Analysis
Guest post
License: All rights reserved. Credit: Green Alliance

New year, new resolve for carbon capture and storage?

Chris Littlecott
Chris Littlecott is Senior Policy Adviser at E3G, and a Policy Research Associate with Scottish Carbon Capture and Storage.
License: All rights reserved. Credit: Greenpeace

Coal power stations were the main focus of CCS - but attention may now switch to gas. 

She made her list and checked it twice, and finally decided who was naughty or nice. European Commissioner for Climate Action Connie Hedegaard played Santa just before Christmas, awarding €1.2bn of funding for 23 innovative renewables projects across Europe. But frozen out of this funding round were projects aiming to demonstrate carbon capture and storage (CCS) at commercial scale.

This is hugely embarrassing for European efforts to address climate change, and particularly for the UK. For the creation of the ‘NER300’ mechanism was agreed back in 2008-09 following British diplomatic efforts and cross-party political leadership. Indeed, the UK submitted 7 of the original 13 CCS projects originally under consideration. As late as October 2012 the UK still had 4 projects out of the 8 vying for funding.

So what went wrong?

One senior European Commission official (who should know better), has been heard to say that ‘CCS is dead’. This is simply not true. The technology for CCS is alive and kicking. Commercial scale capture projects are under construction in Canada and the USA. Injection of CO2 into deep geological formations continues onshore in the USA and offshore by Norway. China is rapidly developing pilot projects of its own, and is set to invest $1bn in a CCS project in Texas. Of course there is still a long way to go, but the problem isn’t the technology.

Here in Europe, CCS projects looking to receive funding from the NER300 were scrutinised and ranked by the European Investment Bank (just as the renewables projects were). Then member states were asked to confirm which projects they would support, together with the level of co-funding they would contribute.

The French government confirmed co-funding for the proposed steel mill CCS project at Florange, only for ArcelorMittal to withdraw at the last minute. The Florange plant was the host location for a CCS demonstration on behalf of a wider consortium of European steel producers. CCS offered the prospect of job retention and a value-added, low-carbon product. The unions are right to be furious.

Other governments performed less well. The Dutch government came too late with a revised offer to support their proposed Green Hydrogen project. The Romanian government had taken positive steps by introducing a feed in tariff for CCS, but were unable to commit funding given an impending election and a fight with the European Commission about EU budget spending. The Italian economy is struggling and its project is behind schedule. Poland meanwhile has been staying close to its broader strategy and holding out for more funding. That leaves us with the UK: the EU member state best-placed to deliver CCS.

A promise unfulfilled

Let’s rewind to the closing months of the last Labour government. After the great success of the Kingsnorth coal campaign, Ed Miliband recognised that there would be ‘no new coal without CCS’. Energy Act 2010 was then enacted with cross-party support, creating a dedicated levy for CCS. This was projected to raise around £11bn over 15 years to support a programme of 4 CCS demonstration projects and associated infrastructure. The Act also required government to regularly report on progress made on power sector decarbonisation and the demonstration of CCS. The first report was quietly published on 20th December 2012. It refers to the development of proposals for Electricity Market Reform, and presents data on power sector emissions in 2010 and 2011. But the real story of what has occurred is entirely missing.

When the coalition government took office in 2010, it promised not only to be the ‘greenest government ever’, but also that it would be ‘First Choice for Investment in CCS’. All-too-quickly, however, these aims were undermined by decisions from Treasury and delays from DECC.

The newly-agreed CCS levy was pulled by Treasury. The negotiation of the first CCS competition ended without award to the last-standing Longannet project. A further year was lost before a new CCS commercialisation competition was launched, but at last it looked like the timelines for decisions under the UK and EU competitions would align. But to great disappointment and surprise, the only firm decision made by DECC in October 2012 was to kick out 2CO’s proposed Don Valley project, with neither firm selections of projects nor confirmation of funding made to the other bidders. Doubts continue over the availability of capital funding in this spending period.

So when it comes to delivering on the agreed rules of the EU’s NER300 programme it is the UK government who has most visibly failed to deliver. Yes, CCS projects are different than renewables, and yes, the co-funding requirements are an order of magnitude larger. But EU funding was there for the taking, and the UK failed to grab it.

New year, new approach

Early action on CCS would have helped European policy makers accelerate decarbonisation of both power generation and industrial emitters. This would have increased political confidence in the desirability and deliverability of European climate policy. But the economic crisis has accentuated the foot-dragging approach of many fossil fuel interests and highlighted weaknesses in the policy framework. Smarter policy choices are required to rebuild momentum and unlock political support for CCS.

At EU level, there needs to be a pause for breath rather than a headlong rush into the second round of NER300 funding. The original approach favoured CCS projects on coal and lignite, but a focus on CCS on gas and industrial emitters would provide greater value to the European economy and support existing technological leadership. Adjusting these criteria would take a few months, but the wait could be worth it. With the EU looking to strengthen the ETS in the meantime, not only could the business case for CCS be improved, but additional funds might become available from the auctioning of the remaining 100 million allowances in the NER300 pot. Member state co-funding would be easier to secure too with more time available.

In the UK, decisions in the new year can also make all the difference. After losing the strong hand of cards it held just 2 years ago, DECC needs to craft a can-do approach that strengthens its chances of success. It must lift its eyes to the bigger picture and communicate a vision of how CCS will play a catalytic role in enabling the low-carbon economy. It must start by supporting all 4 of the UK’s remaining projects through the next stage of detailed engineering development, and fast-track action to create regional CCS development zones. The Energy Bill should complement this by bringing gas plant into the scope of the Emissions Performance Standard by 2030 at the latest.

Policy choices along these lines would inject some new energy back into the CCS sector. And a fresh approach that focuses on industrial benefits, job retention potential and a clear commitment to decarbonisation would also help win new friends. 2013 begins with a need for strengthened resolve to make CCS happen in Europe. Let’s make it happen.

Energydesk exists to promote open reporting, discussion and debate on energy and climate change. Guest posts reflect the view of the author and/or their organisation.

Comments Add new comment

CCS is old hat. What we need is CCC... Carbon Capture & Conversion using algae based technologies to add value to the CO2 by converting it to useful products including liquid fuels and material feedstock. This way the UK would gain some economic benefit. With CCS because all the technologies have to be sourced from overseas the UK gains very little and the cost would push up the cost of energy again. With CCC we can create a new industry.

Good bit of history on the missteps on developing CCS, but the question of why the UK failed to grab free EU CCS money remains. It feels like a problem of political will, which might be why the very sensible proposal to develop CCS clusters hasn't materialised. It's a low-cost, high benefit step which the government could take quickly.

CCS is a scam from the fossil industry to a) pretend they are doing something meaningful, b) extract a few more billion out of the taxpayer to fund research in to this fantasy of a solution.

CO2 can be mitigated far more cheaply and effectively with renewables, so why throw money at the fossil corporations to pretend they are are going to fit CCS to their CO2-belching power plants?

Shame on Greenpeace for giving this awful opinion piece publicity.

DanZz, 

Thanks for your comment. Energydesk is a forum for open data, reporting and discussion on energy and preventing climate change. 

Whilst Greenpeace itself may not agree with all the views expressed Energydesk is founded on the principle that the issues are too important not to be honestly debated.

Our ambition is that honest, open and fact based discussion will have a positive influence on a debate often shrouded in mis-information and propoganda.

Whilst i appreciate that this may appear to give publicity to policy options which many regard as wrong the hope is that overall the project raises the level of the debate, improves it's accuracy and so supports efforts to tackle climate change. These efforts depend on a discussion which is informed by facts and arguments such as those you make in your comment.

It is - in part - an experiment and it'd be interesting to hear your views of the site overall. We have carried a number of articles about the potential of renewables, which you may find interesting. We are also open to guest posts.

Keep in touch,

Damian (Editor)

PS if you want to reach me you can email energydesk.uk@greenpeace.org

Thanks for the comments so far. Here's some initial thoughts in response.

DanZz:

It's a fair comment to suggest that the fossil industry are using CCS to pretend that they are doing something meaningful. As I mentioned in the article, too many fossil interests have been dragging their feet on CCS. They have been willing to put some effort into R&D, but not to support efforts to accelerate its deployment. My take on this is that they are scared at the implications for their existing generating assets, in that they fear that once CCS is available it will be mandated. I would have thought that in such a circumstance the primary winners would be the Renewables sector. Better to get CCS proven (or disproven!) quickly, rather than have it be a continued mirage.

It may be that we will always disagree as to whether CCS is needed in the power sector, but I would hope that we could find more common ground as to the value of CCS when applied to key industrial sectors that are integral to a low-carbon economy. To just take two examples, steel and cement are both massively required for wind power deployment, and CO2 emissions are inherent in those industrial processes themselves.

Beyond industry, the integration of CCS onto biomass plants would enable negative carbon emissions - a potentially important approach for managing climate risk. In my view the CCS debate in Europe would really value much more vocal NGO advocacy of the public interest case for action. CCS is far too important to be left to governments and industry.

Dick:

I don't see this as an either / or question, but one of how we can effectively integrate both CCS and an appropriate use of CO2. I absolutely agree that CCS has struggled in part because it has been perceived as a cost imposition and not a value proposition. Using CO2 to create new feedstocks for chemicals or energy vectors would be a great step forward. However the volumes of CO2 that this would entail are insufficient compared with the amount that needs to be sequestered to manage climate risk. The challenge will be to find a way of using both approaches to maximise carbon abatement while adding revenue streams to projects.

Dustin:

I think the 'political will' point needs unpicking a bit. I don't doubt that DECC would like CCS to come forward, but they have struggled to find an approach that they can deliver in an age of austerity. The Treasury on the other hand was delighted to cut back funding at every opportunity. Under the coalition there has clearly not been a coherent cross-government approach to CCS. To be fair, Labour really struggled with that too, but finally saw the sense of having a dedicated CCS levy in order to try to give a more coherent platform to enable investment. Ultimately, it was the withdrawal of the CCS levy that delayed the launch of the most recent UK CCS competition. Combined with the apparent absence of the full £1bn capital funding, this resulted in DECC unable to make a positive selection in time to claim NER300 funding before Christmas. This really is a poor result given it was 4 years since the scheme was agreed.

But in many respects, CCS hasn't even featured on political radar screens over recent years. Where is the political damage to politicians from the failure to get the EU funding? There has been a near complete absence of external pressure on government to make it happen, beyond the day-to-day engagement of private sector on policy matters.

But DECC haven't helped themselves in this. Firstly, they have followed an overly narrow approach to CCS that sees it as one possible option for future power sector generation, to be incentivised in future via the ETS, rather than an inescapable enabler of a low-carbon economy. Secondly, they threw a blanket of silence over the most recent CCS competition for pretty much the whole of 2012, effectively neutering the potential for positive media coverage of the CCS opportunities in the UK. Thirdly, they appear to have shied away from developing industrial CCS clusters in part because of a 'leave it to the market' attitude and a fear of being seen to be picking winners.

It is out of this context that we need to construct the positive, public interest case for CCS. By focusing on CCS clusters and investment in enabling infrastructure we can position the UK as a pathfinder for new low-carbon value-added industries. To get there from where we are now will require DECC to support multiple CCS projects as a means of maintaining momentum and increasing the political awareness of future opportunities. Only then will we really get to the point of being able to assess whether there is problem of political will...

Always happy to carry on the conversation.

Thanks, a useful summary.

My suspiction is that the UK - and EU - approach to procuring CCS is fundamentally mistaken. The approach is similar to a PPP deal: define the output, transfer the risk, and use competition to ensure the keenest price.

But there are (at least) two problems with that. First, while many elements of the CCS chain are mature, integrated large scale power generation projects with CCS are not yet demonstrated. The projects retain an element of risk, in particular the impact of storage on the integrated supply chain. A contracting framework which seeks to fully transfer that risk, but balks at paying returns commensurate with the risk, is not going to work.

Second, the supply market is not that competitive. There are businesses that pursue PPP deals for a living (facilities projects and the like). But for power companies CCS is not their main business. And while manufacturers of capture equiment, piplines etc. have an interest. the utilities are also needed. The lack of competitive interest means that competitions end in negotiations and negotiations may end in failure.

So I suspect a model of designing the 'right' CCS contract,ealuating and awarding sounds good but is not going to work - at least if it aims at the level of risk transfer usually sought under government contracting. Boulder Dam is being developed by a Government owned company and Kemper Country is in an unliberalised power sector where utility cost outcomes are shared with consumers. So in both cases the level of risk taken by the private sector is less than being sought under EU/UK models.

 

The notion of an open and honest debate on energy issues is generally laudable.  However, I question the "honesty" of the piece above, which calls for the need to develop the CCS while failing to highlight the deep uncertainity about the economic and environmental viability of the technology. This piece is one-sided at best and does little more than to echo the industry-line on how governments should be doing more to support CCS.   As an environmental organization that supposedly operates with the precautionary principle in mind, Greenpeace should be actively highlighting the risks of CCS while promoting renewable energy and energy efficiency- clean energy solutions that are already available.  If the environmental groups such ass yourself won't take this stance then who will?  

Looks like new year, same old guff from coal-industry spokespeople. This article fails to mention the littany of proposed CCS coal power stations that have fallen over in Europe as well as several of the failed attempts in the US, such as Mountaineer and the waiting for godot-esque FutureGen (is it still 2.0?)

As long as someone wants to build demonstration projects and is promosing to build something, articles like this will be able to get written. But a program to deliver CCS, nor a proposed project, actually means a CCS power station will get built.

Seriously, it doesn't take a genius to see why being able to tout CCS, despite it being an obvious smokesreeen, is a god-send for the coal industry. They just want to keep burnuing coal and this gives them an excuse. Why Greenpeace thinks its their job to buy the coal industry more time to pollute the atmosphere is beyond me.

 

Sometimes 2013 the first CCN pilot plant(s) will be running and the battle against CO2 emissisions will be radically boosted. The CCN (Carbon Capture and Neutralization) tech is developed by the Finnish company Cuycha Innovation OY (Ltd) At http://www.cuychainnovation.com/cuycha/  can be found some further information, also some news. But the big news are just to come.

A brief description of the CCN tech can be read at http://www.focusmagazine.fi/focus/105840/

Adjusting these criteria would take
a few months, but the wait could be worth it. With the EU looking to strengthen
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