Member State Perspective -

UK

Ashley Ibbett

Chief Executive, Office of Carbon Capture and Storage

Department of Energy and Climate Change, UK

UK Energy Policy

Climate change goals: • 80% emissions reduction (from 1990) by 2050

• 5 year carbon budgets,

• 15% renewable energy by 2020

Security of supply goals: • Keeping the lights on (short and long term)

• Diversity of supply

• Resilience

Affordability goals: • Costs to taxpayer (short and long term)

• Keeping bills down in short and long term

• Fuel Poverty

Ensuring secure

supplies

Maintaining affordability

Tackling climate change

Overall objectives

• CCS allows fossil fuels to compete in a low-

carbon electricity mix, providing flexible low-

carbon generation to balance intermittent wind

and baseload nuclear

• Will maintain competition in low carbon

electricity market, keeping costs down

• UK ideally placed for offshore storage

• Can also reduce emissions from industrial

sources (another major source of emissions)

Why UK Government supports CCS…

Outcome sought by UK CCS policy intervention:

“As a result of the intervention, private sector electricity

companies can take investment decisions to build CCS equipped

fossil fuel power stations, in the early 2020s, without Government

capital subsidy, at an agreed CfD strike price that is competitive

with the strike prices for other low carbon generation

technologies”

Energy Mix Snapshot –

Data from 22/1/2013

…helps us achieve our objectives

• Collectively delivering full-chain CCS projects on electricity

generation so we can assess the real advantages of CCS over

other low carbon technologies.

• Creating market frameworks that encourage investment in low

carbon technology

• Developing the next generation of capture and sequestration

technologies

• Reducing the costs of CCS to the level needed to compete

against other low carbon technologies.

• Building confidence in the development and reliability of

storage sites.

CCS is still a new industry

Some challenges to overcome

Ferrybridge has completed a year of

operation:

• 1,000 hrs of running time recorded to

date

• 100t/day CO2 capture achieved at 90%

capture efficiency

Aberthaw is operational:

• First tonne of CO2 captured from the coal

burning power station at Aberthaw Power

Station in South Wales.

• Post-combustion carbon capture process,

part of a two-year pilot program designed

to test the technology.

But reasons to be optimistic

Things are happening on the ground right now

• Our overall objective is cost

competitive CCS in the 2020s –

CCS playing a key role in a low

carbon energy mix

• Findings of the CCS Cost

Reduction Task Force interim

report show this is possible

• DECC’s CCS Roadmap contains

5 key interventions to help

deliver cost-competitive CCS in

the 2020s

We are focussed on our objective:

To bring about cost competitive CCS

The £1bn UK Competition aims to support practical experience in

the design, construction & operation of commercial scale CCS.

Projects: • Plan to support portfolio of commercial-scale projects.

Funding: • £1bn to contribute to capital cost.

• Uniquely, Contracts for Difference (CfDs) to recoup

investment and operational costs.

Scope: • Point to point full chain projects, and possibly also clusters

Progress: • Four promising projects shortlisted Oct 2012.

• All four shortlisted projects submitted revised bids on 14 Jan.

• Revised bids are now being evaluated, using the evaluation

criteria set out in our published competition documentation.

Commercialisation Programme

Good progress in £1bn competition

Timing

3 April 2012 Competition launched

3 July 2012 Competition closed –

8 bids received

30 Oct 2012 4 bids shortlisted & bid

improvement phase

14 Jan 2012 Revised bids submitted

Spring 2013 Decision on which

projects to support further

2016-2020 Start operation

• Alstom-Drax – Oxyfuel, coal

• SSE Peterhead – Post-combustion, gas

• Progressive Energy Teesside – Pre-combustion,

coal

• Summit Power – Grangemouth - IGCC, coal

Competition shortlisted bidders

• Energy Bill introduced to Parliament on

29 Nov

• EMR Programme includes:

– Long-term contracts that reflect the value

of low carbon generation to the electricity

market

– Feed-in Tariff Contract for Difference

– An Emissions Performance Standard to

provide a regulatory backstop for the

Government’s policy of no new coal

without CCS

– A Carbon Price Floor that, together with

the EU Emissions Trading System, will

penalise the combustion of fossil fuels

Supportive regulatory environment

Good progress on Electricity Market Reform

Providing long term price security

Lowering costs to investors and to consumers

Supporting investment in low carbon generation

Lowering the cost of investing in low-carbon Generation

CfD Removes Long-term Price Risk

from Investors

Support payments

backed by a contract, and

a robust payment scheme

Clear set of roles and

responsibility between

Government, Delivery Body and Developer

Earlier allocation of

CfDs, reducing risk to

developers

CfDs to provide greater certainty to investors

Carbon Price Floor

Carbon Price Support Rates

Source HM Treasury 2011

Carbon Price Floor Illustration (in real 2009 prices and calendar years)

•Budget 2012 set 2014–15 carbon price support rates equivalent to £9.55/tCO2 (nominal) in

line with the Carbon Price Floor set out at Budget 2011

•Budget 2011 set 2013-14 carbon price support rates equivalent to £4.94/tCO2 (nominal)

£125m UK CCS R&D Programme

c£40m Fundamental Research and Understanding • £4m UK CO2 storage atlas

• £13m UK CCS Research Centre

c£30m Component development and applied

research • DECC £20m CCS Innovation Competition

• £5m MMV technologies

c£55m Pilot scale demonstration (c5-10MWe) • Carbon capture pilot at Ferrybridge coal-fired power station

• c£25m Next-Generation CCS on IGCC

• c£20m Next-Generation CCS on CCGT

2011 - 2015

£55m

£30m

£40m

UK CCS R&D Showcase event: London, 20-21 Feb www.apgtf-uk.com

• Established Cost Reduction Task Force to

advise Government and Industry on reducing

the cost of CCS.

• Interim report (Nov 2012) found that UK gas

and coal power stations equipped with CCS

have clear potential to be cost competitive

with other forms of low-carbon power

generation.

• Final report with agreed actions to be

published in the Spring.

CCS Cost Reduction Task Force

Pathways to cost reduction identified

• Our collaboration is focussed on sharing knowledge

generated through the UK programme and learning from other

projects around the world to help accelerate cost reduction.

• UK supports a range of bilateral, multilateral and regional

workstreams to share knowledge and address both practical

and political challenges.

• The UK Government has also allocated £60m to the

International Climate Fund (ICF) to support capacity building

in developing countries.

• Through the first UK CCS Competition, the UK supported FEED

studies at Longannet and Kingsnorth. The government made

the complete engineering designs for the end to end chain of

capture, transport and storage freely available to support the

worldwide development of the technology.

• Commitment to knowledge sharing embedded in current UK

CCS competition.

International Collaboration

UK driving knowledge transfer

UK FEED studies accessed

across the world

• Continuing our wider work on developing

a CCS industry in the UK, beyond the

competition

• Keen to start engaging supply chain on

future opportunities

• Working with the Cost Reduction Task

Force to take forward the actions required

to get costs down

• Working with industry to develop a

Storage Strategy

• Working with the European Commission

on funding for NER Round 2

• July 2013 further detail on the CfDs

published

What next?

Beyond the competition

• Fundamental objectives - ensuring secure energy supplies,

tackling climate change and maintaining affordability.

• Undertaking the greatest reform of the electricity market in

a generation to bring forward investment in low carbon energy

• CCS can play a critical role in this low carbon energy mix

• The CCS Industry has had some challenging times but many

reasons to be optimistic – renewed momentum

• Comprehensive UK CCS Programme designed to deliver

cost competitive CCS in the 2020s

• Significant package agreed for financial support for

operational expenditure through CfDs

• Engaging internationally to share knowledge and learning

• All parties must work together to get costs down

Final thoughts