Oral Answers to Questions

Debate between Charles Hendry and Thomas Docherty

Thursday 17th May 2012 Commons Chamber

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

11. When he expects to conclude the assessment of bids for funding of carbon capture and storage projects.

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

Bidders were required to register their interest in the carbon capture and storage commercialisation programme with the Department by 13 April, and must submit bids by 3 July. Once bids are submitted, a full and thorough assessment will be carried out, and decisions on which projects to support will be taken in the autumn.

[Thomas Docherty]

I am grateful for that answer. Obviously the Minister will know that we in the UK have vast reserves of untapped coal, including much in Fife. Will he try to ensure that the opportunity for clean-coal technology is not lost in the current process, and will he find the time to come to Fife and see our technologies first hand?

[Charles Hendry]

I would always be delighted to find a chance to go to the hon. Gentleman’s constituency. As he knows, I fought Clackmannan in the 1983 election. They did not see the need for my presence there at that time, but finding other reasons to go back would be a great pleasure. We see this issue as an important part of coal policy, and we want it to provide a long-term future for coal in the energy mix. There are tremendous resources around the United Kingdom, and the work being done in his constituency and elsewhere is important to that process.

Carbon Capture and Storage (Scotland)

Debate between Charles Hendry and Thomas Docherty

Tuesday 17th January 2012 Westminster Hall

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

It is a great pleasure to serve under your chairmanship today, Mr Howarth. I begin with an abject apology to you and to the House for my late arrival. I am afraid that there was confusion in my office about the time at which the debate started; I therefore turned up slightly late. I apologise profusely and will write to Mr Speaker to make my apologies known to the House.

In particular, I had wanted to hear the comments of the hon. Member for Dunfermline and West Fife (Thomas Docherty). He has shown a strong personal commitment to the issue that goes way beyond the interests of his constituency alone, to look much more broadly at the interests of carbon capture and storage and future energy development in the United Kingdom and particularly in Scotland. I am profoundly grateful to him for his interest and the expertise that he has shown, and I was keen to hear his remarks in full—I will read them—but of course I accept his request for a meeting. If he and other hon. Members wish to talk to me about their concerns in more detail at any point, they are more than welcome to do so.

We have had an extremely valuable debate, characterised by the extent to which hon. Members have spoken with both commitment and expertise. It reinforces why we all desire the issue to be seen as outside politics, and there is an enormous prize for our whole country. People looking to invest want to see as much clarity and agreement between the parties as possible, to which the tone of the debate has been conducive. We are all frustrated about the pace of progress and we are all disappointed that the Longannet project could not be made to work within the budgetary framework, but we are all equally committed to taking the issues forward, to ensure that the United Kingdom is one of the most attractive places in the world in which to invest in CCS. The UK has unique facilities, which should put it at the forefront of developing CCS, and Scotland is at the forefront in the United Kingdom. The industry’s potential for Scotland, for existing industry and for new industries that want to support CCS and to provide part of the supply chain is extremely comprehensive.

The frustration was outlined before the general election by Paddy Tipping, then the Member of Parliament for Sherwood and a member of the Select Committee on Energy and Climate Change, who said it was a competition without end—the competition for CCS seems to have gone on for ever. Given that we must now proceed with new urgency on setting a new competition, it is not lost on any of us that we wasted the chance over a number of years to take the opportunity forward, and we must now do so with extra vigour.

[Thomas Docherty]

Does the Minister share my observation that part of the problem with the previous competition was people’s apparent belief that it was a case of the last bidder standing, rather than of having technology that worked? Can he ensure therefore that much more robust criteria are set down at the start, so that everyone understands what the competition is?

[Charles Hendry]

My concern was always that the competition was too narrowly focused. Given the requirement for post-combustion technology, the interest in pre-combustion technologies, such as the BP project at Peterhead, could not qualify. The assumption at the time was that the technology could then be sold to China and elsewhere to retrofit old plants, but the Chinese are now clearly quickly developing their own technology that they want to sell to the rest of the world, so we need to look at a wider range of technologies. An added complication, which I will come to later, is retrofitting an old technology to an old plant, with the significant extra costs inevitably occurred in bringing that plant up to scratch, to give it decades of future life, on top of the cost of the CCS alone.

We all agree that CCS can play a fundamental part in delivering our secure, low-carbon energy needs. It provides us with a generation option that other technologies do not: its flexibility can provide a balance between the intermittency associated with renewables and the base-load nature of nuclear. It allows fossil fuels to play a full part in our low-carbon future and allows the decarbonisation of industrial emissions. We—the whole of the United Kingdom and the Government—remain firmly committed to working with industry to achieve that.

We have made available £1 billion of capital funding to support early CCS projects, and I will say more on that in a moment, in response to the questions. We are establishing a market for CCS electricity through our reforms to the electricity market. We are continuing to lead the world in putting in place the regulatory framework to support CCS, including legislation on third-party access to pipelines. We are supporting essential research and development, including opening the UK’s first carbon capture demo at the Ferrybridge power station. We have also established the CCS development forum, which has drawn together around 40 members from the industry to be directly involved in delivering CCS in the United Kingdom, together with representatives from the international academic and non-governmental organisation communities.

There are many different ways to achieve the decarbonisation of the power sector. At this stage, it is not possible to predict which will be the most cost-effective route or what exactly the power sector will look like in 2030. Nevertheless, we can use economic models to produce projections, using the best evidence currently available. Analysis undertaken for the carbon plan of the Department of Energy and Climate Change suggests that around 40 to 70 GW of new low-carbon electricity generating capacity will be needed by 2030, depending on demand and the mix of generation built. In response to the point made by the hon. Member for Banff and Buchan (Dr Whiteford), a strong continuing role for gas is envisaged in that mix.

--- Later in debate ---

[Thomas Docherty]

The Minister will recall that I previously met him to discuss transmission charging. At that time, we referred to the fact that fossil fuels that come up and down are charged on their capacity rather than what goes to the grid. Will he set out briefly the Government’s thinking on that and how we can change the system?

[Charles Hendry]

The hon. Gentleman’s point is critical to the whole Scottish electricity sector. The work is being taken forward by Ofgem through Project TransmiT, which is considering the appropriate regime for charging when electricity is transmitted over long distances. It will set out its thoughts during the next few weeks, and that can be discussed in more detail. I am very encouraged by the progress that I understand is being made to find a formula that will work for those who are developing projects north of the border and in other parts of the country. More detail will be available shortly, but it is critical to the development not just of CCS in Scotland, but to the whole electricity generating sector north of the border.

We are putting in place a strong financial offer for early CCS projects, and it is one of the best offers anywhere in the world. It includes the £1 billion that is available for the up-front capital costs of projects, the potential for low-carbon contracts for difference to support operational costs and the potential for European new entrant reserve funding, which we fully support.

In response to the point made by the shadow Minister, the Chief Secretary to the Treasury has said that, realistically, because the programme is being put back, the money that we had anticipated being spent in this spending round is unlikely to be spent, and it cannot be spent in the time scale originally intended. If Longannet had gone ahead, it could have started to be drawn down this year and certainly into 2013. With new projects coming through, that will happen at the very end of this spending round and primarily into the next one. However, there is a clear commitment, and the £1 billion remains.

In response to the point made by the hon. Member for Banff and Buchan, good progress is also being made on finding additional sources of funding to bring into the process. Discussion is taking place with sovereign wealth funds overseas to trap their investment in this area. We are seeing a greater appetite from industrial investors to put in their own funding, instead of the Government providing funding. Projects involving enhanced oil recovery might also make a significant financial contribution.

Oral Answers to Questions

Debate between Charles Hendry and Thomas Docherty

Thursday 20th October 2011 Commons Chamber

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

Yesterday’s news on Longannet was obviously deeply disappointing to my constituents, and to the whole of Fife. Will the Secretary of State set out what assessment he has made of the medium-term future of the station, and will his Department work with me to secure a long-term future for it? Will he also confirm that despite the bluster and spin from the Scottish National party Government, not a single penny has been offered by Mr Salmond?

[Charles Hendry]

May I first thank the hon. Gentleman for the very constructive way in which he has engaged in this process and for the support that he has given to his constituents? I think that there is joint disappointment that it has not been possible to take that project forward. The longer-term future of the plant will now be a matter for the company, and that was always going to be one of the problems of a retrospective regime at an old plant with the upgrading costs that would have been necessary. I am delighted that he will engage with us as Ministers and with our officials on the best way of taking things forward, because we are completely committed to seeing carbon capture and storage developed, preferably in Scotland. As far as I am aware, not one penny of support was offered by the Scottish Government.