UK continues carbon capture, use and storage drive

The plans published by the Department for Business, Energy & industrial Strategy (BEIS) represent the second phase of the government’s plans for cluster sequencing for carbon capture, usage and storage (CCUS) deployment – an initiative aimed at focusing support for the use of CCUS technologies in certain locations as part of the UK’s drive to decarbonise the economy.

The outcome of the first phase of the initiative was announced by the government last month. The first phase aims to support two CCUS clusters – the HyNet and East Coast Cluster initiatives – into operation by the mid-2020s. Under the second phase, individual CCUS projects stand to gain support for their deployment if they can satisfy eligibility criteria set by BEIS, which includes being able to connect into one of the HyNet or East Coast Cluster initiatives, or the reserve Scottish cluster.

Expert in climate change and sustainability Stacey Collins of Pinsent Masons, the law firm behind Out-Law, said: “There is momentum building around carbon capture, usage and storage in the UK, and it is great to see that the government is continuing to progress the cluster sequencing programme relatively quickly.”

“There are still some gaps to be filled and we are still some way away from having projects that are ready for investment and deployment. However, if 2022 does deliver on all the details, decisions, strategies and direction that the government is promising, then in the latter half of next year we should have a CCUS and low-carbon sector that has enough certainty to attract the financial investment needed to really get things moving. There is still a lot to do, but it is exciting times for those of us active in these low-carbon markets,” he said

BEIS has split prospective CCUS projects that could win support into three distinct categories – power, industrial carbon capture and hydrogen – with different criteria set for each category and different forms of support available to successful applicants. Every project will have to demonstrate that they can be operational by the end of 2027 at the latest.

In relation to power CCUS projects, businesses stand to obtain a dispatchable power agreement if their applications for support are successful. Under this agreement, the businesses would be paid to make low carbon power – generated by combusting natural gas while capturing at least 90% of the carbon that would otherwise be emitted – available to the electricity grid in Britain at times of need. BEIS is seeking “commercial scale power CCUS plants” that can generate and export at least 100MW of low-carbon electricity to the grid.

For projects falling under the industrial carbon capture category, capital co-funding and/or contractual-based revenue support will be made available to successful applicants. As part of the eligibility criteria, BEIS expects businesses to be able to capture at least 85% of carbon emissions from their industrial processes.

BEIS has made a distinction between the support available for deploying CCUS in hydrogen production. Projects aimed at retrofitting CCUS in existing ‘grey’ hydrogen facilities fall within the industrial carbon capture category, while new build CCUS-enabled hydrogen production plants would fall within the separate hydrogen category to which a new a ‘variable premium’ price support mechanism is to be introduced to help such projects become commercially viable. New build CCUS-enabled hydrogen production plants need to be able to show that they have identified a buyer for the low-carbon hydrogen they produce as part of the steps needed to meet the eligibility criteria.

According to BEIS’ plans, submissions will be scored against five criteria,  deliverability, emissions reduction, economic benefits, cost and how the project will help develop the relevant CCUS market, as part of an evaluation and shortlisting process.

Submissions can be made up until 21 January 2022. BEIS said it expects to announce which projects it will open negotiations with from May 2022, with a final decision on the support to be given to successful applicants expected sometime after the start of April 2023.

In its paper BEIS said that it plans to encourage submissions for projects seeking to deploy greenhouse gas removal (GGR) technologies at a later date. It has encouraged businesses interested to express initial interest in that initiative with a view to designing “a potential separate evaluation and selection process” for greenhouse gas removal technologies to link into the CCUS clusters. BEIS has set out eligibility criteria for GGR projects that wish to take part in the expression of interest process, including that it must have access to one of the HyNet or East Coast Cluster initiatives, or the reserve Scottish cluster, and that it must met BEIS’ definition of a GGR project. That definition includes that the project must remove more greenhouse gases from the atmosphere than it creates in its entire supply chain, both domestic and international.

In the context of GGR projects, and while businesses await the publication of the UK’s full biomass strategy in 2022, the government has recently published a biomass policy statement detailing its strategic view on the role of sustainable biomass for net zero. That statement sets out more details on the government’s vision and aims for sustainable biomass across the economy, particularly in the electricity, heat, transport and industry sectors. It also sets out its view on the role bioenergy with carbon capture and storage (BECCS) can play in contributing to net zero. BECCS is a potential GGR technology.