U.K. GOVT: FOUR CCS PROJECTS ADVANCE TO DEMO COMPETITION SHORT LIST

Tamar Hallerman
GHG Monitor
11/2/12

The U.K.’s energy ministry said Oct. 30 that four demonstration projects have made the short list for its carbon capture and storage competition and that it will further narrow down the field early next year. The Department of Energy and Climate Change (DECC) said that out of eight entrants that applied for funding this spring, two coal gasification, one natural gas retrofit and one oxy-combustion project have made it through to the next round of its £1 billion ($1.6 billion) CCS competition:

• Peterhead—385 MW post-combustion retrofit onto a combined cycle gas turbine at an existing natural gas power station in northeast Scotland; Transport via existing underground pipeline to a depleted gas reservoir in the North Sea; Led by Shell and SSE;
• Teesside Low Carbon—450 MW integrated gasification combined cycle project set for a brownfield site in a northeast England industrial region; CO2 storage in offshore deep saline aquifer; Led by Progressive Energy, GDF SUEZ, Premier Oil and BOC;
• White Rose (Drax)—304 MW new-build oxy-combustion capture project at a fully-abated supercritical coal-fired power station near Drax site in northeast England; storage in offshore saline aquifer; Led by Alstom, Drax Power Limited, BOC and National Grid; and
• Captain Clean Energy (Caledonia)—570 MW new-build integrated gasification combined cycle project in central Scotland; storage in offshore depleted gas field; Led by Summit Power, Petrofac, National Grid and Siemens. 

Perhaps the biggest surprise, though, came from the list of projects that failed to make the cut. Most notably, the CCS project most favored by the European Commission for its own CCS competition, 2Co Energy’s Don Valley, did not make DECC’s short list. DECC’s head said the department selected projects based on deliverability, affordability and probability of helping the government meet its goal of kickstarting a CCS industry by the 2020s, and that its selection criteria were different from NER’s. “We have received some quality bids from industry who have really risen to the challenge set by the competition,” Secretary of State for Energy and Climate Change Edward Davey said in a statement this week. “The projects we have chosen to take forward have all shown that they have the potential to kick-start the creation of a new CCS industry in the U.K., but further discussions are needed to ensure we deliver value-for-money for taxpayers.”

DECC Adds Intermediate Phase to Competition

DECC also surprised many in the industry this week when it announced that it would be adding an intermediate phase to the CCS competition before it makes its final selections. Earlier this spring, the government said it would make its determinations by the end of the year, but DECC said this week that the four short-listed projects must now go through a further round of “intensive” commercial negotiations with DECC before the ministry selects three projects early next year that will complete full front-end engineering and design work. Only after that point, DECC said, will final decisions be made about which projects to ultimately fund. “DECC kind of put another phase into the process that we hadn’t previous known about,” a spokesperson for the Teesside project told GHG Monitor. “We must now go through another process with DECC and provide them more details about certain aspects of our bid.” Calls to DECC for additional information were not returned.

Some critics pushed back on the announcement of the extra phase, arguing that DECC is dragging its feet on the issue. “The U.K. should be at the cutting edge of developing carbon capture and storage. But yet again Ed Davey has kicked a decision about support for carbon capture and storage into the long grass, creating more uncertainty for the industry,” Tom Greatrex, the opposition Labour Party’s shadow energy minister, said in a statement. “We are now at risk of losing our competitive advantage in developing low carbon technologies, engineering expertise and valuable skills that we could export around the globe.” 

Others said that the announcement was a step forward regardless. “Today’s announcement is very positive news for the fledgling CCS industry in the U.K. By selecting four projects to take forward for further negotiations, the Government is sending a signal that they are still strongly committed to supporting the development of a long-term CCS industry which will help to unlock UK based investment,” Jeff Chapman, chief executive of the London-based Carbon Capture and Storage Association, said in a statement.

Unclear How Many Projects DECC Will Fund

Despite the fact that four projects were shortlisted, it remains unclear how many projects DECC will ultimately fund under the competition. When the U.K. government released the roadmap for its revamped CCS program in April, DECC said that instead of seeking to fund a particular number of projects—as it did under its previous scheme that buckled last year—it would instead seek to build an infrastructure for a CCS market by the 2020s with the £1 billion in funding. While the government said it would aim to fund multiple full- or part-chain projects, it did not specify how many it would seek to support. In addition to the demonstration program, DECC also aimed to build up the U.K.’s domestic CCS industry by establishing a separate R&D fund and pushing an electricity market reform package in Parliament that would establish operational support for projects via feed-in tariffs with contracts for difference, a carbon floor price and an emissions performance standard for new coal plants.

Also unclear is how DECC’s decision will affect the U.K.’s ability to gain funding for its remaining projects entered into the European Commission’s CCS competition, NER 300, now that Don Valley is no longer being backed by the government. Teesside and White Rose were fourth and fifth on the Commission’s ranking this summer, respectively, and there are now two projects ahead of them that have priority for funding. Peterhead is considered an ‘alternate’ project for EC funding and will not likely receive support under the scheme. The Captain Clean Energy project did not apply for EC funding.