Peter Brown looks at developments in the UK to realise the potential of carbon capture and storage.
After years of fitful development and uncertainty over its commercial viability, there are signs that, in the UK at least, carbon capture and storage (CCS) is finally making significant progress, with financial support given to two projects. CCS involves capturing carbon emissions from polluting operations, such as power stations and industrial facilities, transporting the gases in pipelines and storing them in deep underground rock formations.
Its rollout cannot come too soon. CCS was identified recently by the Intergovernmental Panel on Climate Change as a key element of global decarbonisation efforts. Its latest assessment warned that any fossil fuel power plants operating after 2050 must be fitted with carbon capture mechanisms to prevent emissions to air.
Powering the UK economy
A joint report published by the TUC and the Carbon Capture and Storage Association (CCSA) in February put the environmental and economic case for CCS. The report argues that CCS has a major role to play in climate change mitigation, quoting 2012 research by the International Energy Agency that the technology could help reduce global emissions by 17% come 2050. The TUC/CCSA report also emphasises the economic benefits – such as the creation of a new energy market and employment opportunities – which could bring annual economic benefits to the UK of £2-4 billion by 2030.
Each part of the CCS process – the capture, transport and storage of CO2 – has already been successfully demonstrated in trials around the world. The Global CCS Institute calculated in 2013 that operational CCS projects were already preventing 23 million tonnes of carbon a year reaching the atmosphere. And, although there has as yet been no successful large-scale commercial demonstration of the technology, it may not be far off. The Boundary Dam project in Saskatchewan, Canada, is next year due to become the world’s first commercial-scale, coal-fired CCS power station, and the UK is also at the forefront of CCS development.
With more than 70 billion tonnes of offshore capacity in the North Sea and Irish Sea – mainly depleted oil and gas fields – the UK has the largest carbon storage resources in Europe. Decc estimates that the UK could benefit from up to 13GW of CCS power by 2030. Significantly, the government’s £1 billion capital funding competition for CCS projects is described as a commercialisation, not merely a demonstration, programme: the objective is to prove the technology’s commercial viability.
With that in mind, in recent months two full-chain projects (capture, transport and storage), Peterhead in Aberdeenshire and White Rose in North Yorkshire, have been awarded contracts to begin “front-end engineering and design” (FEED) studies, with the expectation that final investment decisions would be taken in late 2015. White Rose was also recently awarded up to €300 million under the European commission’s NER300 programme, which allocates money generated by the sale of allowances under the EU emissions trading system. White Rose, a collaboration between Alstom, Drax Power, BOC and National Grid, involves capturing around 90% of emissions from a new coal-fired power station and transporting it offshore to a North Sea saline rock formation storage site.
Peterhead, a joint venture by Shell and SSE, aims to capture 85% of the CO2 from a combined-cycle gas turbine power station and transport it to a storage site in depleted gas fields 2.5km under the North Sea.
In its recently published scoping document, Decc says one or both projects could form the first phase of CCS deployment in the UK. “They would help prove the concept, create important infrastructure that may be used for subsequent projects, create commercial relationships between the different elements of the CCS chain, and begin to build interest from competing businesses and their supply chains,” says Decc.
Power stations are not the only major source of emissions, and many of the potential applications of CCS are in energy-intensive industries, such as iron, steel, chemicals and cement. In a conclusion supported by Decc, the TUC/CCSA report states that CCS represents the only possibility of further significant decarbonisation in such industries. While the two competition projects point the way forward for CCS in the power sector in the UK, industrial CCS presents another set of highly complex challenges.
“The policy framework in the UK is very much focused on CO2 reduction in the power sector first, which is right enough since that’s the biggest single source of emissions,” says CCSA spokesperson Judith Shapiro. “With industrial sectors it’s difficult because it’s not as clear-cut; it’s many different types of industry, and they all have different requirements and are at different stages of development.”
Among developments in industrial CCS applications is the government’s recent £28 million “City deal” for the Tees Valley, which included a £1 million grant to explore feasibility for industrial CCS. The area produces about 4.8% of UK industrial emissions and five of the top 25 single industrial emitters are situated on Teesside. The money will go to completing a pre-FEED study for a Tees Valley industrial carbon capture and storage network, identifying the best option for the full-chain network. Decc estimates that, when completed, the network will reduce CO2 emissions in the area by 7 million tonnes a year, based on the current rates.
Ongoing research and development also has an important role to play in optimising CCS technology to improve efficiency and cut costs. Decc has earmarked £125 million in a four-year research and development programme to investigate next-generation CCS technologies, including new solvents used in the CO2 capture process. In the March budget, the programme received an extra £60 million injection.
Meeting the challenges
But across the power and industrial sectors, CCS experts agree that one of the major challenges facing the wider rollout of the technology in the UK is the development of high-capacity infrastructure, and in particular of the transport and storage facilities to serve the envisioned “clusters” of emitters. Although there is widespread optimism that the Peterhead and White Rose projects will be a big step forward for the sector, they do not tell the whole story.
“Those two projects are critical to developing the CCS sector, but there are real risks if we just sit and wait for them without progressing all the other things that need to happen in parallel,” says George Day, head of economic strategy at the Energy Technologies Institute. “We want to be ready with the next wave of projects, which will piggyback on the infrastructure that they create.”
If there is any chance of CCS delivering the benefits identified by Decc in the next few decades, Day argues, investment in infrastructure needs to happen soon. “For new projects to take a final investment decision they need to be sure that there is a safe storage site available to take the CO2 that they capture,” he says. “Because of the lead times involved we need to be investing in and proving storage sites now to enable those projects that want to get started in the next three, five, or 10 years.”
But investing in CCS storage infrastructure remains a challenge. Beyond the £1 billion capital grant available from the UK commercialisation competition, policymakers need to find ways to make the sector more attractive to private finance. According to Day, the incentives are not yet in place. “We would say there are a number of market failures that mean people aren’t investing in prospecting for storage sites in the same way that they might be investing in prospecting for new oil and gas fields,” he says.
“We need to look at what the market failures are and come up with solutions to them.”
The overall incentive structure for CCS will involve the award of fixed-price contracts for difference (CfDs) under the government’s electricity market reform framework, but the details of how those awards will be made available to a company owning and operating a storage site remain unclear. “Having greater clarity around those rewards and what they’d look like and who would bear what risks will help to clarify how attractive an investment [storage] is,” says Day. Decc says it has already started discussions with developers about how to design a CfD appropriate for storage site appraisal.
However, as Day points out, the CfD mechanism is designed to generate maximum value by encouraging competition on cost. In a developing sector, such as CCS, where huge investment is necessary in shared infrastructure, the incentive structure may need to be different. In particular, it may need to reflect the fact that the strategic benefits of that infrastructure will only be realised over the long term.
“The costs of the early projects that build infrastructure are bound to be higher than the costs of projects that come along and use that infrastructure in later stages,” says Day. “So those projects that develop the strategic aspects of the CCS sector as a whole would be worth paying more for than projects which may in narrow terms deliver a lower cost of electricity but which wouldn’t give you any of that strategic development and creation of opportunities for later projects.”
Shapiro agrees that the need to reward investment in the shared CCS infrastructure is a major issue for the sector, not least because it is essential to the development of the cluster formations of power and industrial emitters that will, over time, cut the cost of the technology. “We’ve repeatedly made the case for building additional capacity into infrastructure so that pipelines and stores can accommodate more than one project, and economies of scale can be realised,” she says. “Individual industries will not be able to fund the full cost of their own CCS, so the only way that sectors like steel and cement and ammonia can make carbon capture a reality is if there’s already transport and storage infrastructure available.”
The allocation of part of the White Rose FEED contract funds to the development of the so-called Yorkshire-Humber CCS trunkline, an oversized pipeline that will be able to transport CO2 from a large number of emitters, is a positive step in this direction, believes Shapiro.
The chicken and the egg
All of the challenges around the commercialisation of CCS form a “chicken and egg” scenario, in which significant investment is needed to demonstrate that CCS is viable but, until that demonstration has been made, investment is hard to attract. While this investment challenge is not unusual for low-carbon technologies, the as yet unproven large-scale commercial viability of CCS makes it a particularly acute problem for the sector, says Professor Jim Watson at the UK Energy Research Centre (UKERC).
“You need to take those investment risks in order to get the plants built, in order to learn how to reduce those risks, so there is a hump to be got over,” he says. “This is why there is such a need for public-private partnership investment, and why things like the competition are so important because without it we just wouldn’t get to the point of knowing how big the risks are or how to reduce them.”
Ultimately, Decc wants CCS to compete with other low-carbon technologies on a cost basis by the 2020s. The CCS cost reduction taskforce was created in 2012 partly to address these financing challenges. “At the moment I don’t think you can have head-on competition between nuclear, offshore wind and CCS because they’re at very different stages,” says Watson. “I can see the argument for having that competition, but we’re going through a transitional stage where we’re trying to support deployment of all those technologies, but for CCS we also need to support it through an innovation process.”
Again, it may be that the CfD mechanism that has been used to reward investment in other low-carbon technologies may need to be tweaked for CCS, which, unlike nuclear or renewable energy, still relies on fossil fuel and therefore has a cost structure dependent on the price of carbon. “A CfD for a CCS plant may well need to be structured differently,” says Watson, “because you’ve got that fuel price risk in there. It may not make sense to treat it just like a nuclear or renewable plant.”
Behind these practical questions of investment and infrastructure, a more general problem facing CCS in the UK is, believes Day, one of perception. “There’s a lot of public discussion and debate around nuclear and renewables,” he says, “but from our work CCS looks to be, if anything, potentially more valuable than those technologies in terms of what it might save the UK when it comes to hitting carbon targets. And yet it seems to be a poor relation in terms of the focus and intellectual energy expended on how to make it work in the UK.”
But, as Watson points out, increased public awareness of CCS – dependent as it is on continued fossil-fuel use – might be a double-edged sword. He refers to the result of a recent UKERC survey, which divided non-governmental organisations. “Some were pretty sceptical if not outright opposed to CCS because of the association with continuing fossil fuel use, but others saw it as primarily a low-carbon technology,” he says.
Watson also raises the possibility that, unlike nuclear or renewable energy, CCS may be uniquely politically vulnerable to changes in overall policy priorities. “CCS, compared with other power-generation technologies, is very dependent on climate change being a major driver of policy,” he says. “In the UK there is still discussion about what those key drivers are, and some government ministers have emphasised affordability or security over climate change. If you were just worried about affordability or security, you might not invest in CCS over some of those other technologies.”
With a general election in May 2015, it remains to be seen whether any such changes are made to the agenda. Meanwhile, there is a sense of urgency among those who want CCS to demonstrate its commercial viability in the UK. “All of the components and the fundamental parts of the technology have been proven,” says Day. “There will no doubt be a whole second order of technical challenges that will need to be addressed to make CCS efficient, but they will be best addressed in the context of real projects working under real world conditions.”
Watson agrees, viewing the two competition projects at Peterhead and White Rose as crucial opportunities to demonstrate the feasibility of full-chain CCS at scale. “Most of the components have been tested at the right scale already,” he says. “It’s now really about the integration, bringing things together in a full-scale or full-chain CCS system from power generation all the way to storage. That’s the big challenge.”
Peter Brown is a freelance journalist.
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