UK Carbon Capture And Storage Projects: Progress At Last?

Introduction

Doubts about the technical feasibility of carbon capture and storage (CCS) remain, but the United Kingdom has recently taken two concrete steps towards exploring CCS potential: CCS provisions in the proposed Energy Bill and the award of funds for developing technical plans for CCS demonstration plants. These have occurred in the context of a growing regulatory support framework for CCS in both the UK and the European Union.

Energy Bill – the 'CCS incentive'

The Energy Bill currently before the UK Parliament is part of the UK's low carbon transition plan for meeting its obligation to reduce carbon emissions 34% from 1990 levels by 2020 under the UK Climate Change Act 2008. If enacted the Energy Bill will implement a 'CCS incentive' to support the construction of up to four commercially viable CCS demonstration projects in the UK. The Energy Bill also provides for funding to retrofit additional CCS capacity to the demonstration projects if subsequently required.

The Energy Bill creates a framework for a financial incentive mechanism to support CCS demonstration projects. It empowers the Secretary of State to provide financial assistance for CCS demonstration projects directly, or to establish alternative 'assistance schemes' to be monitored and administered by others. Amongst other things the assistance schemes will be able to define what can be done under a CCS project, and how much assistance can be provided. The Energy Bill also provides for an electricity supply levy to raise the funds to be used for financial assistance for CCS demonstration projects. The Government expects to raise up to £9.5bn through the levy, which is likely to be added to consumers' electricity bills.

UK Government awards funds for two CCS design and development studies in competition

Launched in 2007, the UK Government's competition to select a project that will result in building one of the world's first commercial scale carbon capture and storage demonstration plants moved forward recently. On 12 March the Government announced it had awarded funds to E.ON and Scottish Power to support the Front End Engineering and Design studies required to develop the companies' designs for CCS installations at their coal-fired power plants. E.ON proposes to fit a pre-combustion demonstration plant to its new station at Kingsnorth. Scottish Power aims to retrofit a post-combustion plant at its existing Longannet plant. The FEED studies are being financed out of funds allocated in the UK's 2009 Budget, and will be completed within about twelve months. The Government will then determine the competition winner. If built, the project will aim to demonstrate CCS on a coal-fired power station with offshore storage of CO2, capturing CO2 from 300MW net (around 400MW gross) of the station's capacity.

If the Energy Bill is enacted, the UK Government says it intends to begin the competitive process for up to three additional CCS projects by the end of 2010, assuming the levy to support them is passed as part of the Energy Bill.

Additionally, in mid-March E.ON submitted environmental "scoping reports" outlining its plans for a CO2 pipeline for its proposed Kingsnorth coal-fired power station. If built, the pipeline would run across the Hoo Peninsula in Kent, and then in a trench on the seabed leading to depleted North Sea gas fields, where the CO2 would be stored. E.ON expects to submit its final proposals towards the end of 2010, as part of the full pipeline planning application.

Regulatory support framework for CCS – EU and UK measures

The CCS Directive (Directive 2009/31/EC, effective as of 25 June 2009) was passed as part of the EU's Climate Change and Energy Package of measures to reduce EU greenhouse gas emissions by 20% by 2020, and ensure that the EU meets 20% of its overall energy needs using renewable energy by 2020. The UK government believes that the provisions of the UK Energy Act 2008 are sufficient to enable the EU CCS regime set out in the CCS Directive to be implemented in the UK.

The CCS Directive includes a significant provision on carbon capture readiness. Under Article 33 of the CCS Directive, a combustion plant of 300 MWe authorised after 25 June 2009 within a member state's territory must carry out assessments concerning the plant's carbon capture readiness. In order for a plant to meet this condition, suitable storage sites must be available; transportation must be technically and economically feasible; and it must be technically and economically feasible to retrofit the plant for CO2 capture. The CCS Directive also requires member states to ensure that plants which meet these conditions set aside sufficient space to install the equipment necessary for CO2 capture. The UK Government has announced that these requirements will be implemented as part of the development consent process under Section 36 of the Electricity Act 1989.

From 9 November 2009, the UK has also required that any applicant who applies for (or who has sought but not yet obtained) consent under Section 36 of the Electricity Act 1989 to construct a new coal-fired power station of over 50MWe will have to produce evidence that the plant will be capable of demonstrating CCS on at least 300MWe net of its capacity from the outset. The same rule will apply to applicants for consent to upgrade existing power stations to allow for the installation of super-critical coal-fired boilers.

CRC Energy Efficiency Scheme

The CRC Energy Efficiency Scheme (CRC), formerly the carbon reduction commitment, is a mandatory emissions trading scheme designed to promote energy efficiency and reduce carbon emissions in the UK. It starts on 1st April 2010.

It aims to reduce carbon emissions in large organisations by 1.2 million tonnes of carbon over the next 10 years. The scheme will be enforced by the Environment Agency in England and Wales, the Department of the Environment in Northern Ireland and SEPA in Scotland.

The Environment Agency is responsible for managing an online registry for the scheme and administering the sale of carbon allowances for the whole of the UK.

Who will the CRC Energy Efficiency Scheme affect?

The CRC will affect mainly large private and public sector organisations. The CRC targets emissions not already covered by Climate Change Agreements (CCAs) or the EU Emissions Trading System (EU ETS). Organisations are likely to be covered by the CRC if their electricity is metered by at least one half hourly meter (HHM) and if they buy on the half hourly market.

The main criteria for an organisation to have to participate in the...