Carbon capture reaches a critical point

London – The UK risks losing out on more than €900 million of EU funding intended to support the construction of carbon capture and storage demonstration projects, according to Liberal Democrat MEP Chris Davies.

Ministers, said Davies, have until the end of the month to give guarantees to the European Commission that they will provide the additional financial support needed to ensure completion of qualifying projects.

Development of CCS is widely regarded as an essential tool in the fight against global warming and has the support of all political parties. It enables CO2 from coal and gas power plants, as well as industrial installations, to be pumped into rock deep underground instead of being released into the atmosphere.

The UK government’s Coalition Agreement calls for construction of four CCS projects but currently only three power station projects are in the running: Don Valley (coal) at Hatfield near Doncaster, White Rose (coal) at the existing Drax power station site, and Peterhead (gas) in Scotland. In each case the CO2 removed will be piped for injection deep beneath the North Sea.

EU Prime Ministers agreed in 2007 to have up to 12 CCS demonstration plants in operation by 2015, but proposals for projects in Germany, Poland, Romania, Italy and Spain have encountered problems and European hopes now rest with the UK to take the technology forward.

Developers believe that CCS will enable CO2-free electricity to be provided at similar costs to onshore wind, and at much less expense than offshore wind or solar photovoltaic cells. However, the first full scale demonstration projects will require very considerable subsidy.

A maximum of £337 million per project could be available from the EU’s ‘NER300’ fund for CCS and innovative renewable energy projects. The fund, derived from the sale of ‘surplus’ carbon allowances, was created as a result of a 2008 initiative by the European Parliament’s rapporteur on CCS, MEP Davies, with strong backing from the UK Government.

Although £1 billion has been allocated by the Government towards the capital costs of CCS projects in the UK, developers will also require subsidy towards the operating costs for at least 10 years. It is far from certain that the Treasury will approve the funding under the Contracts-for-Difference scheme before the deadline.

Davies said: “This is crunch time for CCS, and Ministers need to knock heads together to make sure that Britain doesn’t miss out on a large pot of EU funds that it was responsible for putting into place.

“If we fail within the next three weeks to make the crucial decisions Britain and Europe will lose out on the chance to be global leaders in developing CCS technology, and the world’s prospects of fighting climate change will be very much reduced.”

The need for greater support, worldwide, for CCS has, meanwhile, been highlighted by the Global CCS Institute. It notes that in the past year, the net number of large-scale integrated projects increased by one, to 75; eight previously identified projects were cancelled; and nine new projects were identified, most of which will investigate enhanced oil or gas recovery options.

The Calgary, Canada-based Institute reckons that carbon abatement from eight CCS projects already operating is greater than that achieved by all other energy-related climate efforts combined to date in Australia or the UK.

“CCS projects are on track to achieve 70% of the International Energy Agency’s target mitigation activities for CCS by 2015,” said Institute CEO Brad Page. “But beyond that, it is clear that a very substantial increase in new projects will be required to meet the 2050 target.

“The number of operational projects would need to increase to about 130 by 2020, but this seems unlikely, with Institute projections indicating that only 51 of the remaining 59 projects identified in our annual survey may be operational by then.”

Page said that CCS was already making a contribution to meeting the target of global average temperature increases of no more than 2°C. He said it was the only technology currently available to decarbonise the production of industrial materials such as iron, steel and cement, and was pivotal to carbon reduction in other sectors.

“If, for example, CCS was excluded as a technology option in the electricity sector, the IEA estimates that investment costs in the sector would increase by 40% — about $3 trillion — to 2050, to draw on more expensive abatement options to provide electricity.”