before 2020. Up to £1 billion pounds was to be made available in capital funding, with additional operational support available through guaranteed price contracts—known as Contracts for Difference (CfDs)—to support the initial stages of commercialisation.
In November 2015, just weeks before the final bids were to be submitted in this process, the Government unexpectedly announced that the money was no longer available. This decision came as a shock to the industry and investors. Pulling the plug on the competition without warning in this way was damaging both to the relationship between Government and the industry, and to investment into the UK.
This delay also seems to be in direct contradiction with the direction of energy and climate change policy set out in the Government’s ‘energy policy reset’. With gas and without CCS, we will not remain on the least cost path to our statutory decarbonisation target. If Government is committed to its climate change targets, it cannot afford to sit back and simply wait and see if CCS will be deployed at the moment when it is needed.
DECC must now promptly devise a new strategy for CCS in conjunction with a new gas strategy. The challenging infrastructure surrounding the transport and storage of carbon needs to be considered far in advance of it being utilised and investors need the confidence that the UK is committed to a domestic CCS market. The Department should assess the financial and other benefits of using our existing North Sea infrastructure. It should also engage with the National Infrastructure Commission to explore options for the development of CO2 transport and storage. If Government does not come up with a clear strategy for CCS very soon, knowledge, investment, assets and expertise in the UK will all be lost.
We also note the December 2009 report by the working party, assembled by Lord Oxburgh, on ‘the arrangements needed to develop the infrastructure for carbon capture and storage in the UK’, which recommended setting up a National Carbon Storage Authority, and we urge the Government to give serious consideration to this recommendation.
© Parliamentary copyright 2015
Prepared 4 February 2016