Industrial operators active in carbon capture and storage (CCS) have urged the UK government to take bolder action in support of such projects, warning that rival destinations for CCS investment look increasingly attractive.
Delegates at the recent International Energy Week conference in London spoke of frustratingly slow progress with CCS cluster projects in the UK and warned of the risk of being left behind in the quest to decarbonise heavy industry.
“We don’t want [developers] moving from one jurisdiction to another. Government has to lead, has to respond swiftly and with bold action,” Ruth Herbert, chief executive of Britain’s Carbon Capture and Storage Association trade group, said in a panel discussion on Wednesday.
“It’s very clear there is no level playing field at the moment. We are exposed to international competition,” she added.
The UK government was lauded in 2020 when it kicked off an ambitious selection process to identify carbon capture, storage and utilisation (CCUS) projects to support, while simultaneously spurring development of the capture and transport infrastructure needed to connect industrial emitters with carbon dioxide storage sites.
The CCUS Cluster Sequencing Process targeted two clusters by 2025 and two more by 2030, with the HyNet and the East Coast Cluster shortlisted last August and a first blueprint of their business model released in November.
But the 2025 target is slipping away as Track 2 of the process — which would set out the funding available to projects and trigger contract negotiations — has stalled, delaying the crucial final investment decisions.
Industry insiders say CCS projects fell down the list of priorities after the political chaos that surrounded the demise of two prime ministers, and have yet to gain new momentum under Prime Minister Rishi Sunak.
“We need to see rapid advancement of Track 2, and of the allocation mechanism that follows,” said Graeme Davies, project director of the Viking CCS cluster in northern England, and Harbour Energy vice president.
The industry is now looking at the spring budget statement for signs that the conservative government is ready to provide the clarity that is needed on allocation rounds for contracts for difference.
But while London was busy with political infighting and deployment of infrastructure has been delayed, competition in the global CCS space has grown.
The Biden administration in the US passed the Inflation Reduction Act, with a 45Q provision that sets out eligibility criteria for projects that meet the government-mandated threshold.
A number of countries in northern Europe have also progressed on building the policy ground for CCS and on cross-border CO2 transport. Norway, Belgium and the Netherlands have been particularly active, speakers noted.
Door closing fast
There was a perception among conference speakers that time may be running out for the UK CCS sector to receive the input it needs to progress on to contracting and project development.
The two main hurdles highlighted are unclear support from government and long permitting processes.
“When I look at the pace in UK, I very much see it could be faster,” said Sayma Cox, chief executive at North Sea Midstream Partners (NSMP), who added legislation and government support are the areas where progress is particularly slow.
NSMP is one of the partners behind the Acorn CCS cluster in Scotland, together with Shell, Storegga, Harbour Energy and others.
The risks associated with further delays is a decrease in momentum for carbon capture in hard-to-abate sectors such as heavy industry.
“The challenge is speed up to scale up phase, otherwise money will move elsewhere,” said Storegga chief financial officer Michael Alsford.
Another concern is the three to four years of predevelopment typically needed before arriving at a final investment decision, Davies noted.
“The UK has a competitive advantage in CCS [..] but the international landscape is getting a lot more competitive. Investors are looking at their options,” he said.
For developers and investors, there is an obvious and growing risk that projects will be abandoned and capital diverted to jurisdictions that are moving faster.
“We’re still waiting to get the visibility [from government] for when we can move forward. But with the time horizon and the desire to act, hard-to-abate sectors may look at other solutions than CCS; the route may be different,” Cox said.
As Rob Gross, director at the UK Energy Research Centre, put it: “There is an issue of long-term political commitment.”