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Next steps on carbon capture readiness and UK demonstration competition

DEPARTMENT FOR BUSINESS, ENTERPRISE AND REGULATORY REFORM News Release (2008/132) issued by The Government News Network on 30 June 2008

The four bidders that have pre-qualified in the Government's carbon capture and storage (CCS) demonstration competition were named by Business Secretary John Hutton today. He also announced publication of a consultation on the legislative framework for CCS, including carbon capture readiness.

Proposals in today's consultation document on carbon capture readiness are designed to create a more consistent understanding of what this means across the EU. The proposals mean that the carbon capture readiness of new combustion power stations will have to be addressed by developers in the design process and taken into account by the Government in deciding whether or not to consent to such stations.

CCS has the potential to capture up to 90% of damaging carbon emissions from coal fired power stations. The steps that we are taking to prepare for and support the deployment of CCS technologies are part of a wider strategy to reduce emissions from electricity generation - which include the expansion of renewable energy, a decision to allow investment in nuclear new build and capping emissions from the power sector through the EU ETS.

BP Alternative Energy International Limited, EON UK Plc, Peel Power Limited and Scottish Power Generation Limited were selected from nine contenders based on their responses to the pre-qualification questionnaire, submitted to the Department for Business at the end of March.

Discussions in the next phase of the competition between the Government and the four bidders will cover technical, commercial, contractual and financial issues. The project continues to be on course to be operational by 2014 - making the UK one of the first countries in the world to demonstrate CCS on a commercial-scale.

Energy Secretary John Hutton said:

"Alongside nuclear, renewables and gas, coal is and will continue to be a feature of the UK's electricity mix. The progress we are making with the CCS demonstration competition and on developing a sound legislative and regulatory framework will help to deliver our ambition to see CCS ready for commercial deployment by 2020. We have received an excellent response from industry to this competition - indicating their commitment to the clean energy agenda.

"We cannot deliver wide-scale deployment of CCS, nor tackle global climate change, alone. We need greater international collaboration and will continue to urge other countries to demonstrate a similar level of commitment to demonstrating CCS as the UK. We must ensure CCS is recognised in the EU Emissions Trading Scheme and the Clean Development Mechanism, and have been pushing hard for it to be high on the agenda at the forthcoming G8 Leaders meeting."

The consultation document published today - "Towards Carbon Capture and Storage" - sets out the Government's view on CCS as a 'high potential' carbon abatement technology and asks for views on what more can be done to promote, develop and deploy CCS in the UK, EU and globally.

The document outlines the proposed EU CCS Directive and invites consultation on:

* the principle of carbon capture readiness
* the regulation of CO2 storage

As part of the Government's commitment set out in the Energy White Paper, the consultation seeks views on the definition of carbon capture readiness (CCR) proposed in the EU draft Directive. It describes and seeks views on:

* what CCR means and to which combustion plants it should apply
* whether CCR should be addressed by developers when designing new combustion plant and be taken into account by the regulatory authorities when deciding whether or not to consent to such plant
* how any such requirement would be incorporated into the consenting process under section 36 of the Electricity Act 1989 in England and Wales

The UK is a leader in driving forward the deployment of CCS technology. In addition to the UK's commercial scale CCS demonstration competition the Government continues to support a number of small-scale carbon abatement projects, including R&D and was recently confirmed as the host for the high profile Carbon Sequestration Leadership Forum Ministerial Conference in 2009.

Notes to editors

1. The Government is committed to shifting the UK towards lower carbon energy options through pressing ahead with a renewable energy strategy, inviting operators to consider nuclear as an option for new energy generation, pursuing a number of energy efficiency measures and through commitment to carbon abatement technologies such as CCS. The draft Energy Bill currently before the House aims to develop the UK framework for a diverse, sustainable and low carbon energy mix.

2. Fossil fuels will continue to play a vital role in providing the UK with secure, reliable electricity for the foreseeable future. Carbon capture and storage technology is currently the only option available for making significant cuts in global emissions from fossil fuel power stations - the International Energy Agency (IEA) suggests that CCS technologies could contribute up to 28% of global CO2 mitigation by 2050.

3. Given the participation of the electricity generating sector in the EU ETS, new coal power plants will have no impact on net emissions from industries covered by the whole scheme. Total emissions are set by the EU ETS cap, and the UK, as an individual Member State, can only affect the composition, not the level of total emissions. We support the EU's proposal for the EU ETS cap to get progressively tighter year on year from 2013, continuing beyond 2020, setting a clear pathway towards our long term emissions targets. By 2020, the cap would be 21% below 2005 reported emissions levels.

CCS Demonstration Competition

4. The UK CCS competition will support a demonstration of the full chain of CCS technologies (capture, transport and storage) on a commercial scale coal fired power plant. It was launched in November 2007. The selected project should capture 90% of the CO2 emitted by the equivalent of 300-400MW generating capacity.

5. The Government selected post-combustion capture on coal for the demonstration project as it is most likely to have the biggest impact on global CO2 emissions and because it can be retrofitted once the technology has been successfully demonstrated at a commercial-scale.

UK CCS Consultation

6. There will be a 12-week consultation period for the consultation document - "Towards Carbon Capture and Storage". A copy of the consultation document can be found on the Department for Business website.

7. In January 2008 the European Commission published a proposal for an EU Directive on the geological storage of carbon dioxide (the draft CCS Directive).

8. As well as setting out proposals for an EU regulatory framework for the storage of carbon dioxide and a number of related points on safety, the draft CCS Directive also makes proposals in relation to carbon capture readiness (Article 32). These relate to designing new combustion power stations of 300MW electrical or more so that carbon capture plant could be subsequently fitted, and undertaking assessments about transporting and storage of captured carbon dioxide.

9. Subject to the views in the response to the consultation, the Government is minded to support the EU proposals in Article 32. The consultation explores what the proposals should mean in practice and how they could be most effectively implemented in England and Wales

10. The Energy Bill currently passing through parliament aims to establish a legal basis for licensing offshore carbon dioxide storage and in co-operation with Scottish Ministers, the consultation covers the Government's proposed offshore regulatory regime for the storage of CO2.

11. Negotiations on the CCS Directive have commenced and it is anticipated the Directive will be adopted before May 2009.

Consenting England and Wales power stations

12. The Government will continue to process power station applications and decisions will continue to be taken under Section 36 of the Electricity Act 1989. The applicants for the only coal-fired application with the Department for Business have requested a decision be deferred until the consultation is complete.

Carbon Sequestration Leadership Forum (CSLF)

13. The Carbon Sequestration Leadership Forum is an international climate change initiative that is focused on development of improved cost-effective technologies for the separation and capture of carbon dioxide for its transport and long-term safe storage. The purpose of the CSLF is to make these technologies broadly available internationally; and to identify and address wider issues relating to carbon capture and storage.

14. The Department for Business Enterprise and Regulatory Reform helps UK business succeed in an increasingly competitive world. It promotes business growth and a strong enterprise economy, leads the better regulation agenda and champions free and fair markets. It is the shareholder in a number of Government-owned assets and it works to secure, clean and competitively priced energy supplies.