The UK government has chosen the HyNet and the East Coast carbon capture, utilisation and storage projects in northern England as initial beneficiaries of a £1 billion ($1.38 billion) pot of state funding, with the Scottish Cluster as a backup option if talks with either of the preferred contenders fall through.

This news emerged just a few hours before Energy Minister Greg Hands unveiled the UK’s long-awaited Net Zero Strategy, setting out in detail the nation's plan to reach legally binding targets to become a carbon neutral economy by 2050.

The UK's CCUS cluster sequencing process was launched this May, with this technology described by the government as essential in meeting its net zero targets.

Westminster aims to have at least two CCUS schemes up and running by the mid-2020s and four operational by 2030 at the latest.

According to the government, the ambition is for this technology to capture and store 20 million to 30 million tonnes per annum of carbon dioxide by 2030, forming the foundations for future investment and potential export opportunities.

CCUS, said Hands, will be "crucial" for industrial decarbonisation, low carbon power, engineered greenhouse gas removal technologies "and delivering our 5GW by 2030 low carbon hydrogen production ambition."

The HyNet, East Coast and Scottish clusters are pinning their hopes on coming up with technically and commercially viable CCUS solutions that would dovetail with their longer term goals of producing hydrogen.

These and many other planned clusters in the UK aim to produce 'blue' hydrogen from non-renewable energy sources, while deploying CCUS equipment to reduce carbon dioxide emissions associated with these production processes.

HyNet states that, by 2030, it aims to produce over 30TWh per year of blue hydrogen - derived from natural gas feedstock - for onward distribution and storage.

It intends to store the captured CO2 - about 10 million tonnes per annum by 2030 - in depleted natural gas reservoirs in Liverpool Bay.

The East Coast cluster aims to transport and store up to 27 million tpa of CO2 emissions by 2030 and supply 10GW of blue hydrogen by the mid-2030s.

The government’s cluster sequencing process — via the £1 billion CCS Infrastructure Fund (CIF) intends to provide industry with the certainty needed to deploy this technology at pace and at scale.

There is a separate public financing mechanism - the £240m Net Zero Hydrogen Fund - for CCUS-enabled blue hydrogen projects.

The government says proponents of CCUS-enabled blue hydrogen schemes can draw on the fund to support capital spending, while a return on private sector capital and operating expenditure will be supported through a hydrogen business model.

Because hydrogen projects will have a separate capital fund to draw from, capital support through CIF, says the government, "will not be extended to this sector," although its stresses that CCUS-enabled blue hydrogen projects "may benefit" from CIF-supported transport and storage infrastructure.

Greg Hands, UK Minister of State for Energy, Clean Growth & Climate Change, said this morning: “I am confirming that Hynet and East Coast have been confirmed as track 1 clusters for the mid-2020s and will be taken forward into negotiations.”

In a statement to parliament, he said: “If the clusters represent value for money for the consumer and the taxpayer then, subject to final decisions of ministers, they will receive support under the government’s CCUS programme.”

However, Hands stressed: “We are also announcing the Scottish Cluster as a reserve... if a back-up is needed.

"A reserve cluster is one which met the eligibility criteria and performed to a good standard against the evaluation criteria.”

Elaborating, Hands said government will continue to engage with the Scottish Cluster throughout phase two of the CCUS sequencing process to ensure it can continue its development and planning.

“This means that if government chooses to discontinue engagement with a cluster in Track 1, we can engage with this reserve cluster instead.”

Deploying CCUS will be a significant undertaking because these are major infrastructure projects for a new sector of the economy and carry with them significant risks to deliver by the mid-2020s, said Hands, adding that this is exactly why state support is needed.

“Government will continue to play a role in providing long-term certainty to these projects to manage these risks and bring forward the UK’s first CCUS clusters.”

Hands said the government “remain committed to helping all industrial clusters to decarbonise as we work to reach net zero emissions by 2050, and we are clear that CCUS will continue to play a key role in this process.”

As a result, the minister said government is still committed to Track 2 of the CCUS sequencing process that would enable 10 million tpa of capacity operational by 2030.

“This puts... Teesside, the Humber, Merseyside, North Wales and the North East of Scotland among the potential early ‘super places’ which will be transformed over the next decade,” he added.

The East Coast Cluster is based around the industrial areas of Teesside and Humber on England’s east coast and is being developed by the Northern Endurance Partnership — a collaboration between BP, Eni, Equinor, National Grid, Shell and Total, with BP is the lead operator.

Louise Kingham, BP’s head of Europe & UK, said this cluster “can play a critical role in the government’s levelling up ambition, supporting thousands of jobs and investing in local communities.

“Teesside and the Humber were once the industrial heart of the UK. Today’s announcement paves the way for them to become the green heart of the country’s energy transition, shepherding in the next generation of industry and ways of working.”

HyNet aims to help decarbonise northwest England and North Wales from 2025.

Project director David Parkin said HyNet will bring “huge economic benefits, safeguarding existing jobs across the region and creating around 6000 new employment opportunities.”

“The project partners are ready to deliver and, as one of the first industrial decarbonisation clusters, we will play a big part in shaping the country’s hydrogen economy, positioning the UK as a global leader in the sector.”

HyNet’s backers include Eni, Essar, Progressive Energy, Cadent and Intergen.

One scheme that lost out for Track 1 was the DelpHYnus scheme operated by Neptune Energy.

A Neptune spokesperson said: ”We remain committed to progressing with our DelpHYnus CCS plan, which is an effective, value-for-money solution. We believe all of the proposed clusters will be necessary to support the UK in meeting its net zero targets.”

* Article updated with initial detail on UK's Net Zero Strategy.

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