DPS0022

 

Written evidence submitted by The Institute for Public Policy Research (IPPR)

 

March 2023

  1. Our response primarily addresses the committee’s questions around the government’s vision for decarbonising the power sector in two key areas. First, we set out a case for bringing the government’s power sector decarbonisation target forward to 2030. Second, we highlight the need for a clearer plan for gas power stations and the impact this will have on workers.

THE CASE FOR A 2030 POWER SECTOR DECARBONISATION TARGET

  1. In light of the current gas price crisis caused by Russia’s invasion of Ukraine, there is a meaningful case to increase the pace of decarbonisation of the power sector to reduce reliance on gas imports, increase energy security and bring down energy bills for households.

 

  1. Analysis conducted by Ember suggests that a 99 per cent decarbonised power system is achievable by 2030 and will reduce system costs by £93 billion by 2030 in avoided gas costs (Brown et al 2022). In addition, in 2021, IPPR’s Environmental Justice Commission estimated that just under 1.7 million direct and indirect jobs could be created in green industries by 2035 (IPPR 2021). Upcoming IPPR analysis will explore the employment opportunities from a more ambitious 2030 decarbonisation target for the power sector.

THE NEED FOR A CLEARER PLAN FOR GAS POWER STATIONS

  1. Decarbonising the UK’s power system implies a substantial phase out and/or conversion of the UK’s gas fleet which could have a serious impact on workers without proper planning and support. In the UK there are 46 natural gas power plants and just under 35GW of installed gas power capacity (not de-rated) (DUKES 2022). In order to reach a near-zero power sector by 2030, gas capacity will need to fall to between 20GW-22.5GW, according to analysis by Ember and National Grid respectively (Brown et al 2022). Of the remaining capacity, between 3.4GW-9.1GW will need to be converted into either gas with carbon capture and storage or conversion to a hydrogen power station (Figure 1). Under the Ember scenario this would mean around 16 power plants being decommissioned and around 11 being re-purposed leaving only 19 unabated gas power plants remaining to be used very sparingly during peak times of the year.
Figure 1. A large amount of gas capacity will need to be phased out or converted by 2030

Current gas capacity by type in GW compared to scenarios modelled by National Grid and Ember

  1. Even if the target date were for 2035 not 2030, this phase out will put many workers in the current gas fleet at risk. In its latest analysis for the power sector, the CCC anticipates the overall gas fleet reducing from 35GW to 29GW, of which 14GW would converted or newly built hydrogen plants and 2-3GW would be gas with carbon capture and storage (CCC 2023). While as mentioned above there are many career opportunities in new low-carbon technologies, the government lacks a clear plan to support at-risk workers either to retrain within the gas sector or move out of it into new employment (whether in low-carbon industries or otherwise).

 

  1. IPPR has previously highlighted how support for workers is crucial to a just transition towards decarbonising sectors across the UK economy. Without this support, and indeed co-development of transition plans with workers and unions themselves, there will be political resistance to decarbonisation plans (IPPR 2021).

 

  1. We note that some companies in the energy sector have set out plans to support a transition for parts of their workforce. However, in many cases, plans are predicated on a future transition that relies heavily on hydrogen power stations and carbon capture and storage for gas power stations, neither of which have yet been developed at commercial scale (NAO 2023).

 

  1. Currently, DESNZ estimate that they may need as much as 10GW of CCS capacity by 2035, far higher than the estimates provided by National Grid Ember or the CCC (NAO 2023). While some of this CCS capacity may be needed for industry rather than the power sector, we are sceptical that this scale of capacity could be built by 2035, let alone 2030. The deployment of CCS for gas power stations has been under discussion in some shape or form since at least 2013 (Power Technology 2013) and there is not a single commercially viable CCS project for the power sector that has been built in that time. This can partly be attributed to numerous policy setback such as the last-minute scrapping of the £1bn CCS competition in 2015, which significantly dented industry confidence (Carrington 2015), but even the industry learnings developed in anticipation of that award have not materialised into any CCS project.

 

  1. While the government will be committing to a £20 billion investment in carbon capture and storage (among other infrastructure) in its Spring Budget and has set out an investor roadmap for four CCS clusters by 2030 (DfIT 2022), these are all for use in industrial clusters, not in the power sector, where the technology still faces substantial practical and commercial barriers. Indeed, CCS fitted to gas power stations is likely to be far more expensive than established technologies like offshore wind with some studies suggesting that pre-invasion costs could range from around £75-£100/MWh compared to under £40/MWh for offshore wind (CCC 2023; Aunedi et al 2021; IEA 2020). These costs will now be even higher in line with current international gas prices.

 

  1. More fundamentally, neither CCS for power, nor hydrogen manufactured through industrial CCS, are truly low-carbon. While CCS projects aim for a 90 per cent carbon capture rate or higher, current steam methane reforming techniques – a method of creating purportedly low-carbon, ‘blue hydrogen’ from industrial processes – only capture around 60 per cent of emissions due to venting of flue gases during the process (CCC 2018). While capture rates of 98-99 per cent may be technical feasible with CCS fitted onto industrial sites or power stations, both costs and energy input (and hence overall emissions) increase substantially beyond 90 per cent capture based on current available technology (Moseman 2021). Finally, studies have shown that even if CCS technologies are able to achieve carbon capture rates of 90 per cent and above, there is a serious risk of methane leakage during the extraction and transportation of natural gas, particularly for blue hydrogen manufacturing, which could, in the worst cases, more than cancel out the CO2 being captured (Howarth and Jacobson 2021; Hamburg and Ocko 2022).

 

  1. As a consequence of this over-focus on CCS, there is a serious risk of a ‘cliff-edge’ scenario where slow deployment of CCS and/or a realisation that it is not truly low-carbon forces government to pivot to other technologies, with that result that workers in these industries face job losses. Alternatively, the government sticks to slow deployment and accepts the higher-carbon profile of CCS and misses its legally binding targets to reduce emissions by 78 per cent by 2035. Upcoming IPPR research will be developing further detail on the transferability of skills across the gas supply chain in order to quantify both the risks and opportunities to workers in this sector.

 

  1. To address these concerns, first and foremost, we echo the National Audit Office’s call for a clear delivery plan for the power sector. Within this plan, there must be explicit policies set out which describe how workers will be supported through a transition that involves phasing out or converting gas power plants. In addition, we recommend that the government either revise downwards their ambitions to build out gas power with CCS or introduce much stricter “deep blue” standards on capture rates for blue hydrogen manufacture as well as CCS in power stations and policy interventions such as severe penalties for methane leakage.

 

March 2023

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