Carbon Capture and Storage (Scotland)

Eilidh Whiteford Excerpts

Tuesday 17th January 2012 Westminster Hall

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

Thank you, Sir Roger, for calling me to speak. I am grateful for the opportunity to serve under your chairmanship again. It is the first time that I have done so since your well deserved recognition in the new year’s honours list.

For the sake of clarity, I should draw Members’ attention to my entry in the Register of Members’ Financial Interests and point out that at the last election I received a donation from the union Unison, which has a small number of members at Longannet power station in my constituency.

As Members will be aware, Longannet power station sits at the most westerly point of my constituency. It has been generating electricity since 1970 and it has the capacity to put some 2,000 MW into the national grid. Scottish Power, or its parent company Iberdrola, has been the owner of Longannet power station for a number of years.

Members will be aware that the previous Labour Government established the carbon capture and storage competition, and I will say some more about that shortly. At the tail-end of last year, the current UK Government took the decision to end Longannet’s bidding for the £1 billion pot of money and today I hope to tease out from the Minister exactly where that decision leaves the future of carbon capture and storage, both in Scotland and more generally.

As I said, Longannet power station has been successfully putting up to 2,000 MW into the national grid in Scotland for more than four decades. Several years ago, it had a significant upgrade, which will give it a life through most of this decade. As is the case with all fine pieces of engineering, however, there is only a limited life span left for the power station and of course there are serious questions about how we will keep the lights on in Scotland.

Being a grown-up, I do not think that the Scottish National party’s rather ludicrous plan for 100% of Scotland’s electricity to come from wind turbines and other renewables is at all sensible or deliverable. If someone is a grown-up and has a real energy policy, they have to look at the alternatives to that plan. I firmly believe, as I have done for a number of years, that clean coal technology must be part of an energy mix including nuclear power stations. There should be some role for renewables and fossil fuels, mainly coal, although I accept that there is a limited role for gas. However, I was disturbed to learn from a much esteemed source this morning that 80% of the gas that we now use in the UK comes not from UK shores but from overseas. Security of supply is an important concept. For the benefit of the SNP, which clearly does not understand the concept, let me explain it. If we are dependent on overseas sources of energy, we must have comfort that those sources of energy are reliable, can be delivered safely and are not prone to outside threat.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

Given recent events in Japan, does the hon. Gentleman think that nuclear power is reliable and safe?

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[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I congratulate the hon. Member for Dunfermline and West Fife (Thomas Docherty) on securing the debate. I am rather disappointed that he chose to squander his opportunity today; instead of asking the Government about progress on the plans for carbon capture and storage in the UK, he preferred to take pot shots at the First Minister, who not only is not here but does not have the power to make decisions on CCS that will be made under the current constitutional arrangements.

I want to focus on CCS in Scotland. I share the hon. Gentleman’s disappointment and frustration over the abandonment of the Longannet project. It promised job security for the folk involved, offered technological innovation and would have brought significant investment to Fife. I regret that it hit the buffers, but it is not only the people of west Fife who have been frustrated by the slow progress of carbon capture projects in Scotland. Peterhead, in my constituency, has long been recognised as having leading potential as a site for CCS. Indeed, Scottish and Southern Energy asserted that Peterhead represents the best site in the UK for a gas demonstrator CCS project. By no means is that a new plan. The previous CCS plan for Peterhead was abandoned in 2007, after expectations were raised and then dashed. Frankly, delays and indecisiveness on the part of Government led BP to scrap its plans and turn its attention to projects overseas. The problem was that the previous Government were not decisive enough.

[Thomas Docherty]

The hon. Lady has commented on two decisions, but will she clarify whether a Scottish Government, if they had the powers, would have gone ahead with both those schemes? Would they have put up the £1.5 billion to £2 billion needed for Longannet and the sum needed for Peterhead?

[Dr Whiteford]

I do not deal in hypotheticals. I wish that the hon. Gentleman would turn his attention to where we are now and how we are going to progress, because important questions need to be answered.

[Thomas Docherty]

That is a no.

[Dr Whiteford]

No, it is not. The Scottish Government’s commitment to carbon capture and their involvement in discussions about Longannet and Peterhead have been constructive throughout the process. I hope the Minister will comment on how he has worked with the Scottish Government on the carbon capture and storage projects.

The Peterhead project was resurrected in 2010 when Scottish and Southern Energy Group revived the idea, and last November it joined forces with Shell to make progress on the plans. Those companies are committed to a gas demonstrator at Peterhead, using storage in the Goldeneye field and the existing North sea infrastructure going out from St Fergus. The Goldeneye field is available and has the right pressure and capacity to make the project viable in technical terms.

I do not think there is much argument any more with the view that we need to mitigate the environmental impact of fossil fuels if we are to have any hope of meeting our international commitments and obligations in tackling climate change. We need to continue using fossil fuels, but we also need to make them cleaner. It is also evident—I was surprised by the hon. Gentleman’s comments on this—that gas will remain a crucial part of our energy mix. What are the Minister’s views on the role of gas in the UK’s energy supply? It is important to understand the role that CCS might play, not just from the perspective of energy security, but from that of the sustainability of our planet.

[Thomas Docherty]

Will the hon. Lady give way?

[Dr Whiteford]

I will, and I hope the hon. Gentleman’s intervention will be better than his previous one.

[Thomas Docherty]

I am not sure whether I heard the hon. Lady correctly, so will she clarify whether she thinks it a good thing that we would import 80% of our gas not from Norway, but from Kazakhstan, the middle east and other slightly insecure regions?

[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.

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[Charles Hendry]

The hon. Gentleman is tempting me to go out of line, but I am reluctant to pursue that approach. Until we understand the nature of the projects, I cannot explain to him how they will be funded. They will all have a different funding requirement for longer-term running costs or up-front capital, which may come from one or two sources. We want to make it clear that we want projects to try to find other investors to enter the process. There will inevitably be a process of discovery and of trying to find out exactly what the best projects are, but we have made it absolutely clear that that £1 billion remains available. The hon. Gentleman understands that the time scale has been moved backwards because of the decision on Longannet, but the £1 billion remains ring-fenced.

[Dr Whiteford]

I appreciate the Minister’s candour in outlining how he is trying to find alternative sources of funding, but Shell and Scottish and Southern Energy hope to begin a full-scale field study of the Peterhead project in the second half of this year. They have made it clear that they will need funding in years 2 and 3, and it would be helpful if the Minister indicated what the funding prospects were for that time scale.

[Charles Hendry]

The hon. Lady makes exactly the point that I am keen to focus on: there are investors who might want to come into the project—international investors who want to be part of the early development of this game-changing technology because of its global potential. We are encouraging them to try to talk to other potential investors, and we are looking at a range of projects. We are discussing one that could come through the new competition, but it is not the only one. Other projects are viable and would have greater scope for accessing the new entrant reserve fund, but until we have seen their scope and the collaboration and co-operation between different industrial players, it is hard to come to a final decision. However, I give the hon. Lady the commitment that we have a real desire to take the competition forward much more rapidly than the previous competition, and during the next few weeks, we will provide the details.

We had an industry day in December, and during the next month we will have a further industry day to provide more detail on how the competition will work. We will then open up the competition shortly afterwards with a tight time scale to encourage firms to come back. Having lost time, we want to make up for that and to see the full range of projects that can benefit from funding and find out how we can take that forward.