The UK is committed to Carbon Capture and Storage (CCS) as a key part of its carbon reduction efforts. There has been a long history of early stage CCS projects in the UK, but converting these into operational projects has proved a challenge.
With no project to show from the first CCS Competition arranged by the UK government, we are now in the middle of a second CCS Competition, with two projects being considered. In addition, the Electricity Market Reform (EMR), which enables provision of a Contract for Difference (CfD) should facilitate support for CCS as well as other forms of low carbon power generation.
By January 2014, the Peterhead Gas Project and the White Rose Coal Project had been awarded Front End Engineering and Design (FEED) contracts by DECC under the CCS Commercialisation Competition. The FEED studies are conducted in order to develop detail on the technical design and to enable a more accurate assessment of project costs and risks. Having completed FEED, the projects will hope to have sufficient information to negotiate a project contract with DECC for the detailed design and construction of the plant, including the level of capital subsidy and the level of the Contract for Difference (CfD). This phase is expected to last through 2014 and 2015.
Highlights from the Policy Scoping Document
In August this year DECC launched a CCS consultation and Policy Scoping Document (PSD) entitled ‘Next Steps in CCS’, which outlines the government’s plans for taking forward CCS in the UK and seeks feedback on certain questions. The paper emphasises the UK’s commitment to CCS, through the DECC CCS Commercialisation Programme, currently part funding the FEED studies on the two UK projects. Potentially, these projects could benefit from a share of the £1bn capital subsidy made available for a UK CCS demonstration, should they progress into the development phase. The process for selection and support of subsequent Phase 2 CCS projects is less clear, the paper referring to investment decisions on these project to be ‘later this decade’. This is a disappointment for these projects which have already made significant investment and would have liked a clearer process and schedule. The CfD for CCS under the Electricity Market Reform is to be developed and consulted upon, such that an appropriate suite of enabling architecture can be in place by 2016, with the aim of being implemented first on the Competition projects. The PSD also covers a diverse range of CCS related matters, mainly to seek input on CCS topics including; financing, transport and storage, part chain projects, EOR, industrial CCS and bio energy with CCS. Responses were required by late October 2014.
Update on the two UK CCS projects in FEED
As the Peterhead and White Rose Projects progress with FEED there is little additional material available in the public domain. Both projects have published certain consultation material on their respective websites; White Rose material includes public consultation material, planning notices and preliminary environmental information reports; Peterhead material includes public consultation material and an onshore impact assessment scoping report. Up to the end of September 2014, there had been no Key Knowledge Deliverables (KKD) made publicly available from the projects (KKD are specific items of FEED which developers are obliged to share as part of their funding commitments). We are also unaware of any specific dates planned for Key Knowledge Services dissemination events at which Key Knowledge Deliverables will be communicated, although we understand that both projects have such obligations.
Industrial CCS Activity
With the main focus of CCS in the UK to date having been thermal electrical power generation from coal and gas, it is appropriate for the UK to consider how to stimulate carbon emissions reductions from industrial sources. In 2012, industry accounted for 116 Mt of direct CO2 emissions and consumed 89 TWh of electricity, which is currently equivalent to a further 47 MtCO2 from indirect emissions. Leading the way on industrial CCS, Tees Valley Unlimited, the local enterprise partnership, are progressing a range of work in collaboration with local industrial partners to develop an industrial CCS network on Teesside. The project is expected to lead to the capture of CO2 emissions from several major industrial sources and its transport offshore for deep underground sequestration. The work includes the development of the business case for industrial CCS in the area, which is being coordinated by Pale Blue Dot Energy and the development of a commercial and policy framework which is being coordinated by Societe Generale.
- The outcome from the CCS Competition will remain unclear for some time: It is far from clear how many CCS projects will result from the current Competition process, despite everyone’s best efforts. The two projects in FEED now, could result in 0, 1 or 2 projects being delivered. Demo 1 went through a similar process funding two FEED studies, but DECC was unable to conclude a project contract for development with either E.ON or ScottishPower. Significant factors which could have a bearing on the outcome of the ultimate project contract negotiations in the current Competition include; changes in corporate priorities, changes in UK Government position, complexity of contractual negotiations, risk allocation, corporate fatigue and public perception. All of this is still some way off, with the earliest date for a project contract likely to be 2016.
- Risk allocation for Competition projects will be a challenge to resolve: At the completion of FEED, the projects will still be left with a material degree of cost and risk uncertainty, given the demonstration nature of the projects. So unlike a major procurement competition for established services, which Governments are more used to running, the project contract will need to assess and allocate significant cost and risk uncertainty between parties. This will be no easy task for a CCS demonstration project.
- Wider deployment of CCS in the UK is at risk due to the lack of a clear process for Phase 2 projects: Without a clear process and timetable, sponsors of other pre-development projects will lose their enthusiasm and move onto more tangible commercial opportunities. Without Phase 2 projects, the UK risks the initial demonstration project(s) being expensive white elephants, with no follow through into wider CCS deployment and consequent failure to reduce CO2 emissions from thermal generation.
- Project timing and numbers will delay cost reduction efforts: The 1 or 2 Competition projects which may be awarded a Project Contract by 2016, may be operational by 2020-2022. Phase 2 projects (if any) are unlikely to be operational until the mid-2020s. Significant operational learning, from the few UK projects, which can be used to drive cost reduction, will not be available until the late 2020s at the earliest.
Alan James of Pale Blue Dot Energy recently presented at the SCCS CCS Group bi-monthly meeting in Aberdeen, on the subject of “Experience of Working in CCS”. The presentation included a timeline review of all the main CCS project concepts developed in the UK and the funding competitions which have been run to date to support CCS. Steve Murphy also spoke at the Process Industrial CCS forum in Teesside on the 3rd of October. In the near future Pale Blue Dot Energy have a number of CCS related presentations. On the 11th November Alan James will be presenting at the Institute of Mechanical Engineers CCS Seminar on the Captain Clean Energy Project and on the 20th November, Sam Gomersall will be presenting at the Carbon Capture Journal CCS Conference.