Could Canada hold the key to Britain’s rotten record on carbon capture?
If you want to stop carbon entering the atmosphere and speeding up the process of climate change there are two things you can do: stop using fuels which produce it, or capture it before it does any damage. In a society which is only slowly moving away from its reliance on fossil fuels, that second part of the equation would seem to be utterly crucial. Odd then that carbon capture and storage in the UK has become such a sorry tale of delays, cancellations and uncertainty.
At the end of last month, North Yorkshire power station Drax announced it would not invest further in the planned White Rose demonstration project – a stand alone power plant which would have captured some 90% of the CO₂ emissions it produced, or about 2m tonnes per year. It is only the latest setback – and the company’s operations director Pete Emery blamed the government for the decision:
We are confident the technology we have developed has real potential, but have reluctantly taken a decision not to invest any further in the development of this project. The decision is based purely on a drastically different financial and regulatory environment and we must put the interests of the business and our shareholders first.
The rather uncomfortable truth here is that even though £1 billion of subsidies have been available in the UK since 2007, not a single final investment decision to build a large-scale, integrated demonstration project has been taken in the UK – or anywhere else in Europe for that matter. And this is despite the fact that carbon capture and storage (CCS) technologies are seen as a crucial part of climate mitigation strategies by many international organisations including the International Energy Agency and governments around the world, the UK government among them.
Critics of CCS point out that the technology merely extends carbon lock-in and that prolonging the use of fossil fuels such as coal has a number of other undesirable consequences such as causing air and water pollution at mining sites as well as mining accidents. But notwithstanding those doubts, projects such as Drax’s White Rose are supposed to be the next important step to demonstrate and eventually commercialise the technology.
In 2010 the Department of Energy and Climate Change’s (DECC) aim was to ensure CCS was ready for commercial deployment by 2020, with a number of publicly-funded demonstration projects to learn from (four in the UK and several others across Europe) before that. The government will now struggle to get more than one demonstration project up and running by 2020 – not to speak of any commercial deployment.
The most likely project to receive funding might now be the Shell-operated Peterhead project which (alongside White Rose) had been selected as one of the two preferred bidders in the government’s re-launched CCS commercialisation competition in March 2013.
Haven’t we been here before?
The Drax decision on the White Rose project reminds us of other frustrating moments in carbon capture’s history. During the first government competition for a CCS demonstration project, all the bidders eventually withdrew. The Longannet project in Scotland was the last competitor, before the consortium consisting of ScottishPower, National Grid and Shell eventually pulled out in October 2011 after higher than anticipated costs and lengthy negotiations with the energy and climate change department and the Treasury.
So why is it so difficult to get large-scale integrated carbon capture demonstration projects off the ground?
We tried to answer this question by looking at two examples of proposed projects: Longannet in the UK (which did not go ahead) and Quest in Canada (which is currently under construction). Our research suggests that the answer lies in a complex interplay of political and economic factors.
We found that, in the UK context, several factors prevented the Longannet project from going ahead. For a start, there was a preference for a competition process with a narrow focus on post-combustion coal technology; there were disagreements between the department and the Treasury during the negotiations with the consortium – and there was the fact that utilities like ScottishPower have a number of other options for decarbonisation, such as investing in renewables. Combined, these factors mean firms find it hard to justify investments in carbon capture.
By contrast, in Canada, the overriding concern for the Quest project is to use carbon capture to decrease the carbon footprint of tar sand production in order to prevent a potential threat to international market access (through the Californian low-carbon fuel standard). The Quest project is attempting to reduce the carbon footprint of bitumen processing connected with the tar sand production to similar levels of that of “normal” oil and is therefore of major strategic importance for the companies involved as well as the province of Alberta.
In 2014, the energy sector accounted for approximately 28% of Alberta’s total GDP. Energy resource exports to the US alone account for 75% of its total commodity exports. These are very strong incentives to invest in carbon capture and storage whereas the private benefits of such investments in the UK are much less clear, especially in the absence of a strong carbon price signal.
All of this suggests that the Department of Energy and Climate Change needs to sit down and honestly analyse the current situation of the technology in the UK – and decide what role it should play in decarbonising the UK economy. This assessment should take into consideration the progress made with renewables as well as the (lack of) progress with nuclear power. If CCS should play an important role (for example in the industrial rather than the power sector), then decisions need to be taken on which incentives need to be provided to enable private-sector investment in carbon capture and storage demonstration projects and push towards subsequent commercialisation.
Simply to keep going as we are will not lead to commercialisation anytime soon. While the ambition was to lead the world in carbon capture development, this now seems an unrealistic prospect given limited progress while other countries such as Canada are pushing ahead.