Carbon Capture and Storage

Ross Thomson Excerpts

Thursday 19th October 2017 Westminster Hall

[Peter Aldous (Waveney) (Con)]

It is a pleasure to serve under your chairmanship, Sir David. I congratulate my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke) on securing this debate. His timing is spot on, given the publication last week of the clean growth strategy.

We last held a debate in this Chamber on carbon capture and storage on 24 January. From my perspective, the outcome of that debate was disappointing, but nine months on, I believe that we are in a much better place. A framework is beginning to emerge within which carbon capture and storage in the UK can become a major industry, and we are learning lessons from the aborted second CCS competition.

I believe that the Government are studying closely the proposals in the noble Lord Oxburgh’s report of September 2016. I was on his advisory committee, which heard the evidence, drafted and approved the report, and I believe that it is a good blueprint for the future. We see carbon capture and storage as fitting in well with the 10 pillars of the Government’s industrial strategy; it ticks all the boxes. Finally, the publication last week of the clean growth strategy provides the much-needed road map that business is looking for in order to invest time and money in carbon capture and storage.

Invariably in debates such as this, Back-Bench MPs have an ask of the Government, which we look to the Minister to take on board and respond to. However, from my own perspective, with the publication of the clean growth strategy last week, the Government have, to a large degree, shot my fox. I shall briefly set out the case for CCS and why it is so important that it is at the heart of the UK’s industrial strategy.

The UK has legally binding commitments, set out in the Climate Change Act 2008, to reduce carbon emissions by a minimum of 80% from 1990 levels by 2050. As the Intergovernmental Panel on Climate Change and the Committee on Climate Change have both pointed out, if we do not deploy CCS, it will be very difficult to meet that target cost-effectively.

The UK has a unique selling point that means we should be at the vanguard of the CCS movement. It is the thing that most colleagues in this room have in common, in that our constituencies adjoin it: the North sea. I believe that your seat also adjoins it, Sir David. In the North sea and the UK continental shelf, the UK has its own large, safe and secure offshore CO₂ storage vessel, in the rocks deep beneath UK territorial waters. It provides us with the least-cost form of storage on an industrial scale. Over the past 50 years, as a result of the development of the North sea oil and gas industry, the UK has acquired enormous expertise and experience that can be harnessed to deliver CCS.

[Ross Thomson (Aberdeen South) (Con)]

Will my hon. Friend join me in acknowledging and welcoming that the University of Aberdeen has world-leading experts at the forefront of research into carbon capture and utilisation? It is reflected in the fact that Aberdeen was the only UK university whose entry into the Carbon XPRIZE was accepted. It is developing technology to help create a solution to the damage that CO₂ can cause, such as using what is left as materials for furniture and so on. Does he welcome and acknowledge that?

[Peter Aldous]

Yes, I do. I am happy to acknowledge it. We have enormous, significant expertise across the UK. I am sure that all of us in this Chamber can highlight institutions in or near our constituencies that can and should put us at the vanguard of the low-carbon economy and its global development over the next few years.

As I was saying, the UK has acquired enormous expertise and experience in the oil and gas sector, which can be used to deliver CCS, create jobs and—most importantly for the Government—generate revenue for the Exchequer. However, as the hon. Member for Redcar (Anna Turley) highlighted, time is of the essence. We need to get on with it. As a result of the lower oil prices that have prevailed for the past three years, the North sea is going through a period of transition and restructuring. We must move quickly to use assets that otherwise might be prematurely decommissioned.

As we have heard, CCS has an important role to play in delivering growth across the whole UK and in bringing jobs to coastal communities, which in recent years have faced particular challenges with the decline of traditional industries. There are areas where clusters of energy-intensive industries are based—such as Scotland and the north-east on Teesside, as the hon. Member for Redcar highlighted—which could benefit significantly from CCS. That might not be the exact situation in my own constituency, but we have businesses in East Anglia that are part of the North sea supply chain, whether in oil and gas or in the emerging offshore wind sector, and that would benefit from the development of CCS.

The industrial strategy highlights the importance to the UK of cultivating world-leading sectors and being global pioneers in industries in which we have an advantage. CCS is one of those industries. We have the resources and the skills. It is an industry in which we can not only secure inward investment but, in due course, create significant export opportunities, building on the expertise that my hon. Friend the Member for Aberdeen South (Ross Thomson) mentioned a minute ago.

On the resources and skills required for CCS, Norway is a country with which we have a great deal in common.

--- Later in debate ---

[Alan Brown]

Yes, I welcome that collaboration and announcement. The hon. Gentleman made a joke about being parochial for his area and his constituency, but surprisingly I am not going to be that parochial. I would like to see all these projects develop, with local areas across the United Kingdom benefiting.

The hon. Gentleman talked about taking tiny steps forward. We need to take much bigger leaps forward—this is where I turn to the gloomy aspect that my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey touched on—but we have taken backward steps. The Minister might not like hearing this, but it is important, and it has got us to where we are just now. Pulling the plug on the Peterhead project cost the Peterhead area 600 jobs, but it has the much wider implication that it dented investor confidence. The Government need to take action to recover that confidence and find ways to get private investment going forward.

In 2014, before the Scottish referendum, we were told by the Better Together campaign that only the broad shoulders of the United Kingdom could cope with a reduction in the oil price. Since then, we have sadly seen a reduction in the oil price, but we have not seen enough support from those broad shoulders. That is why the pulling of the project at Peterhead was a further blow to the oil and gas industry in that area of Scotland. That project could have been the perfect fillip.

[Ross Thomson]

Does the hon. Gentleman accept that the White Paper on independence was wrong when it talked about the proceeds from oil and that the Deputy First Minister John Swinney was wrong when he said that there would be a second oil boom? As we are talking about U-turns, will the hon. Gentleman join me in calling on the First Minister to perform a U-turn on scrapping the energy jobs taskforce, because that is needed to support jobs in Aberdeen?

[Alan Brown]

I thank the hon. Gentleman for that intervention and for talking down the oil and gas industry in his area. Yes, the Scottish Government’s predictions in the White Paper had the future price of oil wrong—just like the UK Government and the Office for National Statistics had it wrong. The Scottish Government were somewhere between the two. We were not the only ones who got it wrong; economists got it wrong too. We admit that we got it wrong, but it is why the SNP has long argued for an oil fund, because that would have helped to smooth the trough that came. I am happy to acknowledge that point and put it on the record.

Returning to where I was going to go, the decision to pull the plug on Peterhead had wider implications for investor confidence. It has been acknowledged and was repeated in the clean growth strategy that risk was an issue with these projects, but in the previous competition the real risk was the White Rose project, where the contractors involved could not apportion risk between themselves properly and could not provide a compliant bid. In the Peterhead project, Shell was able to manage the risk. The Government need to review that and find out why Shell said it could manage the risk and provide a compliant bid. That has important implications going forward.

The National Audit Office report compiled after that decision confirmed that a total of £168 million was spent on the two CCS competitions with no tangible research and development outcomes to show for it. The Government may suggest that the contractors or personnel involved in the projects developed some expertise, but there is no guarantee that they will be involved in future projects. There is a risk that they will take their expertise elsewhere. That is why we need to go forward quickly. Following the decision on Peterhead, there has been the withdrawal of funding for onshore wind and solar power, which has caused problems in those sectors, leading to a 95% drop in expenditure on renewables. There is a clear pattern, and I highlight that to remind the Government that investor confidence is low and it must be stimulated. They need to find a way forward.

The Government can find ways forward to manage risk. In the Thames tideway project, they underwrote risk to the value of £5 billion. Hinkley Point C had bonds of £2 billion underwritten, not to mention the fact that the National Audit Office estimates that the project will cost £30 billion. We must remember that, unlike the other contracts for difference awards, Hinkley has a 35-year lifespan and not the standard 15. It is clear that where there is Government will, there is a way. They need to find that will and way for carbon capture and storage. The hon. Member for Waveney talked about the Oxburgh report, which highlights that CCS can deliver an estimated strike price rate of £85 per megawatt-hour. That compares favourably with £92 per megawatt-hour for Hinkley.

Other Members have highlighted the estimate of the Committee on Climate Change that CCS could halve the cost of meeting the 2050 carbon reduction target. In that respect, I welcome the clean growth strategy, which the Government brought forward last week. As I said at the time, however, the strategy gives mixed messages. It states that CCS will be deployed subject to cost reductions, but we need clarity. What are the Government’s cost expectations and what is the expected trajectory once the initial project is up and running? We need to remember how that compares with the “sign at all costs” attitude taken towards Hinkley. The Government also need to state clearly how they expect CCS to be paid for. Members from Teesside have highlighted the need to find a suitable and robust payment mechanism that gives value for money.

I welcome the Government’s statement in the clean growth strategy that they

“will work with the ongoing initiatives in Teesside, Merseyside, South Wales and”—

importantly from our perspective—“Grangemouth”. However, they need to clarify what “work with” means. What is the real level of support that they will provide? It needs to be more than working with or providing token support. As my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey highlighted, the St Fergus project in the north-east of Scotland is being supported by the Scottish Government and EU funding. When it comes to EU funding, what future funding are the UK Government going to allocate beyond the 2020 horizon? How do they see collaborative working going forward?

Due to the abrupt pulling of the previous competition, at great cost to the public purse, not only was the National Audit Office report undertaken, but the Public Accounts Committee also undertook an investigation. It made a number of recommendations; hopefully the Minister will advise us on how the Government will take them forward. First, the Committee recommended that the Government

“set out in its Industrial Strategy the role that CCS can play”.

I am not sure that there is enough detail in the industrial strategy on that yet. The next recommendation was that

“By the end of 2017, the Department should quantify and publish the impact across the whole economy of delays”

to CCS and of its not having been implemented yet. The Committee recommended that an

“Emissions Reduction Plan should set out a clear, joined-up strategy for deploying CCS”.

It also said that the Government need to look at different risk options for energy policies, that the Treasury should buy into the emissions reduction plan at the outset and that there is a need for less Treasury interference—the Department for Business, Energy and Industrial Strategy must actually make the decisions, rather than the Treasury intervening.

I hope that the Minister will respond to that, and advise whether the carbon capture, utilisation and storage cost challenge taskforce that is to be put forward will consider those aspects. I welcome the setting up of that taskforce. Will she also confirm how experts will be selected and incorporated into the taskforce, and what the terms of reference from the Government will be?

It is laudable that the clean growth strategy reiterates that we want to see the implementation of CCS. As the hon. Member for Stockton North (Alex Cunningham) asked, what does large-scale CCS in the 2030s mean, what is the pathway to that, and what projects do we need to see on board before then? The mention of supporting hydrogen production is also laudable; that is certainly a good way forward. I would also highlight the fact that Scotia Gas Networks is looking to run demonstration trials up in Scotland, to see how that will work in a domestic setting.

It is laudable to say that the UK aims to be a global leader, but to be a global leader we need to lead from the front. We need financial commitment, drive and determination, and we need to see a clear way forward soon. I look forward to hearing the Minister’s response.