Energy produced using carbon capture and storage (CCS) technology could become cost competitive with nuclear and offshore wind power in the 2020s, according to a new parliamentary report.

Produced by the Parliamentary Advisory Group on CCS, led by Lord Oxburgh, for the Department for Business, Energy and Industrial Strategy, the report sets out the potential for the beleaguered technology in the UK, and how the government could foster a cost-competitive industry before 2030.

“There is a widespread view that CCS has to be expensive,” the report says. The government itself appeared to hold this view when, in 2015, it cancelled its £1bn competition for carbon capture and storage based on its supposedly high costs. This was seen as a huge blow to an industry that had spent years preparing to deliver new CCS projects.

But CCS can actually be delivered at £85 per megawatt hour, according to the report, which means that the price paid by consumers for early examples of the technology would be immediately competitive with other forms of clean power.

Potential

The UK is ready for CCS, says the report — both the technology and the supply chain are ready to deliver.

However, lead times for new projects are long and, therefore, decisions need to be delivered quickly. The report envisages new projects being built as soon as 2020, to be operated by 2023.

The UK also has natural advantages when it comes to CO2 storage, the report says.

Costs

CCS plays an important role in the Committee on Climate Change’s (CCC) 2013  least-cost pathway to meeting the UK’s target of reducing emissions by 80% by 2050. The CCC is responsible for providing independent advice to the government.

According to the CCC, developing CCS in the 2020s could deliver benefits of more than £15bn on the path towards hitting the UK’s 2050 target. It adds that, without CCS, the cost of meeting this target would almost double, from 0.5% of GDP up to 0.9%.

While the costs of the initial CCS demonstration projects planned for the UK amounted to £150-170/MWh, the CCC saw costs falling to below £100/MWh in the 2020s.

The report by the Parliamentary Advisory Group undercuts this further. It bases its assumption that power can be bought at £85/MWh from plants equipped with CCS on a 2012 report by Mott MacDonald, drawn up for the former Department of Energy and Climate Change. This showed lowest cost technology costing £86/MWh by 2028

For reference, the agreed price for the controversial Hinkley C nuclear power plant is £92.50/MWh, potentially falling to £89.50. Future offshore wind projects will be capped at £105/MWh, falling to £85/MWh for projects commissioning by 2026.

Plan

For these cost reductions to take place, the government needs to have a hand in it, according to the report. It sets out a series of recommendations on how to get CCS off the ground.

The central step is to establish a “CCS Delivery Company” (CCSDC). This would be a state-owned enterprise tasked with delivering whole CCS projects, says the report. This company should have a mandate of sticking to the £85/MWh cap, so that they were only delivering projects that deliver power at the lowest possible cost to the consumer.

This company should be formed and funded as soon as possible, says the report. In the first place, it would require a budget of £200m-£300m. This would be to develop projects to the point of an investment decision, rather than money towards construction itself.

As its only mandate would be to invest in low-cost CCS projects, there would be no specific instructions as to the scale, technology and location of what it delivers.

However, by 2030, the company should be sequestering 15m-30m tonnes of CO2, representing 10-30% of current power sector emissions.

This will be fitted to power stations that will supply 24-48 terawatt hours (TWh) per year of new electricity — 12-24% of the additional 200/TWh per year of new low-carbon power generation that the CCC says is required in the 2020s.

While this would kickstart the UK’s CCS industry, the long-term expectation is that the CCSDC would be privatised, says the report.

Professor Stuart Haszeldine, director of Scottish Carbon Capture and Storage and member of the Parliamentary Advisory Group on CCS, said:

The report includes a number of other recommendations, including:

• Establish a system of economic regulation for CCS in the UK.
• Incentivise industrial CCS through government-funded contracts.
• Establish a group to assess the least cost route to decarbonising heat.
• Establish a CCS Certificate System to certify captured and stored CO2.
• Establish a CCS Obligation System from the late 2020s, forcing fossil fuel suppliers to sequester a growing percentage of supply.

Negative emissions technologies

According to the report, the benefits of developing a CCS industry now could be a boost to an industry that is likely to become more urgent in the future — that of negative emissions technologies.

Since it is difficult to decarbonise all sectors of the economy, having the the ability to remove emissions from the atmosphere could provide more flexibility.

However, the most realistic means of doing this is via a method that relies on CCS — bioenergy with carbon capture and storage, or BECCS. This is largely untested technology that involves sequestering CO2 from crops that are used to supply energy.

The UN Paris Agreement on climate change, signed last year, means that this technology could become particularly significant in light of its target to limit global temperature rise to below 1.5C. The report says:

“The ability to deliver many of these negative emissions technologies will require an established CCS infrastructure to be in place, as is needed for emissions reductions in heat and industry.”

Reaction

Climate change minister Nick Hurd told the BBC: “We are keen to get new ideas on how to promote CCS.”

Others also responded to the report. Luke Warren, chief executive of the Carbon Capture and Storage Association, said:

Liane Smith, a fellow of the Royal Academy of Engineering, said:

Benjamin Sporton, chief executive of the World Coal Association, said: