Carbon Capture and Storage

Tom Greatrex Excerpts

Thursday 20th November 2014 Westminster Hall

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship here, Mr Walker, just as it is in other forums of the House. I am grateful for the opportunity to follow the contributions from members of the Select Committee to this interesting debate. The Committee’s report was timely, coming as it did alongside further interest from the Government in some of the other documents that others have touched on, including the Government’s scoping document.

I was here for most of the previous debate, although I missed the opening comments from the Chair of the Select Committee—whatever state of dress he was in. The right hon. Member for Hitchin and Harpenden (Mr Lilley) also spoke, but he is not here now. Although I have not read the full 1,000 page report, I have read some of the summary documents that were referred to. I do not think that those documents were seeking to mislead anyone in making clear the importance of carbon capture and storage for the future. These debates follow on from each other in quite a relevant way.

I have taken part in most of the debates on carbon capture in this House in the last four or so years, first as a Back Bencher and then as a Front Bencher. My view is that CCS is an absolutely vital technology in our transition to a lower-carbon economy—not just for the generation of power, but in terms of a number of energy-intensive industrial processes.

Some people argue that it may well be possible to generate power in various different ways that mean that carbon capture and storage proves to be too difficult or expensive or becomes something that happens further into the future. However, without carbon capture and storage I do not think that there is any realistic option or alternative for a number of industrial processes to reduce significantly their carbon emissions while continuing to be part of our industrial space and foundation industries for the manufacturing base and other sectors in this country.

It is important that we make sure the focus in the Select Committee’s report on industrial clusters is not lost in this or any other debate about carbon capture and storage, because it is vital. As I have previously remarked, power can be generated from wind, wave and solar, but no one has yet demonstrated how to manufacture steel from sunshine. That is unlikely to be the case in our lifetimes and for that reason, apart from any other, CCS remains vital.

I say that because one of the frustrations in our various discussions of CCS over the past few years is that every now and then, it becomes something that people alight and comment on, saying it is important and wanting to demonstrate commitment to it, but then the subject disappears again and when it reappears we find that we have not moved far along. That is not all the fault of the current Government or the previous Government; some of it is to do with technical issues. It is, however, vital that there is a sense of serious and significant engagement from the Government in the existing situation and into the future.

In August, the Government published their scoping document and there is a lot to commend in it. Interestingly, it also refers to carbon capture and utilisation, as well as to carbon capture and storage, which is another important and interesting aspect. There is no denying that many in the nascent CCS industry were disappointed with some of the content—or, more accurately, lack of content—in the scoping document about some of the big issues that my hon. Friends the Members for Wansbeck (Ian Lavery) and for Southampton, Test (Dr Whitehead) have touched on, particularly on the way in which contracts for difference will work for CCS technologies and how that will be taken forward. There was a level of expectation that things would at least begin to be addressed in that document in a way that, actually, they were not.

I am conscious that there have been some announcements this week. I am not sure whether the members of the Select Committee know—I was made aware of this while listening to the previous debate—but the Government have today released to the CCS Development Forum some proposals in relation to phase 2 projects that seem, from the summary that I have just been able to get by e-mail, quite interesting.

It is welcome that the Government propose to establish an expert group—the Minister may be able to help me if I have got some of the details wrong—that will probably meet before Christmas and will provide evidence to Ministers by April on the way in which phase 2 projects could be taken forward. I presume that that will be a matter for whoever the Government are post the general election.

That is a welcome development. I am also pleased that the UK Government and the Canadian Government this week signed a joint statement on a number of issues relating to CCS, but particularly about cost reduction, to which the Chair of the Select Committee referred. Other issues include the ways in which intelligence, expertise and experience can be shared to meet shared goals.

I was struck by the point that my hon. Friend the Member for Wansbeck made in his description of the series of cartoons about climate change. We could apply that to many different areas of energy policy. The point that I will make is that, often, the longer we leave decisions, the fewer options we have and the more expensive they become. That is certainly relevant in this case. My hon. Friend referred to the lead that the UK claims to have in relation to carbon capture and storage. He is right: we say and have said that frequently. We may not be in the lead, but we do have very significant academic and industrial expertise, which is important. We have the experience of earlier projects, including Longannet, which Scottish Power pulled out of a couple of years ago, for a range of reasons. Some were financial, but some were technical, so there is valuable experience from that.

We have something else that I think is quite important—potential storage capacity that, to other places in Europe, may well be very attractive. Depleted oil and gas fields are available and could potentially be sites for storage. The Select Committee Chair referred to some of the issues in relation to public acceptability. Members of the Committee will be well aware of the situation in Germany, where the public antipathy or opposition to carbon capture and storage was very strong from the very early stages because people were not comfortable with the idea of carbon dioxide being stored underground. However, if we have the opportunity to offer storage sites, a wider economic advantage could come with that.

There is a huge amount of opportunity, which we should not seek to underplay. My hon. Friend the Member for Wansbeck also touched on this issue. The opportunities in relation to economic activity are also potentially very significant. Not immediately but in the second half of the 2020s and beyond, this could be not just an enabler of industries continuing in parts of the country, including—not quite in his area—in Teesside and the cluster of industrial activity there; it could be, in and of itself, a significant employer. There is real potential, which has been highlighted by various bodies.

[Ian Lavery]

Does my hon. Friend share my disappointment that the project at Hatfield was withdrawn or was not successful in getting grant assistance from the Government, despite the fact that it was the top project in Europe in the NER 300?

[Tom Greatrex]

I do indeed. I think that I recall discussing that very issue with my hon. Friend when the decision was made. It was an absurdity to have the top-rated project in Europe and not to achieve the NER 300 support because of the inability of the UK Government to find match funding when they had been saying that £1 billion was available at that point within that comprehensive spending review period. We later discovered, of course, that that was moved to other infrastructure funds and was not then available. That is one of the frustrations that there have been along this bumpy road in recent years.

There have been other frustrations. Some are down to the attitude and commitment of the Government. Some are due to technical reasons and some are due to financial reasons. We have had a situation over many years—it predates this Government; it also existed under the last Government—in which confident predictions are made about how quickly CCS will be available and operational, but we have not met them. That makes the urgency of seeking to meet them all the more important in the years ahead.

The hon. Members who took part in the visit to Saskatchewan referred to the project there. I am struck by the comments just today from Michael Monea, the president of CCS initiatives at SaskPower, about the level of commitment required to ensure that it got the first project up and running. That is also an important point.

Hon. Members have referred to the 22 projects that there are currently around the world. There were previously about 70. Then the number went down to about 50 and now it has gone down to 22. The danger that we may have is that where CCS projects get up and running, they become almost engineering curiosities, isolated from anything else.

We should be very aware of the need to take the programme forward for further projects, because although the competition and the two projects that are undergoing their front-end engineering design studies at present—the Peterhead project and the White Rose project—are important, we want them to be the start of something, rather than just curiosities, as other things have been in the past. That is why I genuinely welcome the information that I got just a couple of hours ago about the work on phase 2 projects. I think and hope that that indicates real commitment to taking those forward, because without that, we will not achieve many of the things that we want to achieve.

The other point to make about industrial CCS is that of the 22 projects, only three are power stations; the remainder include industrial facilities manufacturing iron or processing other things and projects at natural gas processing facilities. That underlines the point about the importance of making progress on industrial CCS. Again, the Select Committee report highlighted that. Indeed, it concluded that there has not been the necessary level of commitment from Government in terms of promoting clustering and the benefits from that.

A range of difficulties are associated with seeking to do CCS for industrial processes, because there are, potentially, a number of different industrial companies on a site or within a geographical area. They will almost inevitably be operating at different points in their own economic cycles, and the capital available will be different. In some ways, it is probably conceptually easier to think about CCS for a power station than for a series of industrial processes in a geographical area, but that makes the case for greater Government discussion of and interaction and engagement with such projects, because for those reasons they are more difficult.

I am glad to have had the opportunity to take part in this debate on a subject that I personally find fascinating and interesting. I apologise for going on for a slightly longer time than I was probably allocated in order to expound some of my views. Carbon capture and storage is a vital process. Everyone who has taken part in the debate has made it clear that they see the importance and urgency of seeking to achieve it. There are different levels of optimism, but I think that we would be in a much worse position if CCS was not something that remained a realistic possibility.

I believe personally that in the long term CCS is a necessity, rather than an option, and that this and future Governments should engage in facilitating and helping to ensure that we manage to achieve that opportunity—for the benefit of our environment, our energy security and a number of different industries, which I very much hope will continue to be part of our economic model in the United Kingdom.

[The Parliamentary Under-Secretary of State for Energy and Climate Change (Amber Rudd)]

Once again, I congratulate my hon. Friend the Member for South Suffolk (Mr Yeo) on securing the debate. We have had some interesting contributions, and it is reassuring and encouraging to see that there is so much commitment to the subject.

The Energy and Climate Change Committee inquiry and report on carbon capture and storage highlighted several important issues. In the Government’s response, we welcomed the Committee’s report and set out the action we are taking in the field. I welcome the opportunity to set out in more detail our work to develop that important technology and our longer-term vision for CCS. I also welcome the opportunity to celebrate the important CCS milestones that have been reached since the Committee published its report in May. Those milestones have reinforced the message about the potential of that important technology.

CCS has the potential to be a critical part of the Government’s plans for future growth in a low-carbon economy, and the need for it is absolutely clear. CCS offers us the chance to enjoy the energy security and resilience benefits of fossil fuels, including our indigenous fossil fuel resources, without the associated emissions. CCS could help us meet our emissions targets in a cost-effective way, allowing us to manage the costs of decarbonisation. The Energy Technologies Institute estimates that successfully deploying CCS could cut the annual cost of meeting our carbon targets by £32 billion by 2050, and it creates opportunities for jobs, growth and exports. The global CCS market is predicted to reach £100 billion by 2050. Because of its potential to contribute to an affordable and sustainable energy mix, its advantages for energy security and resilience, and the growth and investment opportunities it represents, we are committed to working with industry to develop and deploy CCS at commercial scale. We are taking forward a comprehensive package of measures, with significant funding, designed to develop CCS in the UK and ensure we can seize the benefits that that exciting technology offers.

We anticipate that there could be three phases of development of CCS in the UK. The first phase is the current CCS competition, about which we have heard something this afternoon. Through that competition, we want to support up to two CCS projects through to construction, but it will deliver more than that. Those projects could prove the technology at scale in UK conditions, drive down risk, lay down critical CCS infrastructure and demonstrate successful commercial arrangements for CCS. In the second phase, further CCS projects will build on the foundations of the competition, before a third phase in which we hope to see the transition to commercial cost-competitive CCS. Our policies are designed to help bring CCS to that final phase, which is the point at which it can compete with other low carbon technologies.

The Government are working hard to get the first projects up and running in UK conditions. Our £1 billion commercialisation programme is designed to help that to happen, and we have made good progress with the White Rose and Peterhead projects over the past year. In December last year, together with Capture Power Ltd and National Grid, we signed the multi-million pound front-end engineering and design contract for the White Rose project. That innovative proposal is to build the world’s biggest oxyfuel power plant at the Drax site in Yorkshire with full carbon capture and storage, which could bring clean electricity to more than 630,000 homes. That will link into the planned development of a CO₂ transportation and storage infrastructure called the Yorkshire Humber CCS trunkline, which could have capacity for additional CCS projects in the area and provide the foundation for further CCS projects in the region. I hope that that will also address the clustering issue that the Select Committee referred to.

In February this year we signed a contract with Shell for a FEED study of its Peterhead CCS project, which could become the world’s first commercial-scale gas CCS project. The proposal is to attach carbon capture technology to the existing gas power plant at Peterhead and transport the CO₂ for permanent storage in the depleted Goldeneye gas field. The project could bring clean electricity to more than 500,000 homes and capture 1 million tonnes of CO₂ each year.

Gas will continue to play a significant role in the UK’s future energy use. It is important for our energy security, because it provides secure but flexible generation to complement other intermittent low-carbon sources. The UK has established gas resources in the North sea, and there are also exciting opportunities from shale gas. The Government are working hard to bring forward investment in gas through the capacity market, but in the longer term, being able to use CCS on gas will be important to help us meet our emissions reduction targets. Not only do our chosen projects help to commercialise different generation and capture approaches, but they develop important transportation and storage infrastructure. White Rose involves building a new pipeline and storing carbon in a saline formation, and Peterhead intends mostly to reuse existing North sea infrastructure and a depleted gas field. That approach could allow us to commercialise and de-risk a variety of CCS-related approaches which will help pave the way for the projects that follow.

We have set aside £1 billion to support the first CCS projects in the UK, and we are investing £100 million of that now in the development of detailed engineering and planning designs for those projects. That is essential work, which the companies must carry out thoroughly, and they require time and support to do that. That work will provide information on costs that will allow the companies and the Government to take sensible final investment decisions, which we expect to be taken in late 2015 and early 2016, on whether to proceed with the projects. I hope that that will reassure hon. Members about our commitment to developing CCS and our determination finally—we appreciate that we have waited a long time for this—to achieve the production of CCS.

Our vision for CCS in the UK does not stop at those projects. We want a strong and successful CCS industry that can compete on cost with other low-carbon technologies in the 2020s, and that deploys up to 13 GW by 2030. We published “Next steps in CCS: Policy Scoping Document” in August. The document sets out the steps that we have taken so far to develop CCS and our views on the issues that must be addressed in order to bring forward future phases of projects. We are now reviewing the responses to the document to help inform future decisions. The consultation covered a range of issues that we believe will be important in setting the policy framework for further CCS projects.

I reassure hon. Members that we are ambitious for the UK to be at the forefront of the technology, and we are always thinking ahead to ensure that we can support innovation in that field. This morning, I visited Imperial college in Kensington to look at various projects, one of which was described as carbon negative. It was not simply CCS; it actually removed carbon from the atmosphere. There is a lot of innovation in the field, and we are keen to support it. The hon. Member for Wansbeck (Ian Lavery) referred to seeding new projects, and that is exactly what we are doing. We are the only EU country where Government funding is supported for that, so I believe that we are leading in the field. We are working with 13 CCS projects in depth, and we have supported them with a total of £20 million. Many of those projects are based at other leading UK universities. This is an exciting and innovative science, and we must spread our support around to ensure that we back the eventual winner.

[Tom Greatrex]

The Minister is talking about other projects. Can she enlighten us about when the Government will be able to explain how contracts for difference will be adjusted to become workable for future CCS projects? That is a big barrier to potential and partly developed projects.

[Amber Rudd]

I appreciate the hon. Gentleman’s question, and I will address it as I proceed.

The electricity market reform programme will provide a route to market for CCS projects. The reforms are specifically designed to bring forward investment in low-carbon generation, including CCS. One of the key elements of EMR is the introduction of contracts for difference to incentivise investment. In recognition of the fact that the first CCS projects require specific support, the first CfDs will be agreed through the competition process. We are also looking at how EMR can help subsequent projects, and we are working with CCS developers to understand the support that they need to bring their projects forward.

In July, we decided to hold back a significant part of the levy control framework budget, retaining almost £1 billion available by 2020-21 for allocation to renewable and CCS projects, including up to two CCS competition projects. That will ensure that later projects, which may be better value for money, have a potential route to funding.

The hon. Member for Rutherglen and Hamilton West (Tom Greatrex) referred to industrial CCS, and we agree that CCS could be important for supporting the decarbonisation of the UK’s energy-intensive industries. Those sectors are not only major employers in the UK but vital for a low carbon economy. Wind turbines need steel, cement and chemicals, and we are making progress in that area. In December 2013, the Prime Minister announced £1 million for a feasibility study on CCS for industrial emitters as part of the Tees Valley city deal. Our engagement on that with the energy intensive sectors continues. Officials from my Department and the Department for Business, Innovation and Skills held two workshops earlier this month in London and Teesside, building on the report we published in May on the current state of technology and costs for CCS in four key sectors: steel, cement, chemicals and refining. The first outputs from the Tees valley work will be available in 2015, and we will also be publishing broader work on how to decarbonise key industrial sectors in early 2015.

The review led by Sir Ian Wood on maximising recovery from the UK continental shelf was published at the same time as the Peterhead announcement in February. The review recognised the exciting opportunities that CCS offers for the North sea, turning depleted oil and gas fields into CO₂ stores and presenting new opportunities for our world-leading offshore and subsea industries. Sir Ian encouraged further collaboration across industry, with DECC and the research community, as the most appropriate means to promote growth in this area. The UK has extensive, well mapped capacity for offshore storage, and developing that potential would be mutually beneficial for the CCS and North sea industries. Sir Ian was also interested in the role CO₂ could play in enhanced oil recovery in the UK. We saw in north America how EOR played a critical role in the development of CCS.

Building the supply chain is another key part of our vision for CCS. We want to maximise the potential to contribute to UK jobs, growth and exports. So far, more than 20 front-end engineering and design subcontracts have been awarded, supporting both the Peterhead and White Rose CCS commercialisation programme projects, and the Government are supporting partners such as the Energy Industries Council to facilitate contact between the projects and companies through supply chain events.

We are now also seeing exports. A key US CCS project at Kemper county, Mississippi is due to go into operation next year, and it will be powered by $2 million compressors manufactured by the Howden Group at Renfrew in Scotland. In addition, our world-class £125 million R and D programme is developing better, cheaper CCS technologies, including finding new uses for CO₂ rather than simply storing it deep under the sea bed. Econic Technologies, a small company based in London, secured a further £5 million at the end of last year from industry partners to continue work funded by DECC to develop new plastics that use carbon dioxide. Those examples give a sense of the opportunity we have through CCS to support economic growth in this country and to establish the UK as a world leader in CCS technology and innovation.