Written evidence submitted by Drax Group plc (CGE0025)

Executive Summary

1. Drax Group is a large British energy business. In recent years it has transformed the UK’s largest power station into Europe’s largest decarbonisation project by gradually converting four of its six generating units from coal to sustainably sourced biomass. In doing so, it has become the single largest source of renewable power in the country, generating 15% of GB’s renewable electricity in 2017. Through its retail businesses Haven Power and Opus Energy, Drax Group also supplies renewable electricity to over 350,000 business customers.
2. Delivering a clean, smart flexible power system is essential to the UK’s decarbonisation efforts. In addition to being the sector that has achieved the greatest level of decarbonisation to date, reducing the carbon intensity of the power grid also has spill-over benefits for other related sectors such as heating and transport that will increasingly rely on electricity in the future.
3. Earlier this year, Drax announced it would be partnering with C-Capture, a spin-out of Leeds University, to undertake a pilot project to capture carbon emissions from one of Drax’s existing biomass units. The pilot will commence later in 2018, capturing one tonne of CO2 per day. The project will be the first of its kind in Europe and will showcase pioneering British engineering in the battle against climate change.
4. If biomass and CCS (BECCS) technology were deployed at scale at Drax Power Station, it could become the world’s first carbon negative power station. This would make a significant contribution towards the UK’s climate efforts by delivering negative emissions at scale and helping to offset the emissions from other hard-to-decarbonise industries.
5. By utilising existing sustainable biomass import logistics network and supply chains, and through repurposing existing infrastructure at Drax Power Station, the option for deploying BECCS at Drax should be identified as cost effective in meeting UK decarbonisation targets. As well as safeguarding thousands of jobs within the overall supply chain, a BECCS project would also play a significant role on the power grid by providing a flexible and negative carbon source of generation to complement intermittent wind and solar output.
6. Like other CCS project developers, Drax believes that further clarity is required on the policy frameworks and business models available to support the commercialisation of CCS projects if the UK Government is going to achieve its stated aim in the Clean Growth Strategy of having the option of deploying CCUS at scale in the UK in the 2030s.
7. We believe that a roadmap to the decarbonisation of heat needs to be produced to give companies and investors the confidence to invest in low-carbon technologies to meet this challenge.
8. The recent government announcement that internal combustion engine (ICE) vehicles will be prohibited from sale by 2040 has provided industry with the confidence to invest in the production of electric vehicle (EV) and accompanying infrastructure. There is a need for the government to consider how other transportation sectors such as haulage, shipping and aviation will be decarbonised. One option is through the production of synthetic fuels developed using hydrogen and CO2 captured from the atmosphere through BECCS.
9. Finally, industrial processes will need to be decarbonised. To avoid carbon leakage by offshoring the UK’s industrial sector, the UK will need to develop a Transport and Storage infrastructure to allow for CCUS to be applied to industrial processes. Failing to do so will make it more even challenging for the UK to achieve its decarbonisation targets.

The relative importance of the four main areas identified in the Strategy, and whether the Strategy places the right weight on each of those sectors to deliver emissions reductions.

Improving our homes:

10. This section should be looked at in combination with improving business and industry efficiency section of the clean growth strategy. Whilst there will be differences between these sectors, some of the measures used could provide benefits to both for example, energy efficiency measures, deployment of hydrogen production facilities, and the deployment of heat networks.
11. Deployment of energy efficiency across homes and businesses should be a priority as it has the dual benefit of reducing both emissions and energy costs.
12. It is now widely acknowledged that decarbonising heat is a challenging and complex issue, not least because of the immense cost and disruption that could be involved in make the transition from the ubiquitous natural gas boiler. A wide array of technologies could be deployed to decarbonise heat but there doesn’t appear to be a preferred solution that is suitable for all types of premises. We believe that the government should continue to focus on energy efficiency as a no-regrets policy, but urgently develop a roadmap for heat decarbonisation, which outlines key dates and policies to assist the transition. For example, it should set out a timetable for all new build properties to be built with a low-carbon heat source and sale of gas boilers will be restricted. The government should also consider whether applying carbon pricing applied to heating would provide an incentive to switch to low carbon sources. 

Accelerating the shift to low-carbon transport

13. The focus on low-carbon transport has quite rightly been centred around the rollout of electric vehicles and accompanying infrastructure. Despite a slow start the rollout of electric vehicles has gathered pace in recent years, and since the government’s announcement of the phase out of ICE by 2040 manufacturers are increasing their efforts to switch their fleets to electric.
14. Issues still remain however, particularly around the pace of EV charge point rollout and consumer perceptions of EVs.
15. EV charge point rollout is occurring at a slower than expected rate which we believe is hindering the wider EV rollout. We believe that the rollout needs to be accelerated in public places with rapid and ultra-rapid chargers being deployed in these areas to increase consumer convenience. In addition, there is a need to increase EV rollout in workplaces to encourage businesses to switch their vehicle fleets to electric, as well as allow private individuals to charge their vehicles at work. The government has the ability to enable these changes and we would encourage them to explore this.
16. We welcome the government intent to legislate that all EV charge points are smart enabled. Smart charging reduces the amount of capacity required on the system and can enable EVs to act as batteries providing support to the grid in times of peak demand. We would encourage the government to work with Ofgem to remove barriers to enabling smart EV charge points to be used as such.
17. There needs to be some consideration given to decarbonising other areas of transport, including haulage, shipping, and aviation. These areas to decarbonise will be difficult due to the nature of their usage, and it is unclear what a pathway to decarbonisation looks like in these sectors. Several technologies have been suggested as a solution, including hydrogen fuel cells, biofuels, and synthetic fuels produced from hydrogen and CO2 captured from the atmosphere. We believe the government should provide funding for research in these areas to assess the commercial viability of these options.

Delivering Clean, Smart, Flexible Power

18. Across all four of National Grid’s 2018 Future Energy Scenarios, electricity demand is forecast to rise from 2030 onwards, due to the electrification of the transport system in all scenarios and then the electrification of heat in some scenarios. Compared to electricity demand of 297 TWh today, this rise ranges by 25% (373 TWh, Two Degrees Scenario) to 48% (441 TWh, Community Renewables Scenario).[1]
19. At the same time, a significant volume of ageing, less efficient plant is expected to retire over the coming years. Analysis by Aurora Energy Research undertaken by the National Infrastructure Commission suggests as much as 50 GW of existing capacity could retire by 2035.[2]
20. New electricity capacity must be brought on to the system to replace this retiring capacity and to meet the rising demand forecast by National Grid, whilst at the same time meeting our climate ambitions. Of the two FES scenarios compatible with the UK’s 2050 decarbonisation target, “Community Renewables” and “Two Degrees”, both have higher volumes of renewable generation coming onto the system over the coming years than the alternative scenarios. However, both “Community Renewables” and “Two Degrees” also have a higher overall volume of non-renewable generation capacity. In fact, renewables’ share of the energy mix in both scenarios is expected to increase from 37% in 2017 to 60% (“Community Renewables”) and 56% (“Two Degrees”) in 2030, rising to 63% and 58% respectively in 2050.
21. National Grid does not forecast a higher contribution from renewables on the basis that the majority of renewable generation is intermittent and hence only generates when weather conditions are favourable. The changeable and seasonal nature of the weather in the UK means that wind and solar generation can account for a significant percentage of overall electricity supply or a relatively low amount – both within day and over the course of a year.
22. A key focus therefore for the UK Government should be to ensure that it has the least carbon intensive mix possible of flexible, dispatchable technologies that can complement wind and solar output. This will include battery storage and demand side response, who are best placed to support within-day balancing, and reliable, dispatchable forms of thermal generation such as gas for prolonged (multi-day) lulls in renewable output.
23. Caution should be given to an overreliance on interconnection in supporting prolonged periods of generation lull as interconnected countries in Europe may also be affected, and this could create significant security of supply risks. This was highlighted during the ‘beast from the east’ cold snap in early 2018 where interconnection to the UK was exporting to France due to system supply issues on the French system[3].
24. Carbon Capture Utilisation and Storage (CCUS) has been shown by many authoritative organisations to be a technology that is vital to achieving climate targets at least cost. This includes the IPCC[4], the Committee on Climate Change[5], as well as the Parliamentary Advisory Group on Carbon Capture and Storage chaired by Lord Oxburgh[6]. CCUS enables the continued use of flexible power generation such as gas or sustainably sourced biomass but is also a vital technology for the decarbonisation of certain industrial processes, or in the mass production of hydrogen.
25. The CCUS Cost Challenge Taskforce report into reducing costs of CCUS technologies and increasing deployment levels has recommended that CCUS projects should be developed in a cluster approach where large emitters are located in a close geographic area and can benefit from a single transport and storage infrastructure project[7]. These projects are supported by an initial power generation anchor project which acts as a catalyst to this development. These anchor projects will not be developed without support, both in terms of funding capture projects, and the development of transport and storage infrastructure. We would encourage the government to adopt the CCUS Cost Challenge Taskforce recommendations and look forward to the publication of the deployment pathway.
26. Developing CCUS in conjunction with the use of sustainable biomass allows for the development of Negative Emissions Technologies (NET) in the form of biomass with Carbon Capture and Storage (BECCS). NETs are seen as vital to meeting net zero emissions targets by 2050 in a cost-effective manner [8] [9]. Several different types of NETs can be deployed including direct air capture of emissions, advanced weathering, soil carbon sequestration, afforestation, and BECCS. Of these technologies, BECCS has the distinct advantage over other NETs as its produces a useful product (electricity) and has a credible pathway to be deployed cost-effectively at scale.
27. Addressing concerns around the sustainability of biomass, as we have seen in countries such as the United States, demand for low quality wood in bioenergy also helps to incentivise forest owners to manage their forests more actively. Leading to an increase in forest inventory and carbon stock. For example, it has been shown that between 1953 and 2015, tree harvests increased by 57%, largely driven by US economic growth and increased construction. Over the same period, annual wood growth increased by 112%, and inventory increased by 108%[10]. Bioenergy, and in particular sustainable biomass, is already operating in the UK at scale with substantial biomass import logistics networks and supply chains developed. It is only right therefore that the UK explores utilising this significant infrastructure with CCUS to achieve negative emissions at scale.
28. The utilisation of captured CO2 can provide economic opportunities for the developers of carbon capture projects which can help to reduce the costs of developing this technology. Worldwide utilisation of CO2 was 114 MtCO2 per year in 2012, primarily for chemical and polymer manufacture, with future estimates for the utilisation of CO2 ranging at approximately 2000 MtCO2 if utilised for the production of synthetic fuels. The UK has the opportunity to exploit the widespread availability of CO2, but demonstration facilities are required to test technologies and explore if these can be commercially viable at a large scale.
29. From a climate perspective CCU can only be positive for the environment if utilising the CO2 captured means that less fossil resources are utilised, which is possible by assisting biomass generators to continue to generate past 2027 in the UK, or through the manufacture of synthetic fuels which could offset fossil fuels in areas such as aviation and shipping particularly if these fuels are developed from CO2 produced from green sources such as bioenergy.

Progress on meeting carbon budget targets to date and areas where more progress is needed going forward.

30. The UK has currently set its carbon budget targets in line with meeting an 80% reduction in carbon emissions by 2050 as required under the Climate Change Act 2008. The recent IPCC special report into limiting warming to 1.5 degrees as agreed under the Paris climate accords, indicates that the best chance of this occurring is under a scenario where net zero carbon emissions are achieved worldwide by 2050 [11]. It is likely under this scenario that the UK will need to achieve net zero carbon emissions economy wide by 2050, and the UK government recently wrote to the CCC asking for advice on how the UK can contribute to limiting warming to a 1.5-degree rise [12]. Under such a scenario we believe that the UK’s current Climate Change Act will need to be revised to a target at, or approaching, net zero emissions by 2050.
31. In the power sector, significant progress has been made towards a net zero target, due to the phaseout of coal, and mass deployment of renewables including biomass, wind and solar. The immediate priorities for the power sector should be the continued phase out of coal and rollout of renewable, and we welcome the government’s commitment to support the Powering Past Coal Alliance which aims to entirely phase out coal by 2025. The rollout of renewables will need to be supported by dispatchable generation capable of providing both the required capacity to support demand at peak times, and system support services which cannot be provided by any other means, and this will likely mean that gas generation has a significant role to a play in the medium term. Going forwards we would encourage the government to work with the private sector to deliver demonstration CCUS projects in the power sector that can serve as ‘anchor’ projects for industrial users and provide important system services to help National Grid maintain the stability of the national electricity transmission system.
32. Significant progress is still required in the heating sectors in order to meet a net zero target. To date the focus in heating has been around increasing the level of energy efficiency of the UK’s 29 million buildings. Whilst the rollout of energy efficiency should continue eventually the UK will need to transition away from traditional high carbon sources of heat such as natural gas. This transition will need to begin soon in order to ensure that high carbon sources of heat have been entirely phased out by 2050. Assuming there are 23 million gas boilers requiring replacement in the UK almost one million boilers a year, or over 20,000 boilers a week, will need to be replaced if this transition commences in 2025. We encourage the government to develop a roadmap to heat decarbonisation to provide industry with clear signals to begin investment into low carbon technologies. For example, if a robust hydrogen network is needed to replace the natural gas networks there will need to be significant upgrades to the gas transmission and distribution network, the development of hydrogen production facilities utilising CCUS if produced through Steam Methane Reformation, and the replacement of consumer appliances to run on hydrogen. These actions will take time to complete so we would urge action on heat sooner rather than later.
33. The recent CCC Progress report to parliament[13] highlighted that transportation is now the biggest emitting sector in the UK economy following a fall in both industrial and power sector emissions. We welcome the governments intent to phase out ICE vehicles by 2040, but as highlighted earlier this must be accompanied by a significant increase in the number of charging points available for public use. The BEIS Select Committee recently released a report[14] into the Electric Vehicle rollout which highlighted some issues including, a need to clarify what vehicles would be included in a ban, a need to increase EV charge points including in workplaces, a need to adopt smart charging and explore vehicle to grid charging, and the need to establish local charging hubs for consumers without off-street parking. We would encourage the government to assess these recommendations carefully and implement where appropriate.
34. As mentioned earlier there has been a lack of progress in considering how to decarbonise other areas of transport including haulage, aviation, and shipping. To meet an overall net zero target these sectors will need to significantly reduce their emissions to a target at or approaching zero. This can be achieved is through the use of CCUS to produce hydrogen, or through the development of alternative low-carbon liquid fuels.
35. Finally, many industrial processes will need to decarbonise in order to meet 2050 targets. This must be done in a way which ensures that emissions are not offshored through the closure of UK industry. Some industrial processes can be decarbonised through fuel switching for example to bioenergy, or hydrogen. However, several industrial processes including steel, cement, and chemicals will release CO2 as part of the manufacturing process. For these industries the only option for decarbonisation is through the development of CCUS infrastructure, and we believe the government should aim to support initial CCUS projects to enable industry to deploy CCUS at the lowest cost.

The extent to which current and future technologies can help to meet the carbon budgets.

36. CCUS and BECCS will be vital in helping the UK to meet its carbon budget. The Royal Society[15] has estimated that CCUS could be storing around 15% of current UK emissions by 2030 (57 MtCO2 per year), and up to 40% of current UK emissions by 2050 (152 MtCO2 per year).
37. It has been estimated by the Energy Technologies Institute that around 55MtCO2 could be removed from the atmosphere by 2050 by BECCS, which equates to around half of the UK’s emissions target by 2050 under the current Climate Change Act. BECCS at this level would also provide 10% of the UK’s future energy demand.
38. For CCUS and BECCS to realise it’s full potential in sectors such as power generation, hydrogen production, and decarbonising industry, there is a need for the government to support the rollout of Transport and Storage (T&S) infrastructure. Previous CCUS projects have incorporated the costs of T&S infrastructure alongside the costs of operating the actual capture technology. T&S costs are determined by a range of factors including geography, size and the number of users sharing the T&S infrastructure once it’s operational. Recognising this the Lord Oxburgh report, alongside several other prominent organisations including the Energy Technologies Institute, Royal Society, and CCC, have recommended that a T&S company should be created to deliver and manage the T&S infrastructure rather than requiring individual developers to become responsible for creating their own infrastructure. This was also recently recognised as an effective method of reducing costs by the CCUS Cost Challenge Taskforce. A separate T&S infrastructure would allow developers to provide an accurate reflection of the cost of the generation project with carbon capture technology that could then be compared to other forms of generation technology.

How the development and deployment of technology can best be supported, and the extent to which the Government should support specific technologies or pursue a ‘technology neutral’ approach

39. Many low-carbon technologies require long-term policy certainty and direct or indirect funding in the early stages of their development to enable them to achieve deployment at scale and achieve cost reduction in the long-term. As we have seen recently with developments in the offshore wind sector, clear government commitment and support of technologies can drastically reduce the costs of producing and deploying these technologies at scale. Recent Contracts for Difference auction results in 2017 have shown that offshore wind can now be produced for a cost of £57/MWh down from a cost of £117/MWh in 2015. These costs savings are a result of continued government support for offshore wind over many years in the form of renewables obligation certificates and contracts for difference as well as significant policy support.
40. In the case of BECCS / CCUS, we support many of the recommendations earlier this year from the CCUS Cost Challenge Task Force Report and the Royal Academy / Royal Society of Engineering’s Greenhouse Gas Removal Report, including:
• Government to publish the CCUS Deployment Pathway by the end of 2018, including a commitment to have at least two carbon capture, usage and storage clusters operational from the mid-2020s. (CCTF)
• Government and industry to collaborate on a Review CCUS Delivery and Investment Frameworks to develop viable business models for CCUS in power and industry and the associated transport and storage infrastructure. (CCTF)
• Explore how Greenhouse Gas Removal technologies, such as BECCS, which rely on CCUS and provide negative emissions could be incentivised. (CCTF)
• Grow and import sustainable biomass at large scale, where sustainable, to meet the need for both energy and Greenhouse Gas Removal demands. (RA/RSE)
41. Further deployment of low carbon technologies can also be enabled by the Government maintain a robust carbon price. The UK’s carbon price has been fundamental to delivering a 75% reduction in coal use since 2013[16] by providing an economic incentive for lower carbon and renewable generation to replace it on Britain’s power system, and there will be an increasing role for carbon pricing to play in other sectors such as industry, aviation, and shipping. A strengthening carbon price remains the most cost-effective route to meet our international and domestic climate ambitions, and we would urge the government to remain committed to utilising carbon pricing going forwards. This includes developing a suitable replacement of the European Union Emissions Trading Scheme if the UK exits the scheme following its departure from the European Union.

October 2018