Written evidence submitted The UK Advanced Power Generation Technology Forum (CCS11)

Executive Summary

  1. Carbon capture and storage (CCS) options are available and ready for demonstration/commercialisation projects for coal and gas, for new-build and retrofit. In each case, transport of the carbon dioxide (CO2) will be by pipeline and storage will be offshore in depleted oil or gas fields or deep saline formations.
  2. CCS could make a huge contribution to reducing the UK’s CO2 emissions. APGTF members’ research and development (R&D) and project development activities have been predicated on UK targets of 20-30GW capacity of CCS electricity generation on a mix of coal and gas by 2030. In comparison, the Government’s expectations are unambitious and unclear.
  3. There are major potential benefits to the UK economy from successfully developing CCS including exports of CCS technology and avoidance of imports, reduced costs of low-carbon electricity to the consumer, continued operations of high-emitting energy intensive industries within future carbon emissions targets and continued use of cost- competitive indigenous fuels in a diversified low-carbon electricity system.
  4. There are no scientific barriers preventing CCS and, in the UK, because the Government has opted for offshore storage, social barriers should be much less of a difficulty than elsewhere in Europe. It is expected that R&D already underway will provide evidence that will further reduce these barriers.  The regulatory regime is established.
  5. The safety issues are well understood and can be managed by prudent engineering as already is the case for the extensive infrastructure used for the transport and storage of natural gas. Continuing R&D is expected to further improve margins of safety.
  6. Whilst there has been (and continues to be) good support for R&D from the Government and its agencies, and this has been matched by industry, support for full- scale projects has been beset with difficulties, both in the UK and elsewhere in Europe. However, the UK is further ahead than other countries in adopting measures through ‘electricity market reform’ (EMR) to support the implementation of CCS beyond the initial ‘commercialisation’ projects.
  7. The major gap in the Government’s approach is that, despite the title of the 2012 CCS Roadmap (i.e. “Supporting deployment of CCS in the UK”), it has not yet clearly signaled  a level of ambition for CCS deployment in the early 2020s and through to 2030 which indicates a worthwhile market for project developers and equipment suppliers to pursue. These uncertainties have led to a number of companies withdrawing from active work on CCS.

The APGTF – Background

  1. The APGTF is an industry-led stakeholder group that provides a technology focus for the power generation sector in the UK on carbon abatement technologies for fossil fuels including CCS. The industrial members of the APGTF have included almost all of the key players in the development of CCS in the UK over the last 12 years, including SSE, BP, E.ON, Scottish Power, RWE npower, Alstom, Doosan Babcock, Siemens, Rolls-Royce, AMEC and Costain. These members have invested heavily in R&D and project development since the first APGTF Foresight Report in 2001[i].  Many agencies and associations interested in CCS are also represented on the APGTF, including the Energy Technologies Institute (ETI), the Technology Strategy Board (TSB), the Engineering & Physical Sciences Research Council (EPSRC), the UK CCS Research Centre (UKCCSRC), the Industrial & Power Association (IPA), the CCS Association (CCSA), the Confederation of UK Coal Producers (COALPRO), the Association of UK Coal Importers (CoalImp), the Health & Safety Laboratory (HSL), the Coal Research Forum (CRF), other university groupings, and from Government, DECC, BIS and UKTI.

 

APGTF responses to Select Committee questions

Q1:  What types of CCS technology are currently being developed and how do they differ from one another?

  1. For power generation, CCS technology comprises CO2 capture, transport and offshore storage.

 

  1. The three CO2 capture technologies which are ready for application and proposed for the early CCS projects (UK and abroad) are:

 

 

 

 

  1. Pre-combustion decarbonisation with IGCC has higher capital costs but lower operating costs than PCC or oxy-fuel combustion on pulverised coal.  At the present level of uncertainty, there is little difference in the resulting cost of electricity generation. There are many other capture technologies at an earlier stage of development.

 

  1. In each case, the transport of the captured CO2 will be by pipeline and storage will be offshore in depleted oil/gas fields or deep saline formations, with the possibility of enhanced oil/gas recovery (EOR/EGR) in some circumstances.

Q2:  What contribution could CCS make towards the UK’s decarbonisation targets?  Are the UK Government’s expectations reasonable in this regard?

  1. CCS could make a huge contribution to reducing the UK’s CO2 emissions. Fossil fuels currently (2012) provide 70% of the UK’s electricity and, if all of this generation was replaced by coal- or gas-fired generation with CCS, the emissions from electricity generation would be reduced by about 90%. Clearly, if the proportion of generation by nuclear and renewables increases, then the proportion of reductions attributable to CCS would be reduced. APGTF members’ R&D and project development activities have been predicated on UK targets of 20-30GW capacity of CCS electricity generation on a mix of coal and gas by 2030, compatible with the recommendations of the UK Committee on Climate Change to decarbonise the electricity system by 2030 and the ambitions for the UK published in the strategy of the CCSA[ii] .

 

  1. This level of ambition is also consistent with the scenarios published in the new International Energy Agency (IEA) Roadmap for CCS[iii], which envisages 30 projects globally by 2020 (50Mt of CO2 stored per year), over 2,000Mt/y stored by 2030, and over 7,000Mt/y by 2050. The IEA Roadmap makes clear that as long as fossil fuels and carbon-intensive industries play dominant roles in our economies, CCS will remain a critical greenhouse gas (GHG) reduction solution.
  2. Against this background, the Government’s expectations are unambitious and unclear.  The Government’s CCS Roadmap in April 2012 did include the CCSA's ambition for 20-30GW of CCS to be deployed by 2030 and stated:  “The measures being taken by Government, as set out in this Roadmap, should enable this ambition to be achieved, subject to CCS demonstrating its effectiveness as a cost-competitive low-carbon source of electricity generation in time to meet projected demand.”  However, in its draft EMR Delivery Plan, published in July 2013, where the Government presents a forward view of low-carbon capacity in 2030 (Chapter 5 of the draft Delivery Plan), it is much less ambitious for CCS, quoting five scenarios which have a total UK CCS electricity generating capacity of only 1-12GW, whilst the wind capacities quoted are 20-50GW and nuclear capacities are 9-20GW.

Q3:  Are there any potential benefits (e.g. the ability to export CCS technology abroad) of successfully developing CCS to the UK economy and, if so, what are they?

  1. There are major potential benefits to the UK economy from successfully developing CCS:

 

a)        Exports of CCS technology and avoidance of imports

 

  1. UK companies would be well placed to win home and export business along the whole CCS chain – power plant designed for CCS, capture, transport and storage.  The value of the export market and the number of jobs that would arise are hugely dependent on the pace of growth of the market and the market share won by UK companies.

 

  1. As an indicator, a study by the IPA in 2009[iv] , based on the 2009 IEA roll-out programme and a 10% global market share for UK companies, concluded that the ‘UK plc’ share of global business is potentially worth more than £10-14bn/y from around 2025, with the added value in the UK worth £5-9.5bn/y and potentially 27,000 jobs in the UK, increasing to 70,000 by 2035.  The UK companies’ share of this business will depend crucially these companies winning UK, European or North American projects and thereby gaining references that will be the basis for exports.

 

b)        Reduced costs of low-carbon electricity to the consumer

 

  1. Comparison of the levelised costs of low-carbon electricity generation (LCOE) show the cost of generation by coal and gas with CCS (inclusive of capture, transport and storage) in the mid-2020s  to be similar to low-carbon sources such as onshore wind and probably  less than offshore wind. This comparison does not recognise the other cost advantages of CCS. Unlike wind which is intermittent, CCS generated electricity does not require investment in back-up plant and because the CCS power plants will be located at existing power plant sites, CCS does not require significant extra investment in the electricity grid. The Government’s emphasis on comparison of levelised costs (e.g. in its desire for technology neutral auctions for Contracts for Difference (CFDs)) does not give confidence that CCS’s advantages as a reliably available source of decarbonised power are being recognised.

 

c)         Energy-intensive industries

 

  1. CCS will permit operation of high-emitting energy-intensive industries within future carbon emissions targets.  Unlike electricity generation, some of these industries are able to relocate to other areas where different business conditions exist.

 

d)        Indigenous fossil fuels

 

  1. CCS will permit the use of indigenous coal and natural gas (including shale gas) in a low-carbon electricity system.

 

e)        Diversity in the generation mix

 

  1. The development of CCS will allow the UK to have further resilience in its supply of electricity as both coal and gas can be used to provide either baseload power or back-up capacity to deal with any significant shortfall from renewable energy sources. Any lack of impetus in the development of CCS will mean that coal-fired generation disappears from the UK portfolio over the next seven to ten years.

Q4:  What are the main barriers (e.g. economic, political, regulatory, scientific and social) to developing large-scale integrated CCS projects in the UK and internationally?  How can they be overcome?

  1. There is increasing confidence being gained through R&D, studies in relation to potential demonstration/commercialisation  projects and experience around the world that CCS can be employed now safely and in future at the necessary scale and at a cost[v] which is comparable or lower than other low-carbon electricity generation options. The APGTF is currently working to update its recommendations on priorities for R&D and demonstration that will form a necessary part of the programme to achieve cost reductions in line with the expectations of the Cost Reduction Task Force.

 

  1. There are no scientific barriers preventing CCS, and, in the UK – because the Government has opted for offshore storage – social barriers are anticipated to be much less of a difficulty than elsewhere in Europe.  It is expected that R&D (underway and future) will provide evidence that will further reduce these barriers.  The regulatory regime is established but there remains significant concern over the stringency of storage regulation which may yet be a barrier to investment. In particular, the long-term liability associated with storage sites has the potential to be a significant deterrent to potential project developers.

 

  1. The main barrier is the lack of financial incentives to implement CCS. The cost of carbon emissions, whether levied via the EU Emissions Trading Scheme (ETS) or in the UK via the Carbon Price Floor, is insufficient to cover the cost of CCS – particularly for early projects. A similar gap existed for electricity generated from renewable energy sources and has been filled by the Renewables Obligation. To overcome this gap, CCS electricity needs adequate ‘strike prices’ and appropriate CFDs. Consideration should also be given to allowing payments under the Capacity Mechanism to reflect the essential role of decarbonised fossil fuel plant in maintaining security of supply, and some other intervention should be established to ensure that an efficient CO2 infrastructure is created in the UK.

Q5:  Are there any safety issues associated with capturing, transporting and storing carbon dioxide? How could they be overcome? Who should have responsibility for ensuring these activities are safe?

  1. Like any large-scale industrial activity, there are hazards associated with CCS which could impact on human safety if not properly managed.  Many of these hazards are well understood.  Industry is continuing to work with academics and regulators to define the appropriate controls – including prudent engineering solutions – that should be implemented. Where appropriate, knowledge is being transferred from other relevant sectors i.e. the oil and gas sector.  Safety will be ensured by the UK's established safety legislation (enforced by the Health & Safety Executive), which is designed to protect both workers and members of the public and will apply across the CCS chain from CO2 capture to injection.

Q6:  How have other countries incentivised CCS development? How successful have they been? How do they compare to the UK’s efforts?

  1. Many countries including the USA, Australia, Canada, South Korea and China – plus the EU – have been supporting CCS R&D, and the UK’s efforts are among the ‘best-in-class’.

 

  1. The Government and its agencies have supported R&D since CCS was identified as a priority following the DTI Energy White Paper published in February 2003[vi], which identified the importance of cutting CO2 emissions. Industry has responded and invested heavily (ca. £250M) in response to the signals from the Government that it intended to pursue CCS as a key to meeting 2030 targets.

 

  1. A presentation at the 2008 APGTF Annual Workshop listed 26 industry-led projects underway involving more than 20 companies. Currently DECC and other Government agencies are providing £125M co-funding towards 94 projects in a coordinated R&D programme involving more than 50 companies and 15 universities[vii].

 

  1. In contrast, support for large-scale demonstration projects has been beset with problems, most notably in Europe with the failure of the ‘NER 300’ programme to deliver funding to CCS projects (due largely to the collapse in the carbon price).  In the USA, successful projects have generally depended on the financial benefits from onshore enhanced oil recovery (EOR). The Canadian Boundary Dam project also benefits from EOR, in addition to regional government funding. The Gorgon CCS project in Australia was driven by a Commonwealth Government mandate. In China, project development is centrally planned.

 

  1. However, the UK is further ahead than other countries in adopting measures through EMR to support implementation of CCS beyond the initial commercialisation projects; however, this needs to be built on urgently to maintain momentum.  In particular, it is essential that the Government communicates a vision of a target amount of CCS and delivers transparent and long-term financial arrangements to ensure that the industry can deliver these.

Q7:  Is the UK Government’s approach, set out in its CCS Roadmap, likely to incentivise development of CCS in the UK?

  1. The Government in its CCS Roadmap ‘Supporting deployment of CCS in the UK’, published in April 2012, set out a reasonable approach to the commercialisation of CCS, including support for R&D. The major gap in the Government’s approach is that, despite the title of the CCS Roadmap, it has not yet clearly signaled a level of ambition for CCS deployment in the early 2020s and through to 2030 which indicates a worthwhile market for project developers and equipment suppliers to pursue.  This is evidenced by:

 

 

 

 

  1. These uncertainties have led to a number of companies withdrawing from active work on CCS. Most notably Scottish Power and E.ON stopped their UK CCS projects and several project development teams have been disbanded. There is a serious risk that post-graduate students, currently being trained for CCS, will not find work in the industry and that, if an industry does subsequently develop after a hiatus in activity, there will not be an adequately trained workforce to service it.  To this end, a Government commitment to a substantial and quantified build of CCS projects in the UK would be hugely beneficial.

Q8:  Could the successful development of CCS improve international efforts to mitigate climate change? What role could UK CCS play in this? 

  1. According to recent IEA publications, CCS is an important part of the lowest-cost GHG mitigation portfolio. The IEA analysis suggests that without CCS, overall costs to reduce emissions to 2005 levels by 2050 would increase by 70%.  A strong, practical deployment of CCS in the UK on coal- and gas-fired plant, with technologies both for new-build and retrofit, would massively strengthen the UK’s hand in climate change negotiations – far more so than deploying nuclear or renewable energy technologies.

 

Q9:  What are the consequences of failing to develop CCS and what alternatives are available for decarbonisation if CCS fails?

  1. As stated above, IEA analysis suggests that globally without CCS, overall costs to reduce emissions to 2005 levels by 2050 would increase by 70%.

 

  1. In the UK, the ETI (a member of the APGTF) has estimated (using its ESME modelling) that without CCS the cost of the UK meeting its climate change targets would nearly double: The NPV cost from 2010-2050 of meeting the UK CO2 reduction targets would be £300bn for a low-cost practical route (i.e. including CCS), however, if CCS is excluded, the cost would increase by more than £200bn[viii].  The reason that the impact is so high is that as well as providing a cost-effective low-carbon power source, CCS plays across the energy system, including dealing with industrial emissions, enabling hydrogen production and, critically, when combined with biomass firing, potentially creating negative CO2 emissions.  Without CCS, a future carbon-constrained energy system would look very different, for example requiring complete decarbonisation of the transport and/or domestic heating sectors.

 

  1. Only CCS can provide reliable, low-carbon electricity in the quantities needed, with generation continuously adjusted to match variation of demand. There are no known alternatives to CCS for decarbonisation of the energy-intensive industries including steel, cement, chemicals and oil refining. Indeed, some of these emissions sources are so concentrated that they are effectively already captured: Once a CCS infrastructure is in place, these can be disposed of at minimal cost to the public purse.

 

  1. CCS is generally quite benign in its impact; power plants may be somewhat larger, pipelines onshore will be virtually invisible like (but not by any means as extensive as) the high-pressure gas network, and injection (especially offshore) is un-noticeable. Fossil fuel power plants with CCS will continue to quietly and reliably supply the nation’s energy as is the case now. The alternative is for power generation from much more intrusive sources.

 

  1. If CCS fails, the most significant impact will be that climate change targets are unachievable – CCS need not and must not be allowed to fail.

 

 

[i]  Foresight Report:  The transition to zero carbon emissions.  APGTF, July 2001

[ii] A strategy for CCS in the UK and beyond.  CCSA, September 2011 

[iii] Technology roadmap – carbon capture and storage.  IEA, June 2013

[iv] Skills study.  IPA, September 2010

[v] Cost Reduction Task Force Final Report.  The Crown Estate, CCSA, DECC, May 2013

[vi] Energy White Paper:  Our energy future – creating a low carbon economy.  DTI, February 2003

[vii] https://www.gov.uk/uk-carbon-capture-and-storage-government-funding-and-support#ccs-research-and-development

[viii] Modelling the UK energy system: practical insights for technology development and policy making.  ETI, December 2012

 

September 2013