Will the costs of carbon capture justify its benefits?

Senior reporter

The UK now has a pathway to a future where carbon capture and storage makes major contributions to our efforts to cut carbon emissions. Just don’t expect it to be cheap.

Carbon capture and storage (CCS) often appears to be one of those technologies that is perpetually 10 years away. It doesn’t help that in the UK we’ve had several false starts thanks to the collapse of the first government funding competition to build a demonstration plant and an attempt to add CCS to the controversial idea of building the country’s first new coal plant in decades.

But now things are starting to look more promising. This week, the next tranche of funds was confirmed for the second of the government’s two preferred bidders in its revamped CCS competition, Peterhead gas power station in the north east of Scotland. Work will now begin on a £100m programme of engineering studies before the final go ahead is given to the Peterhead project and its coal counterpart, the White Rose project at the Drax power station in North Yorkshire.

Once completed, Peterhead will capture up to 1m tonnes a year of carbon dioxide from the exhaust of its 385MW combined cycle gas turbines using amine solvents, and pipe it offshore to the Goldeneye gas reservoir, 2km below the North Sea bed. White Rose, meanwhile, will see the creation of a new 426MW oxy-fuel combustion plant, where coal is burnt in oxygen instead of air to produce a pure stream of CO2 (2m tonnes a year) that will then be piped into saline aquifers off the coast. This will include the building of a new pipeline system with a capacity of 17m tonnes a year, paving the way for a cluster of CCS plants around the Humber. 

These projects are important not because they will demonstrate that it’s possible to capture CO2 from power stations (several plants in countries including Germany and the US have already done this), but because they will join up the three elements of capture, transport and storage and highlight the UK’s strong potential to become CCS world leader.

Peterhad CCGT plant, Aberdeenshire
Carbon from Peterhead will be pumped offshore to the Goldeneye gas reservoir

Unlike Germany, where CCS has been hampered by public opposition to onshore underground CO2 storage, the UK has access to vast amounts of offshore storage in both aquifers and empty gas fields. There’s also the chance to use the captured CO2 to improve North Sea drilling operations and tap otherwise uneconomic reservoirs by using it for enhanced oil recovery (EOR), helping make CCS more commercially viable. We also have a strong research base and a financial mechanism to support low-carbon power generation (the bit of our energy bills that will subsidise new nuclear, renewables and, eventually, CCS).

The argument for CCS is pretty persuasive from a decarbonisation point of view. It might be an untested system with initially high costs that will still produce some CO2 emissions (around 10 per cent of a fossil fuel power station’s total with current technologies) and still requires a constant supply of difficult to produce fuel, whose cost is volatile at best. However, it also produces a flexible, dependable source of energy that could even help remove CO2 from the atmosphere (if we attach CCS technology to biomass plants).

None of our other options – nuclear or renewables ­– can be easily turned on or off to meet our fluctuating power demands. Without a cheap form of mass energy storage, which we’re not particular close to developing, CCS looks like our best bet for a cost-effective, low-carbon way to meet the gap between our energy supply and demand.

Current estimates suggest CCS could become cost-competitive with offshore wind by the 2020s, and with the price coming down faster. Research by the Energy Technologies Institute indicates that using CCS rather than continuing to rely on CO2-emitting gas plants for flexible power supply will reduce the need to decarbonise transport, heating and industry, with overall savings of up to £32bn by 2050.

What will it mean for UK engineering? We should probably tone down our ideas of a new manufacturing sector exporting UK-grown technology to the world. The major companies developing CCS systems are based elsewhere and the Far East is likely to offer a more attractive home to much of the manufacturing. However, the crossover between CCS and the chemical and offshore gas industries does create an opportunity for UK firms to get in on the action with some supply chain production and expertise in services.

In that sense, these demonstration plants could really be the start of a new world-leading UK industry. One estimate suggests 13GW of CCS-equipped low-carbon generation could be up and running by 2030, generating £3bn-£6.5bn annually for the UK economy and supporting 70,000-100,000 jobs.

To get there, however, we will to provide major financial support to a raft of projects following the initial £1bn given to the current competition. The idea is that the second generation of UK plants will raise their building costs from the private sector but still rely on subsidies for operational costs. And these subsidies could be much greater than the prices we’re currently agreeing to pay for nuclear (around £90/MWh) or offshore wind (£155/MWh). We’ll also need to support research into other CCS technologies, for both power station and industrial emissions. And continue to develop the transport and storage infrastructure. Then finally we’ll get to the third generation of plants that are cost-competitive with renewables but will probably still need subsidies.

If CCS is really our cheapest option for meeting our CO2 targets, then it puts the debate about shale gas into a whole new light. Fracking might produce a reliable new low-carbon energy source but it certainly won’t bring electricity prices down.