Out-Law News 2 min. read
23 Nov 2012, 11:28 am
The interim report (70-page / 1MB PDF) from the CCS Cost Reduction Task Force was published as the Government announced the winners of a competition for £20 million worth of funding for innovative small-scale projects to drive down the costs of the fledgling technology. In addition, the newly-established CCS Research Centre announced that it was setting aside another £1.8 million in Government funding for university-led CCS research projects.
CCS is a technology used to prevent carbon dioxide (CO2) from being released into the atmosphere from the use of fossil fuel in power generation. A CCS project captures the CO2 produced by a power plant, before storing it in such a way that it does not enter the atmosphere. Projects can be full chain, meaning that they are capable of carrying out all steps in the process, or part chain. There has not yet been a successful demonstration of a full-chain CCS project in the UK.
Energy law expert Euan McVicar of Pinsent Masons, the law firm behind Out-Law.com, said that the report's findings showed the "positive contribution" that CCS could make to the UK's energy mix and security of supply.
"The task force has highlighted the need for long-term stable policy commitment to CCS and further engagement with the finance sector as being important in delivering lowers costs," he said. "A successful outcome to the current DECC competition will also be hugely helpful."
The Department of Energy and Climate Change (DECC) announced last month that four bidders had been shortlisted for the next phase of a separate competition which will make £1 billion in funding available to companies planning to develop CCS technology at commercial scale.
Among the 13 projects awarded funding this week are NET Power, which is working with Toshiba and Stoke-based manufacturer Goodwins to develop high pressure turbines, and a new carbon capture pilot plant in Doncaster being built by Millennium Generation.
The CCS Cost Reduction Task Force was established by DECC in March 2012. It is made up of experts from the engineering, hydrocarbon, finance, projects and academic sectors and tasked with advising the Government and industry on the potential for reducing the costs of CCS. According to its interim report, fossil fuel power generation plants fitted with CCS technology will be able to generate electricity at around £100 per megawatt hour (MWh) by the early 2020s, and at a significantly lower cost "soon thereafter".
"These announcements help maintain the UK's place leading the world in CCS and delivering an affordable and secure low carbon energy mix," Energy Secretary Ed Davey said. "CCS is a huge opportunity for our world class research industry. Through the projects we have selected, pioneering companies and universities will be able to create new jobs and expand their markets."
He added that the UK's "clear commitment" to the technology was underlined by some of the world-leading energy companies who had chosen the country as its base to develop the technology.
Energy law expert McVicar said that, given its proximity to North Sea oil and gas reservoirs, the UK was well placed to develop the fledgling technology.
"It is interesting to note how well the UK is placed, given its proximity to North Sea oil and gas reservoirs and the role that captured CO2 can play in enhanced oil recovery," he said. "Our oil and gas practice is seeing increasing interest and desire to maximise existing oil and gas finds and also to find ways of deferring or defraying decommissioning costs associated with depleted reservoirs."
The Government consulted in the summer on the creation of new Decommissioning Relief Deeds. These will contractually set out the levels of tax relief that companies would be entitled to claim on the costs of decommissioning an oil or gas facility. Companies would also be able to claim back at least half their decommissioning costs in the form of tax relief if they become liable for the decommissioning costs of another company which has defaulted under the plans.
