UK Decarbonisation and Carbon Capture and Storage

Alex Cunningham Excerpts

Tuesday 24th January 2017 Westminster Hall

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

I beg to move,

That this House has considered UK decarbonisation and carbon capture and storage.

It is an honour to serve under your chairmanship, Mr Betts, and to have secured this debate. First, I declare an interest. Prior to coming to this place, I was Shell’s contract lead on the carbon capture and storage project at Peterhead. I moved the project from its previous format in Longannet. Further to that, I was on the CCS parliamentary advisory group working under Lord Oxburgh. It reported to the Secretary of State for Business, Energy and Industrial Strategy in September last year with the report, “Lowest Cost Decarbonisation for the UK: The Critical Role of CCS”. I therefore have great interest in the subject, and I commend all Members who have come forward to speak in the debate.

It is prudent to consider, at least summarily, the background against which the debate has been brought to the House. Since successfully winning a narrow majority, the Conservative Government have been rapidly drawing back from the previous coalition Government’s much-lauded green policies. Tony Juniper described it in his article in The Guardian on 24 July 2015 as

“an anti-environment ideology based on the view that ecological goals interfere with the market, increase costs and are against the interests of people.”

The cancellation of the ring-fenced £1 billion funding for the carbon capture and storage competition on 25 November 2015 is just one of a succession of cancellations of green policy initiatives and renewable programmes. Those cancellations include scrapping support for onshore wind; axing solar subsidies; removing the guaranteed level of renewables obligation subsidy for biomass; killing the flagship green homes scheme; privatising the green investment bank, which my hon. and learned Friend the Member for Edinburgh South West (Joanna Cherry) will discuss tomorrow; removing incentives to buy greener cars; abandoning the plan for zero-carbon homes; a U-turn to allow fracking on sites of special scientific interest; dropping the green targets; and—this is what triggered the CCS parliamentary advisory group’s report and, subsequently, this debate—scrapping the ring-fenced £1 billion of funding for the carbon capture and storage competition in November 2015.

With so much backtracking on green and renewable energy initiatives, the scrapping of that funding may not have been a shock to everyone. I forecasted it, but the industry, which was four years into the £1 billion competition, was shocked. Quite honestly, it virtually wiped out the industry in the UK in one fell swoop. Dr Luke Warren, chief executive of the Carbon Capture & Storage Association, said that the decision was

“just incredible. Only six months ago the government’s manifesto committed £1bn of funding for CCS…Moving the goalposts just at the time when a four-year competition is about to conclude is an appalling way to do business.”

What does that do for investor confidence? The litany of cancelled, diluted and abandoned renewable and green initiatives, as well as those within the energy industry as a whole, have virtually destroyed investor confidence in the UK energy sector. The third report of the 2015-16 Session by the Energy and Climate Change Committee, “Investor confidence in the UK energy sector”, was published on 23 February 2016. The Committee is chaired by my hon. Friend the Member for Na h-Eileanan an Iar (Mr MacNeil), and the report identified six factors that combined to damage investor confidence in the UK. The fourth was:

“Policy inconsistency and contradictory approaches have sent mixed messages to the investment community”.

The report goes on to cite three specific examples, of which the third is

“emphasising the important role of gas while scrapping support for carbon capture and storage.”

Earlier in the same month, the same Committee released a report, “Future of carbon capture and storage in the UK”, which opened with the warning:

“Meeting the UK’s climate change commitments will be challenging if we do not apply carbon capture and storage (CCS) to new gas-fired power stations and to our energy intensive industries.”

It goes on to state that alternatives to CCS are likely to cost the UK more in the future to meet legally binding climate change targets as set out in the Climate Change Act 2008. The report went on to criticise the Government’s focus on investment in shale gas exploration and quoted the then Secretary of State for Energy and Climate Change as saying:

“In the next 10 years, it’s imperative that we get new gas-fired power stations built.”

The report concluded that

“the manner in which the carbon capture and storage competition was cancelled, weeks before the final bids were to be submitted and without any prior indication given to the relevant parties, was both disappointing and damaging to the relationship between Government and industry.”

There will be positive news for the Government on that later in my speech.

[Alex Cunningham (Stockton North) (Lab)]

I congratulate the hon. Gentleman on securing the debate. The National Audit Office said that CCS is still proving costly. The Treasury pulled the funding away before there was an opportunity to prove whether or not it was going to be too costly. CCS would provide such a major boost to industries such as those on Teesside, which include cement, steel and fertilisers. Does he agree that it is about time the Government re-engage? They are seen as disengaged at the moment.

[Philip Boswell]

I completely agree with the hon. Gentleman. There are signs that the Government will be considering that. I look to the hon. Member for Waveney (Peter Aldous) and the Minister to confirm that they will consider that in their strategies. The hon. Member for Stockton North (Alex Cunningham) is absolutely right about investment in a key industry. When I was in the project in Peterhead, the technology was basic. We were capturing 90% of the carbon. With advances in technology, we will increase that, and with economies of scale and improved technologies, it will be cheaper. While the report understands the difficult balancing act that the Government face with public expenditure, the delay in bringing forward any plans to implement CCS in the UK while proceeding with fracking means we will not remain on the lowest-cost path to our statutory decarbonisation target.

What of forward planning? On 26 February 2016 in an interview in Utility Week, the chief executive of the Committee on Climate Change, Matthew Bell stated:

“We’ve been very clear that, with the 2050 target in mind, it is much less expensive to meet if we’re able to develop successfully CCS. The government needs to come up with a very credible plan on how it’s going to push forward with CCS.”

Bell says that, without such a plan, that investment in the power sector, at least on the more conventional generation front, could suffer. Gas is being pushed by the Government as the bridging fuel in the transition towards a low-carbon economy, although no new combined-cycle gas turbine power stations have been built in the UK in the past six years.

Acknowledging what is widely expected to happen as coal-fired power stations leave the energy system, Bell said:

“Between now and the early 2030s, gas could have an increasing and significant role”.

He also said:

“However, from some point in the 2030s, if you’re going to hit the 80 per cent gas target and don’t have CCS, then gas has to be virtually off the system…That would imply that during the course of the 2030s gas has to play a declining role – but there is a big ‘if’ there as that depends on CCS.”

--- Later in debate ---

[Philip Boswell]

The hon. Gentleman makes a good point. Now that we have chosen this path for the country, I hope that Brexiteers and remainers alike will make the best fist of it and work collectively with our European neighbours for the best, but he is right that we should do more in Britain and should focus on that. His point is well made.

[Alex Cunningham]

Further to the previous intervention, it is all the more important that, post-EU membership, we ensure we get our emissions-trading regime correct to protect the industries I mentioned in my earlier intervention.

[Philip Boswell]

Again, I agree completely with the hon. Gentleman. Given the coal mining in Europe for power generation and having to deal with climate change, we certainly ought to look at that.

Shortly before the demise of the Department of Energy and Climate Change—it is now the Department for Business, Energy and Industrial Strategy—it commissioned a study from the Energy Technologies Institute to examine where CO₂ clusters and commercially viable storage could be developed around the UK by 2030. The study identified five locations. Only one is deliverable right now, and I will spend a few moments describing how that so-called Acorn project could grow into a mighty oak tree of carbon capture, transport and storage.

To get a CO₂ takeaway network to operate, we need to gather CO₂ from multiple sources onshore and to transport it to the coast through a pipe and then through an offshore pipe to its carbon storage destination. St Fergus in north-east Scotland is the offshore oil industry equivalent of Clapham Junction. Many of the gathering pipes from the North sea bring oil and gas to landfall at St Fergus, which has a huge amount of pipeline infrastructure and processing equipment available. With the decline of North sea activity in certain fields, some of that equipment is no longer required.

Specifically, pipelines from St Fergus to the Atlantic and Goldeneye gas fields have now ceased hydrocarbons transport and are in fact scheduled to enter a decommissioning process. Onshore, three facilities service different offshore pipeline networks and produce about 400,000 tonnes per year of carbon dioxide, which at the moment is vented into the atmosphere. The Acorn project aims to capture and store that CO₂. The SAGE—Scottish Area Gas Evacuation—plant is also in St Fergus but, given the time, I will move on to allow other Members the opportunity to speak.

What of the Government’s new industrial strategy? My colleague the hon. Member for Waveney will discuss that in more detail, so I will touch on it only lightly. Publication this month of the initial “Building our Industrial Strategy” Green Paper is the first step towards introducing a new, engaged Government-industry relationship, which is to be commended. The paper invites engagement and comment, and is most welcome. I urge the Minister to include CCS in the final strategy, and ask him to give assurances today that CCS will be considered carefully and implemented as one of the many steps into Britain’s new industrial future, which looks to both industrial development and a greener, cleaner industrial future for our children and our children’s children.

The summary of the key findings of the CCS parliamentary advisory group’s report states:

“CCS is essential for lowest cost decarbonisation

1. This report addresses the policy disconnect that arises between the previous Government’s cancellation of the…CCS …competition on grounds of cost and the advice it received from a number of independent policy bodies that CCS was an essential technology for least cost decarbonisation of the UK economy to meet international agreements (most recently Paris 2015).

2. The Committee on Climate Change…recently reported the additional costs of inaction on CCS for UK consumers to be £1-2bn per year in the 2020s, rising to £4-5bn per year in the 2040s…The group agrees carbon capture and storage is an essential component in delivering lowest cost decarbonisation across the whole UK economy.

CCS works and can be deployed quickly at scale…Current CCS technology and its supply chain are fit for purpose”—

as I said, CCS works are shovel-ready—

“UK action on CCS now will deliver lowest cost to the consumer. There is no justification for delay. Heavy costs will be imposed on current and future UK consumers by a continued failure to enact an effective CCS policy…Ample, safe and secure CO₂ storage capacity is available offshore in the rocks deep beneath UK territorial waters and this represents the least cost form of storage at the scale required…CO₂ re-use, such as enhanced oil recovery and the production of materials such as building products, already exists and should continue to be encouraged,”

but it will not be able to deal with the huge volume required to make a difference in meeting our climate change targets. The summary continues:

“The lowest cost CO₂ storage solution for the UK at the scale required will be offshore geological storage in UK territorial waters. There is no reason to delay…

CCS in the power sector has an essential enabling role.

CCS has direct or indirect implications for the decarbonisation of all four of the major fossil fuel consuming sectors of the UK economy—industry, power, transport and heating. They need to be considered together so that synergies of a common infrastructure can be exploited…

With some 200TWh/year of new clean power generation needed in the UK system in the 2020s fossil fuels with CCS will play an important role as a cost competitive and potentially flexible power generation technology.

There is a widespread view that CCS has to be expensive. On the contrary, the high costs revealed by the earlier UK approaches reflected the design of these competitions, rather than the underlying costs of CCS itself.”

The poor design in the second CCS competition

“led to the lack of true competition and the imposition of risks on the private sector that it cannot take at reasonable cost for early full-chain”

development. The summary also states:

“Previous third party analysis by the CCS Cost Reduction Taskforce and for the Committee on Climate Change as well as analysis performed for this report show full-chain CCS costs at c.£85/MWh under the right circumstances. This report concludes that, under the right conditions as set out in this report, even the first CCS projects can compete on price with other forms of clean electricity.

To ensure that least cost CCS is developed when earlier approaches have foundered a CCS Delivery Company…should be established that will initially be government owned but could subsequently be privatised”

if the Government so wish. The summary continues:

“This company will have the responsibility of managing ‘full-chain’ risk and will be responsible for the progressive development of infrastructure focused on industrial hubs to which power stations and other emitters could deliver CO₂ which, for a fee, will be pumped to appropriate storage.

The CCSDC will comprise two companies: ‘PowerCo’ tasked with delivering the anchor power projects at CCS hubs and ‘T&SCo’ tasked with delivering transport and storage infrastructure for all sources of CO₂ at such hubs.”

It is clear that we must think and act more holistically about our energy needs and uses, and the inevitable effects of our behaviour on our planet. I hereby recommend that CCS be included in the Government’s new industrial strategy for the benefit of everyone in the UK now and in the future, as our children and our children’s children will be presented with our bill should we get this wrong again.

--- Later in debate ---

[Peter Aldous (Waveney) (Con)]

It is a pleasure to serve under your chairmanship, Mr Betts, and I will do my best. I congratulate the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) on securing this debate, which comes at a particularly opportune time, following the publication yesterday of the Government’s Green Paper, “Building our Industrial Strategy”.

I served with the hon. Gentleman on the group chaired by the noble Lord Oxburgh, which published its report on the future of CCS last September. I commend the noble Lord on the way he chaired the group and for looking at all the evidence, seeking out all views and arriving at what I believe are sound and sensible recommendations that the Government should put into practice as soon as possible. It should be noted that the report has been welcomed globally and the noble Lord has been invited to such countries as Norway, Australia and Canada to talk about it.

The group’s membership was wide-ranging and cross-party, and included independent experts from the fields of industry and research. We heard from a wide range of witnesses who work in research and development, industry, and banking, as well as groups such as the Committee on Climate Change. We set out with no preconceived ideas about what our conclusions might be, mindful that the Government’s cancellation of the CCS competition on cost grounds might mean that CCS was a non-starter. We considered a wide range of evidence and concluded that CCS has a crucial role to play if the UK is to deliver the emissions reductions to which it is committed at the lowest possible cost to consumers and taxpayers.

[Alex Cunningham]

I am grateful to my fellow co-chair of the all-party parliamentary group on CCS for giving way. CCS could be a game-changer for areas such as Teesside; it could drive investment and improve air quality. The Teesside Collective is showing great leadership on plans in that area. There are also plans for a large gas-fired power station, but those are being frustrated by a complicated planning process. Does the hon. Gentleman agree that the Government need to simplify that process while ensuring that plants are CCS-ready so that we can exploit them properly?

[Peter Aldous]

I agree that CCS has an important role to play in the regeneration of coastal communities and perhaps areas that have been forgotten over the last few years. That includes the area that the hon. Gentleman represents, many areas in Scotland and the area that I represent.

The report contains six recommendations for how CCS can perform that crucial role. I believe that we reached the right conclusions, for three reasons. First, the UK has made commitments, through the Climate Change Act 2008 and international agreements, to reduce carbon emissions. Those were most recently reconfirmed in Paris in autumn 2015. As a result, we have a duty to put in place measures that will enable us to get on with meeting those targets at the lowest possible cost to the country’s consumers and taxpayers.

It quickly became apparent to the group that we cannot get on with that without CCS. The great advantage of CCS is that it is a highly strategic technology that can deliver emissions reductions across many sectors, including, as we have heard, power generation, energy-intensive industries, heat and transport. It should also be pointed out that CCS has the potential to safely store 15% of current UK CO₂ emissions by 2030 and up to 40% by 2050.

There is a cost associated with inaction on CCS. Last summer, the Committee on Climate Change highlighted that if we take no action on CCS, the cost to UK consumers will be £1 billion to £2 billion per annum in the 2020s, rising to £4 billion to £5 billion per annum in the 2040s.