Closing Keynote: Low cost decarbonisation for the UK – Findings of the Oxburgh Committee, and ECR Poster Prize, September 2016 Edinburgh Biannual

Written by Jean-Michel Bellas, a PhD student from the Energy 2050 group at the University of Sheffield. His attendance at the UKCCSRC Autumn 2016 Biannual Meeting in Edinburgh was made possible by the UKCCSRC ECR Meeting Fund

Professor Stuart Haszeldine from the University of Edinburgh and the Scottish Carbon Capture and Storage research group, opened his closing keynote presentation by reminding the audience why we were at the UKCCSRC Edinburgh Biannual conference, notably our interest in Carbon Capture and Storage (CCS). This was illustrated by a figure highlighting the continued rise in temperatures since 1880. Subsequently, Prof Haszeldine reemphasised why previous CCS competition models have ultimately failed, noting storage risk, process liability, technological uncertainty and capital costs as the principle drivers. These factors are evident in the UK government risk adverse approach towards the implementation of CCS.  Prof Haszeldine encapsulates the view from government with the phrases “buy it, not build it” and “we want it now and we want it cheap”.

Ultimately have these archaic governmental views and successive competition model failings dissipated the future of CCS in the UK? Or can the recent Oxburgh report, that outlines the critical role of CCS to the Secretary of State for Business, Energy and Industrial Strategy (BEIS) act as the catalyst to motivate government to be a shepherd and not a sheep in making CCS a commercial reality?

Prof Haszeldine firstly emphasises that the Oxburgh report makes clear competition models will not deliver low cost CCS. The high costs previously identified are reflected in the competition model design, rather than the cost of CCS technology itself. Due to these previous failings the trust in the UK government is less than zero. Large corporations who have previously invested in CCS have lost money, therefore, are not willing to invest or engage in CCS. Previous and prospective investors are now highly sceptical about the government commitment to CCS. Hence commitment and investment from the UK government is required before these key stakeholders will reconsider CCS. This means that CCS in the UK is at a critical point, where decision makers in government must decide whether to cross the Rubicon or not.

Prof. Haszeldine stresses that the arrogance and attitude of the UK government is unacceptable. The continued thought from government that the UK will attract a limitless supply of companies who will continually invest and develop energy technologies is unrealistic. They will invest and develop technology in other countries where business is more straightforward.

Therefore, will the Oxburgh report assist in changing perspectives towards CCS? The Oxburgh report produced by a committee of experts predominately from business, finance and investment communities, with input from expert witnesses, is a cross party independent report not paid for by HM Government. The report assess whether CCS can provide a cost effective route to UK energy decarbonisation and makes appropriate recommendations to the Secretary of State whether CCS can play a role in delivering a low carbon energy future.

To effectively assess and provide recommendations the following key questions were considered by the Oxburgh committee:

• Is CCS realistic and does it exist?
• Why should we do CCS?
• Why should we implement it now?
• How can CCS be done?

Prof Haszeldine explains the committee quickly concluded that CCS does exist and it is realistic, demonstrated around the world in various forms including operational projects with full chain and part chain components of CCS. Hence, if the technology is available now and works why wait to implement it in the future? Prof. Haszeldine notes that from a technical perspective nothing further is needed to start CCS in the UK today.

Furthermore, we should implement CCS as it is an essential low cost route to decarbonise the whole economy, and for some industries e.g. energy and heat, it may be the only way. Adding to this, the UK has commitments to reduce emissions and move towards a low carbon economy through legislative mechanisms including the Climate Change Act 2008 and COP21, thus, to meet these targets CCS is unavoidable.

Large engineering and infrastructure projects can takes decades and this will be the same with CCS to achieve zero emissions by 2050. Prof. Haszeldine adds that the committee believe CCS should be built here rather than bought in from abroad, as we have UK applications for CCS, which will need UK solutions, and if we have a coherent national plan then CCS can be part of that plan and the low carbon economy of tomorrow.

Previously, the government has considered CCS as a special case and not a Nationally Significant Infrastructure Project (NSIP). However, the Oxburgh report believes that CCS should be considered as a NSIP such as HS2 or Hinkley Point C.  NSIP are usually large scale projects for energy, transport, water or waste, hence, repackaging CCS can redirect attitudes that CCS is of national significant, rather than an expensive experiment.

Rebranding CCS as a NSIP means that the UK government would create a commercial company acting as the initial and overall project sponsor with the sole aim to deliver full-chain CCS projects at the lowest cost to the UK taxpayer. Hence, initial projects should be competitive from the outset, thus, as stated in the Oxburgh report, “cap prices to £85/MWh on a baseload with Contract for Difference (CfD) equivalent basis for projects reaching financial close in the first half of the 2020s” (Oxburgh, 2016, p. 29). This would mean CCS is immediately competitive with other energy vectors such as nuclear and renewables.

Prof Haszeldine then explains the six recommendations outlined in the Oxburgh report which are summarised below.

Recommendation 1 – Establish a CCS delivery company which comprises of one state owned organisation with two separately regulated companies. The power company would be responsible for delivering full scale power stations with CO₂ capture technology at strategic hubs around the UK e.g. coastal areas such as Teesside. The transportation and storage business would be responsible for delivering the transport and storage infrastructure.

The CCS delivery company will also be responsible for the long-term storage liability of CO₂ and financial accountability of projects, thus, underwrite the full initial investments made for commercial CCS deployment (Oxburgh, 2016).  This company will complete projects at a capped price of £85/MWh ensuring low cost CCS for the consumer and would require an initial investment from government of approximately £300 million until 2020 (Oxburgh, 2016).

Recommendation 2 – Establish a system of economic regulation for CCS in the UK using a regulated return approach, based on existing mechanisms used in the energy market today (Oxburgh, 2016).  The initial projects will be supported via a CCS power contract in line with current CfD at 15 years or via incentivised capacity contracts. Whereas the transport and storage company will be governed similar to existing regulatory structures based on a rate of return basis.

Recommendation 3 – Incentivise industrial CCS through industrial capture contracts by the UK government financing these regulated contracts to remunerate industry to capture and store CO₂, with higher prices paid to emitters in the initial period and lowered following return on capital costs.

Recommendation 4 – Establish a heat transformation group to evaluate the technical and financial viability of heat decarbonisation via electrification or hydrogen. An initial investment of approximately £90 million is required from the government over the next five years to determine which route would be the most feasible going forward. The estimated investment for the heat transformation group is an approximation based on the h21 Leeds City Gate Project (Oxburgh, 2016).   

Recommendation 5 – Establish a CCS Certificate System to certify captured and stored CO₂, where certificates would be issued and traded between different organisations for each tonne of CO₂ capture and stored. This system “will certify safe, long-term storage of CO₂ by any means, not just geological storage” (Oxburgh, 2016, p.44).  

Recommendation 6 – Establish a CCS Obligation System by 2030 that requires businesses who supply fossil fuels to store CO₂ and certify this via the CCS certificate system. The CCS obligation system offers an exit strategy for government to be directly involved with this industry. Failure to adhere to the obligation system would involve financial penalties.   

Prof Haszeldine closes his presentation by summarising the six recommendations outlined in the Oxburgh report, noting that the report provides a long term national plan for the development of a UK CCS industry at the lowest cost to the consumer. This long term national plan aims to remove the costs, risks and uncertainty associated with CCS previously noted in the competition models.

Going forward the UK government needs to be excited about CCS. Politicians and key decision makers need to be motivated and persuaded to develop CCS here. This can be achieved through a number of mechanisms including lobbying prior to the autumn statement in November 2016. Repacking CCS as a NSIP and specifically identifying that we have the skills, technology, supply chain and existing infrastructure to develop CCS will help encourage government that CCS is needed now rather that in the 2030’s. Our long term decarbonisation targets are achievable with CCS. Developing and implementing this technology here would make the UK a world leader in climate change mitigation. Thus, CCS can contribute to the low carbon economy of tomorrow by the government making it a reality today. 

CLOSING REMARKS

Professor Jon Gibbins closed the autumn 2016 Biannual by announcing the ECR poster prize winners  including Marius Dewar, Renato Cabral, Diarmaid Clery and Juan Riaza.

Following this, Prof Gibbins echoed the key message from the conference that CCS is needed now, the government must invest and capital costs can be reduced if we pursue the measures outlined in the Oxburgh report.  

Prof Gibbins thanked the delegates for coming, giving special appreciation to Steph Wright and Fay Campbell for all their hard work in organising the conference.  Finally, Prof Gibbins reminded everyone the next conference will be held at Imperial College in London from Tuesday 11 to Wednesday 12 April 2017. 

References: Oxburgh (2016): LOWEST COST DECARBONISATION FOR THE UK: THE CRITICAL ROLE OF CCS. Report to the Secretary of State for Business, Energy and Industrial Strategy from the Parliamentary Advisory Group on Carbon Capture and Storage (CCS).
 

**Available presentations from the meeting can be found on the Edinburgh Biannual event page.**