U.K. Urged to Fast-Track Drax, SSE Carbon-Capture Projects

May 21, 2014 9:51 am ET

(Updates with government response in sixth paragraph.)

May 21 (Bloomberg) -- U.K. ministers should accelerate funding for carbon-capture and storage projects by Drax Group Plc and SSE Plc to kick-start a technology that’s vital for climate protection, a panel of lawmakers said.

Seven years after the U.K. first pledged to help pay for a project to demonstrate technology that strips out carbon dioxide from power plant emissions, the expected start date has been pushed back to 2020 from 2014, the multiparty Energy and Climate Change Committee said today in an e-mailed report.

With more CO2 locked in fossil-fuel reserves than the world can safely allow to enter the atmosphere, the government should speed up final funding decisions on SSE’s Peterhead plan and Drax’s White Rose project, and encourage other projects by offering guaranteed power prices, the committee said.

“Fitting power stations with technology to capture and store carbon is absolutely vital if we are to avoid dangerously destabilizing the climate,” committee chairman Tim Yeo said in a statement. Ministers “must now fast-track these projects and reach final investment decisions before the election to ensure this technology can start delivering carbon savings by the 2020s,” he said, referring to next year’s U.K. general election.

$1.7 Billion Competition

Britain still has the chance to be a world leader in developing carbon capture, as well as the opportunity to open up a market for storage, because it has underground geological formations capable of storing 70 billion tons of CO2, Yeo said.

“The U.K. is ahead of the rest of Europe with two CCS projects in White Rose and Peterhead actively undertaking detailed engineering studies ahead of full construction,” Energy Minister Michael Fallon said in an e-mailed statement. “It’s important we take the time to get our decisions right and follow a robust process.”

United Nations scientists have said the world has already emitted more than half of the CO2 permissible if it’s to cap the global average temperature rise since the 1800s to 2 degrees Celsius (3.6 degrees Fahrenheit). That’s the point at which scientists and politicians say climate change will become dangerous because of rising seas, longer droughts and more intense storms.

‘Lost Decade’

Carbon capture and storage, or CCS, equipment would trap carbon-dioxide emissions from factories and power plants and pump them underground for permanent storage. The International Energy Agency says efforts to develop the technology need to accelerate so the world can meet the 2-degree temperature goal.

A total of 12 CCS projects were operational worldwide last year, according to the Global CCS Institute in Melbourne, Australia. None were in power generation. Southern Co.’s Kemper project in Mississippi and a SaskPower International Inc. project in Saskatchewan, Canada, are set this year to become the first two power stations equipped with CCS, the institute says.

In the U.K., the government in 2012 began a competition for 1 billion pounds ($1.7 billion) of funding for CCS projects. In March 2013, it announced two preferred bidders: the White Rose project involving Drax, Alstom SA, BOC Group Ltd. and National Grid Plc, and an SSE and Royal Dutch Shell Plc venture at Peterhead. The energy department expects to make a decision by early next year.

An earlier contest dating back to 2007 failed to award funding after the current government in 2011 withdrew from talks with the last remaining bidder, Iberdrola SA’s Longannet project, saying the costs of fitting the technology at the coal- fed plant were too high.

CCS Progress

“Progress on CCS in the U.K. has been frustratingly slow,” the lawmakers wrote, referring to a “lost decade” of potential progress.

Aside from speeding up decisions on the Drax and SSE plans, ministers must ensure other projects can apply for so-called contracts-for-difference that guarantee the price they’ll get for generating power, the lawmakers said.

“Government needs to prioritize designing a credible financial incentive framework using guaranteed-price contracts for difference and commit to a realistic but ambitious timeline for awarding support,” the panel said.

The government in December set out the guaranteed prices it plans to award to some low-carbon technologies through to April 2019, though not for CCS.

“Our vision for CCS in the U.K. does not stop at these first projects,” Fallon said. “We want to see a strong and successful CCS industry able to compete on cost with other low- carbon technologies in the 2020s.”