UK Decarbonisation and Carbon Capture and Storage

Clive Betts Excerpts

Tuesday 24th January 2017 Westminster Hall

On resuming—

[Mr Clive Betts (in the Chair)]

The sitting is resumed and the debate can continue to until 4.10 pm.

[Philip Boswell]

Thank you, Mr Betts. I will continue with my quotation from Matthew Bell:

“We have a 15 to 20-year time horizon with reasonable certainty for the role of gas, then we have an uncertain period—is that enough for investors to decide to go ahead with their projects? There is a way of clarifying that uncertainty, and that is for the government to be clear on CCS.”

There is a consensus from watchdogs and experts alike. They agree that the Government have the opportunity to get this right. Getting it right, including carbon capture and storage, will be more economical for the UK in achieving our climate change targets, while simultaneously creating CCS as a leading, technologically advanced industry within the UK.

What of the costs of meeting our climate change commitments without CCS? The National Audit Office’s report of 20 January 2017, “Carbon capture and storage: the second competition for government support”, found that carbon capture and storage “formed an important part” of the Department for Business, Energy and Industrial Strategy’s role in reducing carbon dioxide emissions. The report goes on to state:

“Given its potential to decarbonise different sectors, many stakeholders still regard CCS as being critically important to the UK achieving its decarbonisation target. It is currently inconceivable that CCS projects will be developed without government support.”

That support would enable investment in CCS, creating a large-scale demonstration of CCS technical and commercial viability, and leading to further-improved CCS schemes in the UK and the development of CCS as a successful industry. Although the report is constrained by the very specific NAO brief, which was to assess how the Department ran the second competition before its cancellation, it is none the less unequivocal in its support for CCS as the least-cost route to decarbonisation.

What of the most detailed report focused on the determination of whether CCS offers the solution of lowest-cost decarbonisation? I am referring to “Lowest Cost Decarbonisation for the UK: The Critical Role of CCS”, which is cited as Oxburgh 2016, a report from the parliamentary advisory group on carbon capture and storage to the Secretary of State for Business, Energy and Industrial Strategy. The report was requested by the then Secretary of State for Energy and Climate Change, the right hon. Member for Hastings and Rye (Amber Rudd). Its terms of reference were to assess the potential contribution of CCS to cost-effective UK decarbonisation and to recommend accordingly to the Secretary of State by the end of summer 2016.

The report was delivered by Lord Oxburgh and his team in September 2016. The group comprised some of the most qualified and experienced representatives of politics, industry and academia. They did not carry out primary research but instead, given the substantial volume of work already published on the subject, focused on synthesising experience and knowledge into an optimum recommendation. They also considered walking away from CCS as an option.

The report found six core recommendations that are worth repeating in full:

“1. Establish a CCS Delivery Company…A newly formed and initially state-owned company tasked with delivering full-chain CCS for power at strategic hubs around the UK at or below £85/MWh on a baseload CfD equivalent basis. Formed of two linked but separately regulated companies: ‘PowerCo’ to deliver the power stations and ‘T&SCo’ to deliver the transport and storage infrastructure, the CCSDC will need c.£200-300m of funding over the coming 4-5 years.

2. Establish a system of economic regulation for CCS in the UK…The government will establish a system of economic regulation for CCS in the UK which is based on a regulated return approach. This will draw heavily on existing regulatory structures in the energy system and hence include: a CCS Power Contract based on the existing CfD or capacity contract to incentivise CCS for power…

3. Incentivise industrial CCS through Industrial Capture Contracts…The Industrial Capture Contract, will be funded by the UK government and will remunerate industry for capture and storage of their CO₂. It will be a regulated contract which will have a higher price in the early period in order to deliver capital repayment in a timescale consistent with industry horizons…

4. Establish a Heat Transformation Group…The Heat Transformation Group will assess the least cost route to the decarbonisation of heat in the UK (comparing electricity and hydrogen) and complete the work needed to assess the chosen approach in detail. The HTG has a likely funding need of £70-90m.

5. Establish a CCS Certificate System”—

this is completely self-explanatory—

“Government will implement a CCS Certificate System for the certification of captured and stored CO<sub>2.

6. Establish a CCS Obligation System…Government will also implement a CCS Obligation from the late 2020s as a means of giving a long-term trajectory to the fossil fuel and CCS industries. This will put an obligation on fossil fuel suppliers to the UK to sequester a growing percentage of the CO2 associated with that supply.”

Climate change bodies, politicians and industry alike almost all agree that CCS is the optimum low-cost option for decarbonising the UK, but it is generally accepted that only Government intervention will stimulate it in the UK. I therefore ask the Minister please to consider carefully carbon capture and storage as part of the Government’s new, hands-on, interventionist industrial strategy for Britain.

What is the way forward? The way to a greener industrial future and lowest-cost decarbonisation for the UK without doubt includes carbon capture and storage. The proven technology continues to improve and we should not be frightened to embrace the new technologies that continue to spring up around CCS, such as Toshiba’s new 25-MW-gross electric turbine, the headline for which reads:

“Toshiba Ships Turbine for World’s First Direct-Fired Supercritical Oxy-Combustion CO2 Power Cycle Demonstration Plant to U.S.”.

That supercritical CO2 power-cycle system achieves the same level of generating efficiency as a combined-cycle power plant. It separates and collects CO2 at high pressure, eliminating the need for separate carbon capture equipment or processes, and secures full CO2 capture—I repeat: full CO2 capture—without any increase in the cost of electricity, using supercritical CO2 as a working fluid to generate low-cost electricity while eliminating emissions of nitrogen oxides and other pollutants. We must embrace such technology or risk falling further behind or completely missing out on a unique opportunity.

Where should we develop the first CCS project? We already have some shovel-ready projects.</sub>

--- Later in debate ---

[Several hon. Members rose—]

[Mr Clive Betts (in the Chair)]

Order. Five hon. Members wish to speak, and I want to start the Front-Bench wind-up speeches at 3.38 pm. That gives us about 35 minutes—about seven minutes each. Will Members keep to that guideline?

--- Later in debate ---

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I was going to say that the debate had been characterised by a mighty cross-party alliance in favour of CCS, which I heartily concur with, but obviously there is this afternoon one exception to that. I want briefly to address that exception: the hon. Member for East Antrim (Sammy Wilson).

The issue is basically about the imperative to decarbonise our energy supplies, and it is an unashamed imperative because we know that climate change is real and that, if we do not do anything about it, that will be disastrous overall, for us all. Indeed, we can go back, in terms of alternative costings, to the Stern report. Stern said that doing nothing on climate change would probably consume 5% of our GDP, whereas doing something about it might consume 1% of our GDP. It is a very substantial investment for the future and rather a good bargain overall, in terms of what we might put in and what we might get out.

Of course, the same applies, in the context of the energy sector, to CCS. The question is really how we decarbonise our energy supplies, using different potential scenarios, and what would happen if we did not take CCS into account as far as decarbonising our energy supplies was concerned. It is not that we cannot, but it is about the relative costs of doing that with different technologies. It is not me saying this: it is the Committee on Climate Change in setting out its scenarios for the fifth carbon budget, which, of course, the Government have now adopted as a way forward over the next period.

We have basically adopted a scenario for energy decarbonisation that has at its centre, and as part of that fifth carbon budget, that energy emissions should be below 100 grams of CO₂ per kWh by about 2030. The Committee on Climate Change says that the investments we have at the moment give us an emissions intensity of about 250 grams of CO₂ per kWh. If we close remaining coal-fired power stations and replace them with gas-fired generation in the short term, that would take emissions marginally further down to 190 grams of CO₂ per kWh.

Of course, if all the existing nuclear power stations were also replaced by gas, and gas met new demand subsequently, emissions intensities would rise to over 300 grams of CO₂ per kWh by 2030. The Committee on Climate Change goes on to say:

“Commercialisation programmes for CCS and offshore wind alongside lowest-cost investments in the 2020s in a mix of new nuclear, onshore wind, solar and offshore wind rather than expanding gas generation would bring emissions intensity down to below 100 gCO₂/kWh.”

That is a very straightforward and exact road map for where we need to go in terms of energy decarbonisation.

Of course, if we did not have CCS in that scenario, we would have to do a lot of different things to replace what CCS would have done by physically taking the carbon dioxide out of the process and putting it into the ground. We would have to do something else to take that carbon dioxide out of the process. That could be a lot of additional energy efficiency or it could be a lot of new, different low-carbon plant.

We come to the question of what the alternative costs might be if we did not have CCS in the process. Indeed, the NAO report on the carbon capture and storage pilots, which hon. Members have mentioned this afternoon, clearly sets out that meeting the 2050 target for decarbonisation of our whole system, without CCS, would

“cost up to £30 billion more in the power sector alone”.

Hon. Members have mentioned what that means in terms of an annual basis, but that is the overall cost. Interestingly, the NAO cites where that particular figure comes from: of course, it came from the Department of Energy and Climate Change in 2015.

We are clear about the ends, but we are not currently clear about the means. That is where the scandalous cancellation of the two pilot projects—which, by the way, had already been included in those Committee on Climate Change estimates I just mentioned, so we are even further back from the starting line than we would otherwise have been—puts us in terms of having, at the moment, the possibility of ends.

We have agreed the fifth carbon budget. The Government are due to produce their low-carbon plan some day soon; I think it was supposed to be last year and then it was supposed to be this spring, but I see from the industrial strategy announcement yesterday that the target is now some time in 2017. I am interested to know from the Minister whether that low-carbon plan is going to be published in the early part of 2017, as I hope. If it is, I would be extremely surprised if it included no mention of the key role CCS will have to play in making that plan a reality. That is the truth of the matter: without CCS, it is very difficult to envisage a lot of the systems that we talk about in terms of low-carbon energy as a whole—not just low-carbon electricity—working very well.

My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) mentioned, among other things, the possible role that hydrogen might play in the future heat economy. Hydrogen can be made by electrolysis of spare electricity but it is more likely that, during the earlier period, it is going to be made using existing infrastructure by steam methane reformation. That gives us a potent fuel in terms of sorting out the decarbonisation of our heat structures, and possibly the substantial decarbonisation of our transport structures, but CO₂ is a by-product that needs sequestering in the process, otherwise it is not low-carbon at all.

The essential role that carbon capture and storage will play across the board in our decarbonised, low-carbon energy economy is without question. The question is: what do we do about it? We have heard mention this afternoon of the estimable Oxburgh report, which was essentially commissioned by Government after the closing down of the pilot schemes. Without wishing to repeat some of the details of the Oxburgh report that have been mentioned this afternoon, I would say that the report does not talk about pilots and does not talk about ways of trying to introduce bits of CCS here and there. It talks about a very practical route forward, which is costed and relatively low-cost, for what Government need to do—exactly in line with what we think we are doing at the moment about industrial strategy and how we move that forward—to make carbon capture and storage a part of our energy landscape over the next period.

I commend anybody who has not read that report to look at exactly what it says. That is exactly what it does: it sets out how we move forward over the next period to integrate carbon capture and storage with various measures as part of our processes. I ask the Minister whether the Government intend to respond to the Oxburgh report in the near future. If they do intend to respond, what form is that response likely to take? I hope that when the Government decide to respond, they respond in a very positive way because that is what we need right now. Undoubtedly, we need to decarbonise radically. Undoubtedly, carbon capture and storage has to be a part of that decarbonisation. Setting out a way forward for making carbon capture and storage a reality in our energy firmament is, it seems to me, a very high priority for Government at the moment.

[Mr Clive Betts (in the Chair)]

I thank all hon. Members for being so co-operative with the time available to make sure that we got everyone in and they had a full opportunity to contribute. I now call the Minister.

Steel Industry

Clive Betts Excerpts

Thursday 3rd November 2016 Westminster Hall

[Jessica Morden (Newport East) (Lab)]

I, too, thank my hon. Friends the Members for Middlesbrough South and East Cleveland (Tom Blenkinsop) and for Redcar (Anna Turley) for securing this debate, and for their sterling efforts on behalf of the all-party group on steel and metal related industries, which is out today in some force.

Last week, the Community union, which does an absolutely fantastic job for its members, quite rightly praised steelworkers in a statement, saying:

“We believe the workforce should be commended, in the strongest terms, for continuing to deliver for Tata throughout this exceptionally difficult period and indeed restoring previously loss making parts of the business to profitability”.

I start with that quote because it is right that we always acknowledge what a difficult time this is personally for those who work in our steel industry. We must never underestimate the effect the continued uncertainty is having on steelworkers and their families. I know that from talking to those who work for Tata at Llanwern and at Newport Orb. A steelworker emailed me last week to say:

“We feel forgotten about and we have no news on the Government’s and Tata’s plan for the pension, no news on where we stand on the future on any proposed merger, no answer on the deficit etc. Things seem to have come to a standstill and there are no answers coming from Parliament or Tata”.

That very much echoes what my hon. Friend the Member for Aberavon (Stephen Kinnock) said at the start of his speech. Aberavon and Port Talbot’s fortunes are very much linked. I absolutely concur with what my hon. Friend said about that feeling of uncertainty and how difficult it is for people. Many steelworkers feel that their lives are on hold. I hope the Minister understands that and takes it away from the debate.

We have in this place relentless debates, questions and statements about steel. Just yesterday there were two fantastic questions at Prime Minister’s questions from my hon. Friends the Members for Cardiff South and Penarth (Stephen Doughty) and for Penistone and Stocksbridge (Angela Smith). In response, the Prime Minister said:

“This Government have stood up for British-made steel, and we have taken a number of measures”.—[Official Report, 2 November 2016; Vol. 616, c. 880.]

She also said,

“we recognise both the importance of steel and the importance of Tata in the United Kingdom.”—[Official Report, 2 November 2016; Vol. 616, c. 886.]

On the lack of clarity about Brexit, she said:

“I am very clear that what we want to achieve is the best possible deal”.—[Official Report, 2 November 2016; Vol. 616, c. 880.]

We appreciate those words, but we need more detail and more commitment from the Government, with stronger words and stronger action.

Workers in my constituency want to know that the Minister is fully engaging with the short-term urgency of the problems facing the Welsh steel industry. There are bits of good news, but the underlying problems have not gone away, as many other Members have said. We are still waiting for assurances from the Government about Port Talbot, which will affect Llanwern, and for any news on the joint venture between Tata’s strip products division and ThyssenKrupp, which could affect Orb in my constituency. If there is such news, what assurance can the Government give that commitments will be made on jobs, investment and the continuation of primary steelmaking at Port Talbot and across south Wales?

The Government lobbied against the EU imposing tariffs on the dumping of Chinese steel. The Prime Minister did not even put Chinese steel dumping on the agenda when she first met the Chinese Prime Minister. Electricity prices are still a huge issue in the UK, with a disparity of £1 million a week between the UK and Germany, which has an effect on competitiveness. As many Members have said, despite the procurement guidelines, French steel is still being imported for Trident renewal. I know we will all be watching as large infrastructure projects get the go-ahead. The Government cannot let up on ensuring that all major procurement projects—from rail to airports and tidal barrages, which will be important for places such as Newport if Swansea bay tidal lagoon goes ahead—use British steel.

As every one of my hon. Friends has said, the Nissan announcement is brilliant news, but where is the Brexit plan for the steel industry? So far, the Secretary of State for International Trade has said that he has no plans to support the steel industry with trade defence instruments. When combined with the other uncertainties Brexit has caused, that is a major concern. Brexit has many other implications for the industry, so we want similar assurances to those given to Nissan.

In brighter news, the Welsh Government are thankfully doing all they can with the powers and levers available. I very much welcome the active work of Ken Skates, the Welsh Government’s Cabinet Secretary for Economy and Infrastructure, who through Business Wales is supporting the industry through Welsh public sector infrastructure and construction projects.

I appreciate that it is not all gloom and—I will make this point before someone intervenes on me to make it—I also appreciate the point about primary steelmaking. Liberty Steel now employs about 1,500 people, including in the steelworks in my constituency and the two Scottish steel plate mills, one of which I know opened recently in the constituency of the hon. Member for Motherwell and Wishaw (Marion Fellows). Liberty Steel also has the SIMEC Uskmouth power plant and it is involved in the tidal lagoon initiatives, which were mentioned earlier and which are very important, not only for Swansea but, further on down the line, for places such as Newport. Liberty Steel has a long-term, sustainable strategy of steelmaking in the UK and actively invests in steel, power and the downstream industries. As we heard earlier, that is all built around a green steel vision, whereby Liberty Steel is working towards producing steel made from recycled scrap metal and powered by renewable power. That is an important addition to the traditional steelmaking industry.

Finally, I take this opportunity to invite the Minister to visit Newport East to see the site in my constituency and see at first hand the plans for Liberty.

[Mr Clive Betts (in the Chair)]

It is now time for the Front-Bench spokespersons; no more than 15 minutes each, so that there are a few minutes at the end of the debate for the mover of the motion to wind up.

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[Gill Furniss]

I thank my hon. Friend for that point. Thirdly, I want to give credit where credit is due and thank the Government for the guidance published in October last year, which has put some emphasis on supporting British steel in major procurement projects. However, despite the good intentions behind that move, we are still seeing major contracts going to foreign steel manufacturers, most famously the new Trident submarines, which are being built with French steel. Had a British firm been engaged to supply the steel, more than 1,000 jobs would have been supported, but alas, that is not the case. Will the Minister commit to ending the exemption from the guidance of tenders funded through contracts for difference? Will he look at strengthening the guidance better to reflect the social and economic consequences of current procurement decisions? Will he follow the examples set by the Scottish and Welsh Governments and publish future pipelines of projects so that British steel manufacturers can prepare themselves to fulfil future demand?

Fourthly, there is the issue of trade defence mechanisms and Chinese dumping. Whatever else Brexit may mean, it is absolutely vital for the industry that we avoid any sort of punitive restrictions on access to the European market. Last year, more than two thirds of our steel exports went to EU countries and our own steel industry is closely bound up with the Dutch plant at IJmuiden. Our trade defence mechanisms depend so much on what the final Brexit deal looks like, but whether or not we find ourselves bound by the rules of the single market, it is critical that the UK stands up for fair trade globally. While we still have a voice in the European Commission, we should be throwing our weight behind the scrapping of the lesser duty rule, which is hamstringing all efforts to counteract Chinese dumping, and opposing China’s application for market economy status, which will kill those efforts stone dead. Free trade does not mean fair trade and until the Government wake up to that reality, the steel industry will never have the level playing field it is asking for.

On the industrial strategy, the difficulties that the steel industry has with energy prices, business rates, procurement problems and unfair global trading practices are all issues that the Government need to address immediately. There are swords dangling over the industry’s head, but if British steel is going to not just survive but thrive, it needs a proper long-term industrial strategy to put it on the right track for the future. I am glad that the Department for Business, Energy and Industrial Strategy has commissioned research into the future capacity and capability of the steel industry. I and no doubt all of us here are looking forward to its findings next year.

Every job in steel supports three in the supply chain and the industry really is the cutting edge of UK manufacturing. Most of the types of steel being produced were not even in existence 15 years ago. Steel will play a central role in our transition to a low carbon economy if we manage it correctly and it can continue to lead the world in terms of quality and innovation. Will the Minister reassure us that BEIS will put steel at the heart of its industrial strategy?

Steel is not a dying industry. It is not a relic of a bygone era. It may be a proud part of our industrial past, but it also has the potential to be a dynamic part of our economic future. Without it, we will not only have lost an industry—make no mistake—we will have lost our entire manufacturing base. No one is asking for special treatment; we are asking for a level playing field that will allow the industry to move forward with confidence. Four months on since we last debated this issue, the steel industry is still in crisis. I urge the Minister to show more energy than his predecessors and do what it takes to save our steel.

[Mr Clive Betts (in the Chair)]

If the Minister would just allow a few minutes at the end for the wind-up speech, that would be appreciated.