The Climate Change Committee's (CCC) Report issued (10 February) on the future of Carbon Capture and Storage (CCS) concludes that the manner in which the Government's decision to withdraw support for CCS technology made last year is damaging to the relationship between Government and industry. In July and October 2015, the Department for Environment and Climate Change (DECC) confirmed it would continue to promote CCS. But in November 2015, weeks before the final bids, the Government unexpectedly announced as part of its Spending Review that it was withdrawing funding.
Within the CCC's remit of examining DECC's policy the CCC's report is critical and notes the serious detrimental impacts on the investment community, and that this decision (being only one of a number of policy announcements) reflects very badly on the UK Government's ability to drive long-term investment and is damaging of investor confidence in the energy sector.
The CCC's report makes a number of recommendations to DECC:
- To collect and compile the lessons learned information from the cancelled White Rose and Peterhead projects as soon as possible and make it publically available in the first quarter of 2016 so that a wide group of stakeholders can benefit
- To facilitate discussions between UK developers, the European Commission and the European Investment Bank to keep the funding for innovative low-carbon energy demonstration projects in the UK.
The CCS report is clear that the Government must now devise a new strategy for CCS in conjunction with a new gas strategy which must clearly address the following:
- reflection and analysis of the lessons learned from the abortive projects
- clarify the timescale for CCS, as the 2020s, 2030s or at all
- any plans for bringing forward new gas-fired power stations, retrofit of CCS and the mechanism for achieving this
- clarification of CfDs to be available for CCS for this and/or the next Levy Control Framework period
- detailed study of the potential of existing and new storage sites in the North Sea
- details of what is required for the development of industrial CCS in the UK.
In addition to coming up with a new CCS strategy, the Report recommends DECC to:
- engage with the National Infrastructure Commission (NIC) to explore options for the development of CO2 transport and storage and NIC to consult if this should be a priority area for it
- immediately begin consultation on CCS strategy and publish it by summer 2016 to include proactively engaging with industry to discuss the next steps
- to set up a National Carbon Storage Authority as first set out in the December 2009 report.
Without CCS technology one way forward may be more investment into low-carbon alternatives such as renewables and nuclear power, on the basis that CCS was seen as a way of extending the life of coal and gas-fired power stations. However, EDF has recently announced plans to extend the life of four nuclear power plants in the UK, while the final investment decision on two new reactors at Hinkley Point remains outstanding.
As the current indication is that Britain will push ahead with shale development it will need to develop CCS to make sure it can still meet emission reduction targets. This was the view Task Force on Shale Gas which reported on this point last year and recommended that the Government should commit to applying its energy specific revenue derived from a developed shale gas industry to investment in R&D and innovation in CCS and low carbon energy generation, storage and distribution.
The Task Force's view is that a serious development of CCS is essential for the medium term viability of any significant shale gas industry.
There may therefore still be a future for CCS, but as recommended by the CCC it is incumbent on the Government to 'mend the bridges between investors and the Government by being proactively engaged with the industry in a consultative way to discuss the next steps for businesses involved with the development of CCS in the UK.'