Thursday, October 20, 2011

Carbon Capture Plan Collapses – A Set Back or an Opportunity?

The Government's plans for carbon capture and storage (CCS) were dealt a major blow yesterday with the collapse of plans to fit CCS equipment to the Longannet power station in Fife. The Government has commitment to fund up to four CCS demonstration schemes, however the collapse of the Longannet scheme means it will now have to start from scratch - there are no other potential CCS schemes currently under consideration.

Yesterday's announcement was prompted by ballooning costs for the scheme. The Government had committed £1 billion of funding for the project, but the length of the pipeline needed to transport carbon dioxide from the plant to undersea reservoirs meant that the project would cost at least £1.3 billion, prompting the plant's owner, Scottish and Southern Energy, to pull out.

The Government has clearly stated that it is the technical difficulties at the Longannet plant, rather than with CCS as a whole, that has made the scheme non-viable. However, there is no doubt that this is a serious blow to the Government's plans and delays the process of rolling out CCS by several years.

The Government often states that it is not in the business of picking technology winners, but plans for the transition to a low carbon economy (drawn up under the previous Government) do rely heavily on CCS to help de-carbonise the UK's electricity supply. A de-carbonised and expanded electricity supply can then be utilised in sectors currently dominated by fossil fuels such as space heating and transportation, hence the Government's strong support for battery electric cars (you read my views on these on page 9 of this magazine).

However, CCS is still a technology that is untested at an industrial scale and has little chance of ever being considered 'cheap'. A full scale rollout of CCS essentially involves the creation of a shadow energy industry to capture, transport and dispose of the unwanted carbon emissions. The construction and running costs of such a industry are likely of a similar magnitude to the fossil fuel industry it would shadow, costs that will have to be born by UK citizens and businesses either through fuel bills or taxation. Whilst costs can no doubt be reduced CCS will always be hugely more expensive than the cheap energy baseline – coal or oil fired generation without CCS.

Technologies such as solar, wind and, dare I say it, nuclear energy all start from a position of producing zero carbon emissions, and crucially have significant scope to reduce their cost through research and development and economies of scale. Unless the UK wants to be wedded to a future of expensive energy then perhaps the Government should take a chance and offer up the enormous £1 billion per plant that they've committed for CCS to research and development in a broader range of energy technologies. This would perhaps be a bigger gamble compared to plumping for CCS, but holds out the promise of cheaper low carbon energy in the longer term.

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