The UK's recently appointed Energy and Climate Change Secretary Edward Davey has launched a new CCS competition to receive the £1 billion capital funding which went unclaimed after the abandonment of the first competition, launched in 2007.

The competition, which is to be known as the ‘CCS Commercialisation Programme’, is again designed, ‘to support practical experience in the design, construction and operation of commercial scale CCS.’ In order to qualify for the competition, projects must:

• be CCS Full Chain, or part chain capable of demonstrating the prospect of being part of a Full Chain Project in the future;

• have the power plant and capture facility located in GB and the storage site located offshore;

• be operational by 2016-2020, though earlier is desirable;

• abate CO2 at commercial scale (or be a substantive step toward that objective) whilst meeting all relevant environmental requirements; and

• be an electricity generator, or an Industrial [CO2] Emitter where it is part of a Cluster Project.

The Department of Energy and Climate Change (DECC) at the same time published a UK CCS Roadmap and awarded £125m for Research and Development, including a new £13m UK CCS Research Centre.

"What we are looking to achieve, in partnership with industry, is a new world-leading CCS industry, rather than just simply projects in isolation,” said Ed Davey, “an industry that can compete with other low-carbon sources to ensure security and diversity of our electricity supply, an industry that can make our energy intensive industries cleaner and an industry that can bring jobs and wealth to our shores. The CCS industry could be worth £6.5bn a year to the UK economy by late next decade as we export UK expertise and products."

The UK Carbon Capture and Storage Association (CCSA) also gave its support: “Today’s announcement sets out one of the most comprehensive support packages for CCS in the world, sending a positive signal to the CCS industry, who are ready and waiting to respond,” commented Jeff Chapman, CEO of the CCSA. “Indeed, the industry is already responding - in the last fortnight alone, plans for a new commercial-scale CCS project were announced and another proposal also announced major inward investment from an international company bringing to seven the number of proposed large scale projects in the UK.”

UK National Audit Office (NAO) conclusions on the first UK CCS competition

The NAO report concluded that the competition had been a high risk and challenging undertaking launched with insufficient planning and recognition of the commercial risks.

The competition was launched in 2007 by the then Department for Business, Enterprise and Regulatory Reform. It was cancelled four years later by the Department of Energy and Climate Change (DECC) on the grounds of protecting value for money and because the project could not be funded within the £1 billion budget agreed at the 2010 Spending Review. The results of engineering and design studies completed by bidders, upon which the Government spent £40 million (63 per cent of the £64 million it spent in total on the competition), may help to reduce the costs of future carbon capture and storage projects. The cost of the competition was relatively small compared to the investment required to develop CCS at commercial scale and the competition has increased the Department's experience in this field and understanding of project costs.

DECC now plans to pursue other carbon capture and storage projects using the £1 billion capital fund. The NAO has made recommendations for the Department to address in its future programme.

The former Department for Business, Enterprise and Regulatory Reform had wanted industry to take up a commercial contract for a large and potentially costly developmental project, even though there was considerable uncertainty over its design and costs.

Neither DECC nor its predecessor engaged sufficiently early with the commercial risk involved. During the competition, DECC's decisions to continue were not informed by detailed consideration of the probability of reaching acceptable contract terms and the time lost should the competition not succeed. The inability to agree mutually acceptable terms with all members of the consortium contributed to DECC's decision to cancel the competition. For its new programme, the Department needs to understand fully its commercial proposition to industry.

Lack of clarity over government finance for the project delayed the early stages of the competition. When a capital budget was decided in October 2010, there was no agreement on government funding for operational costs. For its new programme, the Department and Treasury should be clear on the public investment available and establish any affordability constraint.

Amyas Morse, head of the National Audit Office, said:

"In the context of value for money, developing new technologies is an inherently risky undertaking. Taking calculated risks is perfectly acceptable if those risks are managed effectively; but in this case DECC, and its predecessor, took too long to get to grips with the significant technical, commercial and regulatory risks involved.

"Four years down the road, commercial scale carbon capture and storage technology has still to be developed. The Department must learn the lessons of the failure of this project if further time is not to be lost, and value for money achieved on future projects."

Support through the EMR

The CCS competition will help to get a project off the ground, but continuing support will be necessary to make CCS sustainable as part of normal UK power generation.The Electricity Market Reform (EMR) programme gives developers of CCS power projects more certainty, via a set of incentives. These include:

• the prospect of long-term contracts that reflect the value of low-carbon generation to the electricity market;

• financial support for early stage CCS projects that will help overcome the additional demonstration risks associated with these projects whilst ensuring that this support remains affordable for consumers;

• an Emission Performance Standard (EPS) set at a level to limit the emissions of new unabated coal fired power stations, but with exemptions for plants that install CCS;

• a Carbon Price Floor that, together with the EU-Emissions Trading System, will penalise the combustion of fossil fuels. Again there are exemptions for CCS;

• a requirement for all new fossil fuel power stations to be Carbon Capture Ready, to ensure that newly constructed unabated fossil fuel power stations are able to fit CCS.

CCS Research Centre

The Engineering and Physical Sciences Research Council (EPSRC) and DECC have announced a £13 million investment to establish a UK CCS Research Centre.

EPSRC will invest £10 million over a five-year period, with funding of £3 million from DECC to establish new capital facilities that will support innovative research.

The new Centre, based at the University of Edinburgh, will be a virtual network where academics, industry, regulators and others in the sector can collaborate on analysing problems and undertaking research. A key focus will be to maximise the contribution of CCS to a low-carbon energy system for the UK.

Other institutions involved in the centre are the Universities of Cambridge, Cranfield, Durham, Leeds, Newcastle, Nottingham and Imperial College London, the Plymouth Marine Laboratory and the British Geological Survey

The new capture research facilities will allow UK scientists and engineers to work with industrial partners to develop improved capture technologies. The facilities include:

• pilot scale advanced testing facilities in Yorkshire, with a 1 tonne CO2 per day amine capture facility

• a mobile testing unit to allow a range of tests to be conducted on real power station flue gases

• advanced oxyfuel fluidised bed and chemical looping pilot facilities.The Centre’s first goal will be to identify further research needed to accelerate CCS deployment.

An integrated pipeline network

UK National Grid believes it will be far more cost effective to provide single, large scale pipelines, into which several carbon emitters in a region can connect.

 This ‘cluster’ or ‘gateway’ approach could deliver the UK Government’s aspiration of cost competitive power generation with CCS, decarbonise the UK’s electricity generation and industrial sectors, and provide a lasting legacy from this phase of the development of CCS.

 National Grid is involved in a number of projects around the UK where it is demonstrating both its commitment to the cluster approach and its expertise in designing, constructing and operating multi-user pipeline systems.

 On Humberside, through its Humber Gateway development, it is working with: 2Co Energy on the Don Valley Power Project near Doncaster; Alstom, Drax and BOC Linde on the White Rose Project near Selby; and C.Gen Power on its North Killingholme Power Project.

 At Grangemouth, west of Edinburgh, it is working with Seattle-based Summit Power and Petrofac on the Caledonia Clean Energy Project.

 And on Teesside, it is part of a consortium alongside BOC, International Power, Fairfield Energy, Premier Oil and Progressive Energy developing the Teesside Low Carbon Project.

 Alongside the carbon dioxide transportation solutions, National Grid is also developing a saline formation storage site in the southern North Sea, known as 5/42, which it intends to offer into the DECC competition process and make available to emitters. National Grid believes the site offers secure and economic long term storage for CCS projects close to the largest source of emitters in the UK.

UK study on CCS cost reduction

DECC has commissioned a report to analyse the scope for cost reduction by fuel/technology and components for CCS.

It is expected that the study will give projections for a range of outcomes, illustrating the uncertainty in both initial cost estimates and cost trajectory. However it is likely to indicate the potential for a downward trend in costs.

The analysis will be compiled from the bottom up, attempting to identify the cost drivers acting on the main components for each of the four main capture technologies, pipelines and the two main storage options. While the report will identify various technical developments it is difficult to translate this into cost changes as more efficient or better performing equipment does not always come at a lower cost. The numbers provided in the report are the best estimates possible based on available data.

Some examples of areas the report is likely to examine are:

• compressor advances – energy penalty benefits for all options

• air separation advances – energy penalty benefits for oxy combustion and to a lesser extent IGCC

• improved solvents and sorbents – resulting in smaller absorbers, lower energy penalties for post combustion

• gas recirculation for post combustion gas – reduced absorber size and energy penalties

• economies in scale in absorbers – for post combustion

• improvements in construction logistics from learning and advanced simulations – for all options

• process optimisation for all technology routes

• reduced design margins for all systems

CCS Cost Reduction Task Force

DECC has asked the Carbon Capture and Storage Association to establish an industry-led CCS Cost Reduction Task Force to work alongside the Office of Carbon Capture and Storage to set out a path and action plan to reduce the costs of CCS.

The objective of the Task Force is to advise Government and industry on reducing the unit cost of CCS so that it can compete with other low carbon technologies in the electricity market by the early 2020s.

The Task Force will:

• build on work undertaken for DECC to identify potential reductions in the cost of CCS; the scale of those reductions; and the actions required to deliver those reductions;

• seek to gain a commitment from Industry on initiatives to reduce cost and develop advice setting out the steps industry and Government could take to develop the most promising technologies and establish the right market framework and incentives to encourage industry to invest; and

• produce a report to the CCS Development Forum setting out its findings and recommendations for action by Government and industry.

The work of the Task Force will help to shape the future of the Government’s CCS Programme and the Roadmap will be updated to reflect the findings and recommendations of the Task Force.

Source: Carbon Capture Journal, Feature Articles, July  08  2012

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