The UK has longstanding ambitions to be a centre for carbon capture and storage (CCS) and that remains the case. However, the nature of its ambitions has changed. Whereas two decades ago the UK imagined itself as supplying CCS equipment to the power industry, now it hopes to act as custodian of captured carbon dioxide produced by other industries that have no other way of reducing carbon dioxide emissions.
Below ground beneath its North Sea waters the UK has about a third of Europe’s potential storage capacity. Norway also has a third of capacity, but it is further from major emitters in Europe, while the remainder is split between different jurisdictions. The UK has the resource: but if it is to make storage a European, or even global, business, it first has to demonstrate it at the domestic scale and convince industry that it is a reliable partner.
The UK has competition. Partly that arises from programmes in other European countries, which may not have the UK’s resources but have smaller storage areas and are going ahead with projects.
France, for example, began consulting on a CCS strategy based around industrial areas in July 2023, and it plans to begin testing storage sites this year and next. There is also competition from the USA, boosted by measures in the Inflation Reduction Act (IRA). Esso, for example, is focusing its CCS development on the USA (and similarly its nascent hydrogen production), attracted not only by the simplicity of the financial incentive provided by the IRA but also by the expected speed of deployment. The US began developing a regulatory framework in 2022 and it is expected to move to potential sequestering as soon as 2025.
Finally, the UK also has to face a different type of competition important to industries that emit carbon – from countries where carbon dioxide emissions are free. The UK CCSA believes one-third of the UK’s emitting industry that is considered to be part of the pipeline of customers for carbon removals “thinks about relocating where they don’t have to face costs.” To retain those industries, the UK needs to put in place takeoff agreements for carbon dioxide and business models that will be attractive enough to keep industry in the country.
The new CCS customer base
In some respects the false starts in the UK’s programme have reflected the changing nature of the CCS challenge. The UK first opened a CCS competition, with ‘up to’ £1 billion of government funding on offer, way back in 2007. At that stage investment was directed at technology for capturing the carbon dioxide from power plant emissions – pre or post combustion – for transport and disposal. The competition was cancelled in 2011. A second attempt at a competition launched the following year was cancelled in 2017, leaving two shortlisted bidders, centred around power stations in eastern Scotland (Peterhead) and Yorkshire (White Rose consortium), out of pocket.
The UK’s strategy now is no longer based on the premise that CCS would be led by the electricity industry, with a fleet of coal or gas fired power stations fitted or retrofitted with carbon capture. That assumption has gone, at least in the UK and Europe. Coal fired stations are becoming rare, replaced by a mix of renewables and gas fired plant. But the latter are operating only partly on baseload. Increasingly, a proportion of the gas plant in systems with a high proportion of renewables operate on an intermittent basis, either to fill in the supply gaps in the mix of wind, solar and hydro, or to provide inertia and other grid services. Gas plant operating hours now vary considerably, but in the UK annual running hours for some plants have been down in the 20-30% level – low enough for operators to replace some large gas turbines with fleets of small gas engines.
Running for such low hours makes it hard to justify investment in new unabated gas plant. To bring new gas plants forward, a capacity market was set up in GB a decade ago and other countries have followed suit. And the new reality of the energy market makes investment in gas fired stations equipped with CCS, at extra cost, even more difficult. No country has been able to fund a CCS-equipped gas fired power station simply on avoiding the cost of carbon dioxide emissions (set via emissions trading schemes like those of the UK or EU) and ongoing payments from a capacity market.
Instead of being led – and funded – by the power sector, the UK’s new CCS strategy is based around industry that cannot reduce carbon emissions inherent in the process or switch from gas to electricity to provide heat and energy. Those companies are faced with the cost of carbon emissions, and when in 2019 the UK raised its legislated 2050 climate target from 80% carbon reduction to net zero emissions, it was clear they would require carbon capture.
Now, although the power sector will remain a key user of CCS infrastructure, the UK’s strategy is based around emissions from a suite of major industries. Such industries are typically sited together in regions with access to transport, water and energy infrastructure and the UK has followed other countries in encouraging industry to self-organise in ‘clusters’ that can share pipelines and have access to storage sites offshore.
The UK government’s new target is to capture and store 20-30 Mt of carbon dioxide per year from these clusters by 2030 and it has pledged to invest £20 billion to do that. It has consulted on business models for all the steps in the value chain, from capture to transport and storage. In contrast to other countries it aims to build a competitive market for both capture and storage, while the pipeline will be operated as a monopoly regulated asset in a similar way to gas and electricity networks. It has also announced support for the first four industrial clusters, split into two phases (see below). Demand from industry is growing. Storage sites in the UK have order books of emitters waiting for final investment decisions on infrastructure.
Nevertheless, the industry remains nervous about the programme, believing that action is needed immediately, especially given the UK’s history of cancellations.
Heads of terms have been agreed between the members of the first two consortia and the government, but final prices are waiting for approval. That signature has been slow to come, although the funding envelope is set and the final costs are in, because of HM Treasury checks and balances. The supply chain is said to be getting impatient. Its members have provided fixed price contracts as required – fixed until September next year, rather than the one or two months that would normally be required. Fixing often raises prices, especially over a longer period, and that brings up ‘value for money’ questions in the Treasury process.
The industry would like to see contracts signed in this half-year, not least because there is a general election looming in the UK. The date of the election is not fixed and speculation most often places it in the third quarter.
There is political consensus on the carbon capture and storage programme and even on the four clusters. Nevertheless, the election itself, the traditional period beforehand when no announcements are made and the need for a new government to settle in (whatever its makeup) would create further practical difficulties in signing off the agreements with the government that would allow a final investment decision to be taken.
Meanwhile, individual projects have moved forwards elsewhere in Europe. In December, Ørsted began construction of two CCS facilities at the Ørsted Kalundborg CO2 Hub, which has been awarded a 20-year contract by the Danish Energy Agency (DEA). These are expected to begin storing carbon dioxide in 2025. The project was awarded a 20 year contract by The Danish Energy Agency (DEA) in May 2023.
In France, Heidelberg Materials, Lafarge France, Lhoist and TotalEnergies launched a CCS project at the port of Nantes-Saint-Nazaire in July 2023, planning to take an investment decision in 2027 for commissioning in 2030.
The UK remains in the game. Its four lead industrial clusters would deliver the government’s its 30 Mt target by 2030, but its position remains vulnerable.
“Companies are still interested in the UK,” says the CCSA, “but if they don’t see final investment decisions in the first two clusters soon, investors will think ‘is the UK still happening?’”
UK CCS clusters, ‘Track 1’ (the leaders)
• East Coast Cluster
The East Coast Cluster aims to capture and store an average of around 23 million tonnes of CO2 per year by 2035. In this cluster the Northern Endurance Partnership – bp, Equinor and TotalEnergies – is developing the common end-to-end CO2 transport and storage system needed to transport CO2 from emitters in the Humber and Teesside clusters to offshore storage in the Endurance aquifer in the Southern North Sea. In December 2023 the Northern Endurance Partnership agreed the key conditions for economic, regulatory and governance models of the transportation and storage of CO2. The ‘Heads of Terms’ agreement paves the way for the three initial projects and the Northern Endurance Partnership to take final investment decisions in September 2024.
The three initial projects are: Net Zero Teesside Power (a 860 MW CCGT that would employ a GE Vernova 9HA.02 gas turbine integrated with a Technip supplied CCS system based on Shell’s Cansolv technology, capturing and storing 2Mt CO2 annually); H2Teesside (BP’s hydrogen production plant based on steam methane reforming, targeting 1.2 GW of hydrogen production by 2030); and BOC’s Teesside SMR, one of the UK’s largest hydrogen production facilities, which in 2027 will be retrofitted with post combustion capture technology designed by Linde Engineering expected to capture 200 kt annually.
Technip Energies (leader of a consortium with GE Vernova, and construction partner, Balfour Beatty) has received a letter of intent from bp on behalf of NZT Power Limited for the execution phase of Net Zero Teesside Power (which has been granted a Development Consent Order, ie planning permission). If the project comes to fruition it could be one of the world’s first commercial scale gas-fired power stations with carbon capture.
Other potential cluster participants in the Teesside region include bioenergy projects MGT Teesside and Lynemouth Power, gas-fired power stations Whitetail Clean Energy and Alfabara CCGT Teesside. Potential industrial users of the transport and storage infrastructure include CF Fertilisers Billingham Ammonia CCS, Redcar Energy Project, Tees Valley Energy Recovery Facility (ie energy from waste), Lighthouse Green Fuels and Teesside Green Energy Park.
Northern Endurance Partnership also says other businesses on Teesside including Alpek, Ensus, MGT, Anglo American, NSMP and Venator are exploring the potential to use the infrastructure.
Meanwhile a second group of projects around the Humber estuary, around 100 km to the south, may take advantage of the store with a second transport pipeline. That includes the huge Drax power station (although Drax Power said it had an alternative potential disposal route via the Viking cluster, see below), three gas power stations (Keadby 3, C.Gen Killinghome and VPI Humber Zero), two blue hydrogen projects (H2H Saltend and Uniper Humber Blue Hub) and a half-dozen industrial sites including two fuel refineries.
• HyNet
HyNet aims to reduce industrial carbon dioxide emissions by 10 Mt annually by the mid 2030s. In this cluster Eni will gather, transport and store emissions from industrial and power sites in the Northwest of England and North Wales to its depleted gas reservoirs in Liverpool Bay. (Eni is also planning a second UK CCS hub, the Bacton Energy Hub, to decarbonise the Thames Estuary region. It has been granted a licence to store carbon dioxide in the depleted Hewett gas field in the Southern North Sea but the project is not among the current supported clusters.)
In the Heads of Terms, five HyNet partners were announced by government. They are Hanson Cement (Hanson Padeswood Cement Works carbon capture and storage project in North Wales, which aims to capture 800 kt of carbon dioxide annually, Viridor’s Runcorn Industrial CCS project (which aims to capture 900 kt of carbon dioxide annually from its energy from waste plant), Encyclis (which is developing plans for a CCS plant at its energy from waste at the Protos energy innovation hub in Cheshire), Tarmac’s Buxton Lime Net Zero (which aims to use CCS to capture and store up to 20 kt annually of process carbon dioxide produced during the manufacture of lime) and Vertex Hydrogen (a joint venture between Essar Oil UK and Progressive Energy which will use Johnson Matthey’s LCH SMR technology to produce hydrogen at the Stanlow Manufacturing Complex in Ellesmere Port).
In addition, HyNet hopes that producing 1 GW of hydrogen locally will allow industry to move away from high-carbon fuels. Potential hydrogen customers include companies such as Heinz, Kellogg’s, Encirc, ESB, Essar, Novelis, Tata Chemicals and Pilkington Glass.
The UK CCS clusters, ‘Track 2’ (the second wave)
In July 2023, it was announced that the Scottish cluster and the Viking cluster, in the Humber, would move forward to the next stage of deployment as ‘Track 2 clusters.’
It was also announced that the Acorn and Viking transport and storage systems, due to their maturity, remain best placed to deliver government objectives for Track 2 at this stage. The government has started initial engagement with the Acorn and Viking T&S systems, and in early 2024 was planning to ask for plans for an ‘anchor phase’ of initial capture projects provisionally targeting deployment from 2028-2029, and a provisional cluster expansion plan.
Acorn transport and storage is a joint venture of Storegga, Shell UK, Harbour Energy and North Sea Midstream Partners.
Viking T&S is Harbour Energy (with non-operator partner bp). It built and operated an onshore terminal and offshore pipeline infrastructure for the Viking gas field, 140 km out in the southern North Sea and plans to repurpose it, together with depleted reservoirs in the Viking field.
The Scottish cluster is a group of industrial, power and hydrogen businesses in the Central Belt and North-East Scotland, including SSE, INEOS and ExxonMobil.
The Viking cluster plans to store 10 Mt of carbon dioxide per year by 2030. The first phase of the project is a consortium between Phillips 66 Limited and VPI Immingham LLP and aims to remove up to 3.8 Mt of CO2 from the Immingham industrial area every year by around 2027.
The EU sets out its plan
At the start of February 2024, the European Commission published the new EU Industrial Carbon Management Strategy. The strategy has now to be turned into a regulatory framework that can deliver its objectives.
The EU wants to develop a range of technologies to capture, store, transport and use carbon dioxide emissions and remove it from the atmosphere, via:
- capture and storage;
- capture and utilisation as a substitute for fossil-based carbon; and
- removal from the atmosphere, followed by storage.
Transport infrastructure, consisting of pipelines, ships, road or rail transport, is “a key enabler” and necessary to establish a carbon dioxide market in Europe.
Industrial carbon management solutions will be most needed in sectors such as cement, steel and natural gas processing, electricity generation (especially from biomass), low-carbon hydrogen, refining processes, waste incineration and heat production.
The Net-Zero Industry Act proposes that at least 50 Mt of CO2 per year be stored geologically by 2030. The EU wants to capture 280 Mt/year by 2040 and around 450 Mt/year by 2050. The limited number of large, operational industrial carbon management projects in Europe means an EU-wide approach and vision are needed.
The new strategy will “complement and complete” existing EU policies and funding instruments, notably the CCS directive for geological storage, the EU’s Emissions Trading System, the proposed EU certification framework for carbon removals, the Net-Zero Industry Act, support for CO2 transport infrastructure, the Innovation Fund and the Connecting Europe Facility.
The Strategy has three stages:
- By 2030: CO2 storage capacity of 50 Mt/y with related pipelines, ships, rail and road.
- By 2040: economically viable regional carbon value chains and carbon dioxide as a tradable commodity. Up to a third of captured carbon dioxide to be used.
- After 2040: industrial carbon management as an integral part of the EU’s economic system. Carbon-based industrial processes or transport use biogenic or atmospheric carbon.
A study by the Joint Research Centre (JRC) estimates that transport infrastructure could span up to 7300 km and deployment could cost up to €12.2 billion by 2030, rising to around 19 000 km and €16 billion in 2040. The Commission will start preparatory work on a transport regulatory package to optimise development and provide certainty to investors.
The regulatory framework could include issues such as market and cost structure, cross-border integration and planning, technical harmonisation and investment incentives for new infrastructure, third-party access, competent regulatory authorities, tariff regulation for transport assets and ownership models. The Commission will develop a platform to matching carbon dioxide suppliers with storage operators.
A future framework will also look at interactions with the electricity, gas and hydrogen sectors and the need for future spare capacity, including potential repurposing and re-use of existing infrastructure.
International collaboration will be needed. The EU is already working closely with members of the European Economic Area on industrial carbon management solutions. The first commercial cross-border agreement to capture carbon dioxide produced in the EU and ship it for sequestration off the coast of Norway has already been signed as part of the Northern Lights project.
off the coast of Øygarden in the Norwegian North Sea
Author: Janet Wood
