Carbon Capture and Storage (Scotland)

David Mowat Excerpts

Tuesday 17th January 2012 Westminster Hall

[Thomas Docherty]

My hon. Friend is exactly right. That is the holy grail. I am not sure if that makes my hon. Friend the Member for Rutherglen and Hamilton West the Sean Connery or the Indiana Jones of the analogy, but it is the holy grail that we should be pursuing, and it can be achieved. My point about Betamax is that it was a fine piece of technology, and our advanced gas-cooled reactors in particular were, and still are, superb engineering kit. I see that the SNP is now a convert to the case for AGRs, championing Hunterston and Torness having life extensions in the years ahead, but when the rest of the world is going down the VHS road, it is slightly disturbing to think that we are going to pursue gas at the expense of coal. Coal is the long-term priority, and there is a significant market, if we can get the technology to work: we can export it not just to developing countries, although that would be a big market, but to many western and European countries that are also very coal reliant.

I should perhaps say a little about the technology itself, and its benefits for Scotland. As Members are undoubtedly aware, the trick with the technology is not just to capture the carbon but to store it. The Peterhead scheme is, as I understand it, very similar to that for Longannet, in that it would seek to push the captured carbon up into the North sea, into land owned by the Crown Estate. It is important to recognise the Crown Estate’s role, and perhaps the Minister can outline how that will work. Reuse of the now extinguished gas and oil fields off our UK shores is also provided for. Interestingly, the Longannet scheme was a tri-party approach, involving National Grid, Iberdrola and one of the largest oil and gas companies, which had an extinguished field. I hope the Minister can say more about how he will encourage the private sector to do more such partnership work.

It is worth saying that no short-term danger is posed to the Longannet power station by the current carbon capture and storage project not getting the go-ahead. The lights will not be turned off at the station tomorrow morning, but there is a question about its medium-term future. There is a genuine debate to be had about whether it would be the right decision to build another coal power station, whether Iberdrola should be encouraged to seek a further life extension, and if so what Government support could be offered, or whether, as at Cockenzie in East Lothian, a decision is made to shift the type of fuel. Whatever the options, I sincerely hope that the UK Government will do all they can to offer genuine support to Iberdrola as it seeks to take this forward, and I would be grateful if the Minister found time—for either himself or his colleague Lord Marland, who has, to be fair, been a big supporter of CCS—to meet with me. Whatever decision is made about Longannet, I hope, ultimately, that when we get successful CCS we can either retrofit the station or, if we do persuade Iberdrola to go for a new build, that we can get it included. For the benefit of my constituents, I would be grateful if the Minister spelt out what support the Government will be able to give to any new build fossil fuel plant that might be needed to keep the lights on.

I am conscious that other Members wish to speak, so I will draw my speech to a close.

[David Mowat (Warrington South) (Con)]

I thank the hon. Gentleman for giving way. I have listened very careful to his arguments about coal and gas. It seems that this technology is a long way from being proven, and it would be a big win if we could get it to work for either gas or coal. I want to address the point about Longannet. The Government’s most recent publication, “The Carbon Plan”, which came out about a month ago, states that the first decision about an operational plant for CCS will be made in 2018. That is a long time after the current generation of coal is scheduled to be switched off, so there is an issue there if we expect this technology to save some of the coal stations that are planned to be switched off in the next five years.

[Thomas Docherty]

I am most grateful to the hon. Gentleman, because he has reminded me of an important issue. If the project had gone ahead at Longannet, the full 2,000 MW would not have been converted to a CCS scheme. Forgive me if my figures are slightly out, but roughly only 20% of the capacity would have moved across. He is entirely correct to say that it is a long-term technology. The problem with energy and its supply is that by its very nature it requires long-term decisions, which is what makes the SNP’s ludicrous plan for 100% renewables so unachievable. They have no “plan McB”—to use the First Minister’s slogan. When the hon. Member for Banff and Buchan addresses the Chamber, I would be grateful if she spelt out how an SNP plan McB would work, given that it is so clearly failing on its plan McA.

--- Later in debate ---

[Dr Whiteford]

I agree with the hon. Gentleman that energy security is crucial, but the point about gas is that I do not think we have a choice any more, and the reason why we will have to use gas, wherever it comes from, is the previous Government’s indecisiveness. They refused to make decisions, for example, on whether to have new coal at Kingsnorth. After 13 years in government, it is very easy for the previous Government to put pressure on the new Government, but they need to take some responsibility for their own decisions when they were in office and their failures, which have made us very dependent on external gas at present.

That, however, does not negate the argument for a CCS gas demonstrator project at Peterhead. We are where we are and we are dependent on gas, but the proposed Peterhead site fits in extremely well with both the UK’s strategic objectives and the EU’s strategic priorities. It is also very well located for old oilfields in the North sea. We are in a good position to use them—it is probably a better position than that of anywhere else in Europe at present.

[David Mowat]

I agree with the hon. Lady that gas is the default solution to energy where decisions have not been made. On gas from overseas, I think I am right in saying that the majority of our coal also comes from overseas at the moment, but we can rest assured that, from 2015, Europe is likely to be flooded with cheap shale gas from the US, so I think our concerns about that particular fuel source are misplaced.

[Dr Whiteford]

I am grateful to the hon. Gentleman, who has considerable expertise in this area, for making the important point that it is not just gas but coal that comes from overseas. The point about CCS technology is that it is extremely marketable and the UK has a comparative advantage in that market. A number of coal demonstrator projects are taking place elsewhere in Europe, whereas gas is not being explored to anything like the same extent internationally. That could give us a proper comparative advantage in gas CCS technology. It is about not just our domestic markets but international marketability.

The key issue is funding. There is no doubt that the collapse of the Longannet project and the Treasury’s announcement that it would reallocate the underspend has created a great deal of anxiety and uncertainty. However, Shell and SSE have made it clear that they would require funding in the next two to three years to make the project viable, and revenue support during the operational period. In that respect, the energy companies have argued that spreading the finance too thinly over too many projects risks jeopardising all of them.

What proportion of the funding will the Government make available during this Parliament? What discussions have been had about the prospects of levering in further investment from sources other than those in the public sector? What is the Government’s response to the argument that the UK needs to focus its efforts on funding and risk management? The Government have published a timeline for implementation. How likely is that timeline to be met and how is it progressing?

We have to recognise that this is a demonstrator plant. It carries investment risks and might not go smoothly and completely according to plan, but that is why it is so important for it to have Government backing. I hope the Peterhead project will progress apace.

--- Later in debate ---

[David Mowat (Warrington South) (Con)]

Thank you for letting me speak, Sir Roger—I had not intended to do so. I want to make two points in relation to some of the comments I have heard: one in favour of CCS and one expressing some reservations. I will mention the latter one first, which relates to cost.

Many hon. Members have talked about the benefits of CCS technology. Of course, we live in a country where energy is still 90% fossil fuel generated, and anything that can enable us to make the transition from that in a carbon-free way, such as CCS, is attractive. Yet there seems to be something wrong. What the Government should be doing is setting a price for carbon and then letting the private sector do the work. We do not know the details about Longannet but, for whatever reason, that approach is not enough. People are saying that we have to invest a further £1 billion here and have a further pilot scheme there. What the Government’s role ought to be—this is the energy market reform—is, as it is with nuclear, to set a price for carbon, give industry that stability and let it make the investment. For example, let us consider Iberdrola.

[Ian Swales]

The hon. Gentleman might be interested to know that the pressure I feel in my constituency is essentially coming from industry, not from power generators, because industry can very much see what is happening to it competitively and so on through carbon pricing. Does he agree that there may be a carbon pricing method that can incentivise the power sector to play its part in bringing this new technology on board faster?

[David Mowat]

I do not, no. If this technology is to work, it has to be done on the same playing field as everything else. I mentioned the price of carbon. The other thing about CCS technology that is not in doubt is that it requires an injection of power over and above what a power station is currently using—in the order of 25% for coal. That is an immediate increase in emissions and everything else just to make CCS work.

[Gordon Banks]

I want to press the hon. Gentleman and ask him whether he is advocating that the Government should not be spending this £1 billion.

--- Later in debate ---

[David Mowat]

I am willing to accept that this technology is new and that the Minister might therefore say it is a bet to try to get it to work in our country. I agree that our country is uniquely well suited for CCS because of the offshore gas fields. In places such as Germany, people have been resistant to CCS because the fields are onshore and they do not want CO₂ under them. Our country is in a uniquely good position for CCS, as it is for wind, and I do not necessarily begrudge the Government spending the money. However, I repeat the point that, structurally, the energy market reform sets the price for carbon and we should let the market decide. We will watch with interest whether the market does decide that this technology is worth pursuing. That is my negative point. I shall now make my positive point.

[Thomas Docherty]

The hon. Gentleman is certainly bringing a different perspective to the debate. Does he not accept that Governments have given subsidies and financial support to both nuclear and renewables for a decade-plus and that CCS pump-priming would be no different from the support that those industries already get?

[David Mowat]

That is a fair point. In the energy market reform that has been published, the Government are very proud of the fact that they are giving no subsidies to nuclear in going forward—[Interruption.] Well, that is a different argument. The Government have subsidised and continue to subsidise renewables. That takes me to my next point.

[Dame Anne Begg]

Will the hon. Gentleman give way?

[David Mowat]

Certainly. I have clearly aroused some interest.

[Dame Anne Begg]

Does the hon. Gentleman accept that it is not simply about the economic argument because if we leave the market to decide, it will always go for the cheapest option? There is also an environmental argument and the Government need to be involved on that basis because this is still a new technology with demonstrator projects. Until the technology can be proven, the market and the industry will not make the investment. The Government may therefore need to make that investment to pump-prime and ensure that we get the environmental benefits.

[David Mowat]

Just to be clear, I completely buy into the Climate Change Act 2008 and its requirements. However, the way that the Government have chosen to meet their environmental obligation is by setting a price to carbon. That is what makes CCS viable because, obviously, the companies will save the money from burning the carbon at whatever the rate is—£30 or £50 a tonne—and so on. That is my point. The level playing field that the Government are trying to obtain through the energy market reforms is being achieved over the medium term by the price of carbon.

Let me now make my point about CCS from a more positive point of view. What worries me a little about the Government’s position on CCS is a little similar to what worries me about the Government’s position on nuclear. Both CCS and nuclear have one thing in common: they are extremely good at reducing carbon, but they are not renewables. The Government have an issue to work through, and I have said this in other forums. The Climate Change Act 2008 requires us to reduce our carbon emissions by 80%—a huge and difficult target, but it is right that we are trying. My concern is that, in 2009, the EU 20-20-20 directive required us to increase our use of renewables by a factor of five over a decade or so. That objective is not necessarily consistent with the objective of reducing carbon.

It is possible that CCS may lose out, like nuclear, through a little bit more ambivalence on the part of Government. I looked at the Government’s carbon plan. It estimates how much of our electricity will be produced from CCS by 2030 and how much will be produced from renewables. I am not anti-renewable at all, if it can be made to work in a cost-effective way. The Government’s estimate for 2030 is a factor of five difference between renewables and CCS. I do not know whether CCS will be made to work or not. We should try, and it would be great if it did, but I am worried that the emphasis of policy is not on carbon reduction. The emphasis of policy is on renewables, and that might take us to, or down, a sub-optimal path.

[Ian Swales]

Just one point of clarification: those two things are not necessarily entirely separate. A new 300 MW biomass power station has been announced for Teesport. A CCS network in the area could actually feed into that. As I said earlier, we could end up with carbon negative power as a result of doing that, so they are not entirely separate. While 300 MW is not a huge amount, it is worth noting that the Longannet project was only 400 MW.

[David Mowat]

I agree. I mentioned CCS and nuclear as opportunities. Biomass is also an opportunity. In common with the first two, it is also not a renewable. As I said, I am concerned that the emphasis of policy is in the wrong place. The 2008 Act was a hugely ambitious plan to try to achieve. We should not be diverted from doing so and we should look very hard at optimising that.

[Mr George Howarth in the Chair]

Finally, we have not really covered nuclear in any detail, other than an exchange at the start between two hon. Members from north of the border—the hon. Member for Dunfermline and West Fife (Thomas Docherty) and the hon. Member for Banff and Buchan (Dr Whiteford). People say to me that there is no cost-effective option. On the facts, it would appear that nuclear is cheaper than some of the other options, but of course the market needs to determine that. I agree with that. The carbon price will allow that to happen. That needs to be the case with CCS.