There are “no technical barriers” to the deployment of carbon capture and storage in the UK, according to the Carbon Capture and Storage Association (CCSA).
Chief executive of the CCSA Luke Warren said a new study showed whilst there are “a number of outstanding commercial challenges” to overcome, the technology has “significant potential for rapid cost reduction”.
The organisation has a released a report detailing 36 lessons learnt from programmes to support the development of CCS in Britain. It largely focused on the commercialisation competition which was scrapped by the government in November. Two projects bid for the competition – Peterhead and White Rose.
The Peterhead project could have been successfully delivered under the “structure, risk allocation and terms” of the programme, the study said, albeit with “some amendments”. However, it said more major adjustments would have been needed for the White Rose project to be delivered.
It said the two storage sites for the projects – Goldeneye (Peterhead) and Endurance (White Rose) – were, and continue to be, ready for development. It added the infrastructure which serves the sites could be extended to access other stores at a “relatively low cost”, and that in general the reuse of existing infrastructure seemed to offer “very good value for money”.
In May 2013 the CCS Cost Reduction Task Force published a report forecasting that the first CCS project would need a strike price under the Contracts for Difference scheme of between £150 and £200/MWh.
The CCSA said developers of both the Peterhead and White Rose projects would have bid for strike price within that range and that follow on projects would have required strike prices “well below” those needed for the competition projects. It quoted National Grid Carbon which said using the infrastructure developed for the White Rose plant for a second project would have allowed transport and storage costs to be reduced by between 60 and 80 per cent.
According to the association the assessment of the costs and benefits of CCS enabled generation “suffered from a lack of like-for-like comparison” with other forms of generation, particularly when it came to the potential benefits for other sectors.
Despite the apparent viability of the Peterhead project, the CCSA said the “full-chain private sector business model” used in the competition is unlikely to work in the future. It said “investing in early offshore CO2 storage projects is currently not, and is unlikely to become, an attractive investment proposition for the private sector” as it provides “insufficient reward for the potential risk impact and commitment involved”. The report noted the conclusions of Norwegian company Statoil, which said government guarantees are needed to underwrite some of the risks.
Furthermore, it said the “likelihood and consequences of cross-chain default” by the generation, capture, transport or storage operators is a “significant challenge” to investors. In this respect it said Peterhead was “the exception that proves the rule,” as a single company would have controlled the project’s capture, transport and storage assets.
Director of Scottish Carbon Capture and Storage Stuart Haszeldine said: “After the abrupt withdrawal of CCS funding by the treasury, subsequent government defence of this action cited its high cost. However, the CCSA’s evidence-based assessment finds the now cancelled projects and their projected costs to have been in line with the government’s stated objectives and expectations.
“In particular, Peterhead is found to have been a unique opportunity … that ‘would seem unlikely to recur’. This is a huge strategic loss to the UK’s decarbonisation capability.”
Earlier this month energy minister Andrea Leadsom revealed that £30 million has been paid to bidders in the commercialisation competition since it was cancelled.