U.K. GOV’T INTRODUCES BILL PROVIDING LONG-TERM OPERATIONAL SUPPORT FOR CCS PROJECTS

Tamar Hallerman
GHG Monitor
12/7/12

The head of the U.K.’s Department of Energy and Climate Change (DECC) introduced a measure in Parliament late last week that would provide long-term operational support to the developers of carbon capture and storage projects. Energy and Climate Change Secretary Ed Davey sponsored electricity market reform legislation in Parliament, including in the much-anticipated bill a provision that would ultimately boost the economic case for CCS and other low-carbon energy technologies. More than two years in the making, that measure aims to transition the U.K.’s electricity market away from fossil fuels and toward low-carbon generation. The centerpiece of the reform package provides major operational support for technologies like CCS, nuclear and renewables via feed-in tariffs with contracts for difference. That provision allows the government to negotiate a long-term rate, or ‘strike price,’ with project operators for the price of power generated per MWh from fossil fuels installed with CCS or other low-carbon technologies. Project operators would then sell their electricity to the market, with government paying the developers the difference between the going rate on the market and the strike price.

DECC said the reform package would incentivize technologies like CCS in the long-term, helping cover some of the operational costs that are often considered a large roadblock to project development. “The bill will support the construction of a diverse mix of renewables, new nuclear, gas and CCS, protecting our economy from energy shortfalls and significantly decarbonizing our electricity supply by the 2030s as part of global efforts to tackle climate change,” Davey said in a statement. The legislation also sets a greenhouse gas emissions performance standard similar to the proposal released by the U.S. Environmental Protection Agency this spring that mandates the installation of CCS technology on new coal plants.

Proponents of the electricity market reform package said the measure could generate £110 billion ($177 billion) in new investment by 2020 and provide the largest restructuring of the country’s electricity sector since privatization in the early 1990s. The reform package is expected to easily clear Parliament in 2013 given the size of the ruling government coalition and the relative level of consensus surrounding climate change, experts said. DECC released a draft version of the bill in May for discussion in Parliament.

Mixed Signals for the U.K. CCS Industry This Week

The Department maintained this week that the provisions in the market reform package, paired with the support provided in its £1 billion ($1.6 billion) CCS competition constitute “one of the best offers in the world for CCS.” However, days after introducing the measure in Parliament, DECC confirmed that the three British projects entered into the European Commission’s CCS competition would not be receiving funding under the scheme. Several U.K. CCS project developers contacted for this story said they would not comment on policies currently under negotiation.