UK MPs warn of damaging CCS cancellation

MPs have issued a warning to the UK government that its sudden withdrawal of £1bn (US$1.44bn) worth of funding for CCS has damaged its relationship with industry and unless a clear strategy on CCS is urgently developed, knowledge and investment in the technology considered key to decarbonisation will be lost.

The cancellation of the commercialisation competition in November has led investors to abandon both the Peterhead and White Rose CCS project, and an opportunity to develop CCS infrastructure in the UK in the early 2020s is “likely to have been missed”, the Energy and Climate Change Select Committee said in its report published today.

The committee has urged the government to set out a new strategy for CCS in line with its policy to replace coal-fired plants with gas, and rebuild confidence with investors by setting out pricing contracts for electricity generated from capture projects.

'Ministers must set out exactly how much of their planned new gas capacity is to be retrofitted with CCS and by when. And the government must let investors know when CCS projects will be able to apply for guaranteed-price contracts alongside other low-carbon energy schemes,' said committee chair Angus MacNeil.

The committee decried a decade of government inaction on CCS, explaining that carbon dioxide emissions from gas plants without CCS will be far above the limit needed to meet its coming decarbonisation and climate targets.

'If the government is committed to the climate change pledges made in Paris, it cannot afford to sit back and simply wait and see if CCS will be deployed when it is needed,” said Angus MacNeil. “Getting the infrastructure in place takes time and the government needs to ensure that we can start fitting gas-fired power stations with carbon capture and storage technology in the 2020s.'

The government must now rebuild momentum following the collapse of Peterhead and White Rose projects but this will be difficult given that the lack of engagement before and after the cancellation has damaged relationships with the companies and investors needed to develop CCS, the committee warns.

'The manner in which the government pulled the plug on the CCS commercialisation competition was hugely disappointing. UK companies had been working towards this for years and were only weeks away from final proposals. The first hint one company had about the decision was when they read a news report the night before,' said MacNeil.

Shell told the committee that it was disappointed by the withdrawal of funding, and that if approved the Peterhead project would have been the world’s first CCS facility fitted to an existing gas-fired power plant. 'It had the potential to bring huge value, placing the UK at the forefront of this vital technology, and developing knowledge for the benefit of wider industry,' Shell said.

Luke Warren, CEO of the CCSA, warned that damage from the cancellation will ripple beyond the immediate players and touch those looking to invest in ‘phase two’ projects to advance the technology.

'These were the products that would have seen the big reduction in costs and would have been cost-competitive,' Warren told the committee.

Neil Kenley, who gave evidence to the committee on behalf of the Teesside Collective – a group of heavy industry players seeking to develop a hub to capture carbon from the region’s chemicals, fertilisers and industrial gas producers – said the cancellation threatens to put back the project by five years, although on a positive note said more organisations have approached to join the partnership.

'The private sector at this moment in time is still 100% behind us and wants to see this happen,' Kenley said.

Commenting on the report, Warren said: “We very much welcome the Energy and Climate Change Committee’s call for the UK government to urgently come forward with a clear strategy for CCS.

'We look forward to working with government to deliver a successful CCS strategy that can ensure the decarbonisation of the UK’s power sector at least cost, enable a long-term sustainable future for vital energy intensive industries, and retain the opportunity to maximise our North Sea oil and gas assets'.

The Committee also recommended that the Department of Energy and Climate Change immediately collect and compile the lessons learned from the White Rose and Peterhead projects to safeguard the knowledge for future projects; commission a detailed study of suitable storage sites for carbon dioxide in the North Sea; engage with the National Infrastructure Commission to discuss options for the development of transport and storage; and look to set up a National Carbon Storage Authority.

In a final warning, the committee wrote: 'Given initial costs and lead time for projects, if we do not commit to CCS now, we may have to accept that it will not be part of the future UK energy policy.'