The UK government passed up the opportunity to lead the global carbon capture and storage (CCS) sector. Can they learn from offshore wind to give the much-maligned technology a genuine chance?
In 2014 then UK Prime Minister David Cameron sat before the House of Commons Liaison Committee to discuss the UK’s approach to staving off the threat of climate change. Reflecting on the strategies needed to decarbonise the UK’s economy, he singled out one technology as “absolutely crucial if we are going to decarbonise effectively”. Fast-forward four years and many readers would be surprised to know Cameron was referring to CCS.
In an industry understandably excited by the potential new era of smart grids, decentralised energy systems and renewables, advocates of this decidedly less glamorous technology have struggled to be heard. Like all good tales however the history of CCS is littered with plot twists, conflicts and lessons for those who appreciate the morals of the story.
The latest chapter of the CCS saga began in 2010 with the announcement of the second iteration of a £1 billion CCS Commercialisation Competition. This flagship programme was billed as the final push needed to take the technology from demonstration phase to commercial scale, pitting industry heavyweights such as Shell and Drax against each other in a race to build an economically viable CCS system. The government’s enthusiasm did not last long however and following the formal cancellation of the project five years later (by the now divisive Chancellor George Osborne) the competition’s last remaining project in Peterhead, Scotland, was shelved.
Today the North Sea storage sites proposed by the Peterhead projects remain conspicuously free of CO2. In the waters surrounding them however, a different low-carbon energy source is fast emerging as a significant force in the UK energy mix. 2017 saw a stunning 25% increase in wind power capacity in Europe, with the UK accounting for over half of this rise. Industry insiders were similarly stunned when two wind farms agreed to a Contract-for-Difference (CfD) price of less than £58/MWh in September, representing a drop of over 50% in just 2 years.
The contrasting fortunes of CCS and wind power offer many lessons for policymakers. The decision to abandon the CCS Commercialisation Competition, described succinctly by the then Scottish Energy Minister Fergus Ewing as a “disgrace”, seems emblematic of the thinking around CCS that has undermined attempts to get the industry off the ground. Economic assessments of CCS, whilst rightly pointing to the prohibitively high costs in the short-term, have given less thought to the wider picture. The remarkable drop in the wind energy prices show how costs can be driven down in an environment where companies can learn on the job in a competitive market. CCS has yet to be given the chance to realise the efficiency improvements that come naturally from operating a plant at commercial scale.
Through the CfD scheme wind has also benefited from the security of receiving a guaranteed ‘strike price’ for the energy it produces, providing vital stability to project funders. Subsidies for CCS have invariably come in the form of grants for initial capital costs, leaving organisations at the mercy of the market once the technology is in operation and spooking would-be investors.
The elephant in the room is that there is currently little financial incentive to develop CCS, meaning successive governments have kicked the technology into the long grass. There are however many future scenarios in which it becomes a commercially necessity (ramping up of carbon taxes being the obvious one), and if countries are actually serious about their emissions reduction targets the intergovernmental panel on climate change (IPCC) reckons widespread CCS is probably unavoidable. This, therefore, suggests a significant possibility of there being global demand for CCS technologies and expertise over the coming decades, and in the author’s opinion CCS could be a smart bet for any government willing to take a mature, long-term approach. The recently announced CCS Cost Reduction Taskforce is a start, but the chequered history of CCS suggests its wise not to count the chickens until they’ve hatched.
For all its successes the offshore wind boom is notable for its absence of UK-based organisations, and the key players in the industry’s growth from France, Denmark and Portugal have left little room for any British entrants. Supporting the British CCS industry at this stage however gives the UK a chance to be a world-leader in the sector. Whilst international carbon transport and storage infrastructure may seem a lofty ambition it will be vital in the long-term if CCS is to make a dent in global emissions. Taking a lead in the development of such infrastructure can extend the UK’s geopolitical influence.
With Brexit around the corner the opportunity to establish knowledge-exchange partnerships with countries at an earlier stage of their CCS journey and would also be an excellent source of soft power as the UK attempts to define its new role in the global knowledge economy. Perhaps CCS deserves another chance?
Jacob Ohrvik-Stott is a policy professional from London whose research interests span the relationships between energy, technology, and society.