The UK government cancelled a CCS commercialisation programme in November 2015, citing the high cost. However, CCS is "essential for low cost decarbonisation" and inaction will cost UK consumers £1-2 billion a year in the 2020s, rising to £4-5 billion per year in the 2040s, the Parliamentary Advisory Group on Carbon Capture and storage said in its report.
Lead times are long on this sort of project, so early decisions are needed, the advisory group said. "UK action on CCS now will deliver the lowest cost for the consumer. There is no justification for delay," it said.
The report recommended that a CCS delivery company should be established to manage development of infrastructure. based on hubs to which power stations and other emitters could send CO2 and have it sent on for storage for a fee. This should initially be government-owned, but could later be privatised in two parts: one delivering the hubs and one the transport and storage infrastructure.
Energy expert Chris McGarvey of Pinsent Masons, the law firm behind Out-Law.com said: "The report, and particularly its recommendation that a government-owned CCS delivery company be established represents a radical departure from the previous two government funding competitions which sought to place responsibility and reward for CCS deployment on the private sector on an arm’s length basis. The rapid reduction in costs recently experienced in renewable technologies and the anticipated potential of storage and demand-side measures have combined with low oil and carbon emission prices to undermine the case for investment in CCS in the short term."
"However, intermittency and energy density limitations mean that fossil fuels will continue to constitute a significant proportion of energy supplies across the power, transport and heating sectors for the foreseeable future," McGarvey said. "It is this ongoing reliance together with carbon emissions from industrial manufacturing that supports the case for deployment of CCS as one of several tools to meet the UK’s obligations under the Climate Change Act and Paris Agreement."
The hubs should deliver the full chain of CCS services for at or below £85 per megawatt hour (Mwh), the report said.
"That would make it comparable with other sources of low carbon generation," McGarvey said, "but for a first of a kind project, pegging costs to more established technologies could ultimately prove undeliverable and counterproductive. The £85/MWh figure assumes considerable efficiencies and cost reductions can be found from previous estimates. In the absence of development of a global CCS industry, it is difficult to identify how these savings can be realised. Focusing on a levelised cost of generation in this way may also fail to properly account for wider benefits that CCS can bring in terms of overall system flexibility and reutilisation of the existing oil and gas skills base and, possibly, physical infrastructure."
The report recommended that CCS be encouraged through industrial capture contracts, funded by the government, and that a group be set up to assess the lowest-cost route to decarbonising heat provision in the UK.
A certificate system could be used to certify that companies have captured and stored CO2, and a CCS obligation should be implemented from the late 2020s, obliging fuel suppliers to capture a growing percentage of the CO2 associated with their supply, it said.
"Establishment of a CCS obligation along the lines of the previous renewables obligation would represent a particular challenge given the geographical constraints of emissions sources connected to storage sinks," McGarvey said.
"Initial available capacity would be limited to whatever first project the CCS delivery company would construct and, assuming the obligation would have some form of buy-out price similar to the renewables obligation, there would be a strong political tension between setting a price high enough to underwrite future investment in capture and storage capacity versus affordability, with the risk that the obligation simply becomes another form of levy without driving the behavioural change desired," he said.
The Committee on Climate Change (CCC), which is the statutory body established by the UK government to provide advice on climate change matters, wrote to Secretary of State for Energy and Climate Change Amber Rudd in July stressing the "urgent need for a new approach" on CCS.
The CCC welcomed the advisory group report. "The CCC has previously highlighted the crucial role of CCS in helping the UK to meet its climate change targets. If delivered in a low-cost way, the technology could greatly reduce the cost of decarbonising the UK and global economy," it said.