Teesside bids to secure industrial future
6 Oct 2015
Process companies hand government detailed plans for industrial carbon capture and storage network in North East England.
This summer a group of major process companies descended on Westminster to present the Department of Energy and Climate Change (DECC) with detailed proposals for an industrial carbon capture and storage (ICCS) network to be developed in Teesside.
The companies - BOC, Lotte Chemical UK, SSI UK and GrowHow – in January joined forces with National Grid and local enterprise partnership Tees Valley Unlimited (TVU) to form a consortium known as the Teesside Collective.
What the Teesside Collective is doing goes hand in hand with this government’s ambition to upskill the workforce
Energy and climate change minister Lord Bourne
After initially announcing its plans for an ICCS network in the Tees Valley at the start of the year, the Teesside Collective met with DECC in July to submit detailed plans that included technical and financial reports from Amec Foster Wheeler and Societe Generale, respectively.
Speaking at the event in Westminster in July to mark the handing over of the plans, energy and climate change minister Lord Bourne said the Teesside ICCS proposals – which would see CO2 captured at the four companies’ Tees Valley sites and then pumped for storage underneath the North Sea - complemented the two projects included in the government’s existing CCS Commercialisation competition: the 426MW White Rose facility at Drax* in North Yorkshire, and Shell and Scottish and Southern Energy’s (SSE) Peterhead CCS in Aberdeenshire, both of which also plan to capture CO2 and then transport it for storage under the North Sea.
“What the Teesside Collective is doing goes hand in hand with this government’s ambition to upskill the workforce and support thousands of jobs in the North,” he added.
However, though the proposed ICCS network also has the potential to save 2.6 million tonnes of carbon per year, it is the economic argument for the project rather than the environmental one that is most likely to persuade this current Conservative government to part with substantial levels of funding for the scheme.
With the government in April doubling the UK tax rate on carbon emissions – known as the carbon floor price – to £18 per tonne, major emitters of CO2 in the UK effectively pay a price of around £23 per tonne of carbon when participation in the EU Emissions Trading Scheme is included (where carbon is currently trading at around €7 per tonne), major industrial firms are at a significant disadvantage to international competitors when it comes to operating costs, even when the government’s Carbon Price Support relief scheme is factored in.
By capturing carbon emissions, the companies involved in the Teesside ICCS network could see their exposure to carbon taxation fall dramatically.
“The opportunities that the CCS network provides in terms of reducing emissions and carbon costs for energy-intensive industry is likely to create a strong incentive for new process plants to re-locate to the Tees Valley and join the CCS network,” claims a submission in the report by consulting firm Cambridge Econometrics.
However, the initial cost of installing the technology to enable an ICCS is currently prohibitively expensive, with the Teesside Collective report estimating that over a 20-year period it would equate to £95 per tonne of carbon.
“Implementation of ICCS will require that those capturing CCS must see their costs fall compare to those that continue to emit,” says Stan Higgins, chief executive of the North East Process Industry Cluster (NEPIC).
Within the Tees Collective July report, Societe Generale puts forward two potential funding mechanisms: firstly an “emitter” contract for difference (CFD) model similar to that used in the power sector, where the government tops up the difference between the price of carbon on the EU ETS and the cost of using CCS; secondly, a capacity payment mechanism that would fund the transfer and storage of the carbon, substantially reducing the risk for the companies involved to just installing the capture technology on their own sites.
The government talks a good game when it comes to supporting industry in the North; the Teesside Collective has presented it with a chance to put its money where its mouth is, and then some.
*Drax has pulled out of the White Rose CCS project due to the “drastically different” financial and regulatory environment.
