Out-Law / Your Daily Need-To-Know
The UK government has selected eight projects to enter contract negotiations with over the formation of two carbon capture use and storage (CCUS) clusters in the UK.
Last year, the HyNet and East Coast Cluster initiatives gained the backing of the government in the first phase of its initiative, and 20 projects were then shortlisted for consideration to form part of those clusters.
Now the government has announced that it will enter into negotiations with three projects – Net Zero Teesside Power, bpH2Teesside, and Teesside Hydrogen CO2 Capture – as part of the East Coast Cluster, and that it will enter into negotiations with a further five projects – Hanson Padeswood Cement Works Carbon Capture and Storage Project, Viridor Runcorn Industrial CCS, Protos Energy Recovery Facility, Buxton Lime Net Zero, and HyNet Hydrogen Production Plant 1 (HPP1) – in respect of the proposed HyNet Cluster. This represents the outcome of ‘phase 2’ of ‘track-1’ of the government’s CCUS initiative.
The government said: “The eight projects represent a range of innovative CCUS technologies that have the potential to: accelerate our decarbonisation ambitions; realise economic benefits across North Wales, North-West England, and the East Coast of England; kick start the hydrogen economy; put us on a path to decarbonising our power system by 2035, while maintaining security of supply.”
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The government envisages that both the East Coast and HyNet clusters will be operational by the mid-2020s. It has, though, announced its intention to expand both clusters – with a view to adding further projects to the clusters to increase operational capacity by 2030. A process to achieve that outcome will be launched later this year, it said.
In addition, the government has opened a second wave of the CCUS clusters initiative (track-2) aimed at supporting the development of two further CCUS clusters in the UK. It hopes those clusters will be operational by 2030 too.
The latest announcements follow the UK government’s recent commitment to provide £20 billion of funding for the CCUS industry.
“Today we have a clearer pathway for development of the projects that will actually deliver on the promise of that funding,” said Stacey Collins, an expert in CCUS and low carbon hydrogen projects at Pinsent Masons. “This is fantastic, and long-awaited, news for the successful track-1 phase 2 projects, many of which Pinsent Masons is advising on. Those projects that weren’t selected, and other projects already in development, will set their sights on the confirmed track-1 expansion process to be launched later this year and the announced track-2 process.”
“It is certainly going to be the busy 2023 that those of us in the sector were hoping for, however there is still a lot of work needed to get the required CCUS projects to financial close and into the construction phase. This is not the end of the journey, but an important milestone nonetheless,” he said.
Alongside the CCUS updates, which included support for ‘blue hydrogen’ projects, the government also made announcements on Thursday aimed at delivering a hydrogen economy in the UK. That included the announcement of 20 electrolytic hydrogen projects that have been shortlisted for support through the Hydrogen Production Business Model (HPBM) and Net Zero Hydrogen Fund (NZHF). A further round of funding via the HPBM and NZHF is to open later this year. It has also selected 15 projects that will, subject to the signing of contracts, receive a share of £37.9 million of public funds from the government’s £240m NZHF.
Collins said: “It is fantastic to see the government continuing to commit to the accelerated development of the UK’s low-carbon hydrogen market. The announced shortlisted projects, a number of which Pinsent Masons advises, and the commitment to round two opening later this year, is important to those across the market who are investing time and money in bringing the promise of low-carbon hydrogen to life.”
“The government has restated its commitment to funding the development of low-carbon hydrogen for power, energy storage, transportation, heating, fuel-switching and industrial use. We have an opportunity in the UK to be world leaders in low-carbon hydrogen deployment – today’s commitments keep the industry on that pathway,” he said.
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