UK Decarbonisation and Carbon Capture and Storage

Philip Boswell 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 ---

[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>

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

I congratulate the hon. Gentleman on securing the debate. He is making some good points. Has he considered the impact that leaving the European Union might have on Britain’s ability to deliver on its climate change obligations? Previously, we looked towards a European-wide solution at the Paris climate change summit, so what more do we now need to do in Britain to meet those carbon-reduction obligations?

[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.

[Several hon. Members rose—]

--- Later in debate ---

[Jim Shannon]

My hon. Friend may regret it, but it will not diminish our friendship in any way whatever. It is good to have a broad church of opinion within our party.

I will pose some questions because it is important to do so. Environmental issues are of great importance, so it is essential that our strategy is effective. I say to the Minister that I am not sure that we have managed to achieve all we could or should thus far. That is the question many have posed, including the hon. Member for Coatbridge, Chryston and Bellshill during his introduction.

It is opportune that we are having the debate on the back of the industrial strategy Green Paper announced by the Department for Business, Energy and Industrial Strategy yesterday. Many believe that the Department has not achieved value for money for its £100 million spend on the second competition for Government financial support for carbon capture and storage. Other hon. Members have said that there must be an investment to get a return, and that the return will justify the investment.

It is my understanding that CCS is a process to avoid the release of carbon dioxide into the atmosphere, and that it has the potential to help to meet the UK’s target for a reduction of CO₂ emissions in both the power and industrial sectors, which is commendable. We have pledged to cut 1991-level emissions by 57% by 2030. While that is a great goal, how will we achieve it? Hon. Members have outlined potential job creation and the opportunities that will come if it is done in the right way. To achieve the goal is most certainly a challenge, given the untried nature of the technology.

[Philip Boswell]

I point out to the hon. Gentleman that the technology is truly tried and tested. The curious scheme in Northern Ireland aside, I would urge both hon. Members from Northern Ireland, who are my friends, to read the Oxburgh report and contrast the less than £85 per KWh that is achievable under this system with the Hinkley Point strike price of £92.50. Furthermore, the networks already exist. That is the attraction of having an existing infrastructure.

[Jim Shannon]

I will respond to the hon. Gentleman’s intervention during my comments. The future costs for the duration of the CCS project are unknown, and perhaps the figures do not add up on all of the lines.

Two projects that were shortlisted for the CCS process both failed to meet the proposal goals. The work done centrally by the Department in sustaining negotiations for the second competition for the project with its preferred bidders must be noted—a process is in place. The hon. Member for Coatbridge, Chryston and Bellshill has clearly outlined some of the evidence, and I will pose some questions on that. I can clearly say that I support the principle of what we are trying to achieve, but I wonder whether it can be achieved by that process. There are lessons to be learned, and hopefully valuable commercial knowledge and technical understanding of how to deploy the competition projects will have been gained, as he said. If we have that information, let us see how we can use it to further the project.

There are currently no examples of large-scale CCS projects in the UK, and only 16 operational projects worldwide. BEIS should maximize its expertise for future CCS strategies and put into practice the lessons it has learned—in other words, the evidence should be used for the betterment of delivering such projects. If and when CCS projects are self-sustaining and economically viable, we will see clean electricity from renewable sources, which we wish to see and are committed to trying to achieve. However, the sticking point is in the phrase “if and when”, meaning we could achieve those things “if and when” the Government and BEIS find a happy medium and the in-between. Hon. Members are often tasked with finding a balanced in-between or the correct way forward.

The substantial future benefit of the CCS process is to avoid the release of CO₂, as several hon. Members have indicated. However, it is clear that there are serious problems and critical issues with such projects that we cannot ignore. As I have discussed, there are no large-scale examples of long-term storage projects in the UK, despite a series of UK Government and EU initiatives aimed at incentivising their development. It has been argued that CCS technology is too expensive to be commercially viable for private developers without Government support in the shape of a strike price. Government involvement is critical in taking this forward.

I am aware of the work carried out by the parliamentary advisory group on carbon capture and storage, which found that good design could make CCS affordable. However, I have reservations about the cost of CCS competitions to the taxpayer.

--- Later in debate ---

[Philip Boswell]

I am delighted to see such excellent and almost comprehensive cross-party support for the inclusion of CCS in the Government’s commendable industrial strategy doctrine. Clearly, we are mostly on the same page, and I am sure the application from the hon. Member for East Antrim (Sammy Wilson) to work for the Trump Administration will be successful.

Although the Minister understands that the cost of developing CCS is an existing issue, I am sure he recognises that the cost of not developing and including it will be greater—that is well articulated in the report. None the less, he has undertaken to keep to climate change commitments, to publish the Government plan in quarter one of 2017, to publish details about decarbonisation across all sectors including CCS, and to consider the Toshiba option, which is to be highly commended. I very much look forward to developments in the near future.

I am delighted to see Lord Oxburgh in attendance and thank all hon. Members for their contributions. Finally, I thank you, Mr Hollobone, and all the staff who enabled the debate to take place.

Question put and agreed to.

Resolved,

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