The government is reviewing its policies on Carbon Capture and Storage (CCS) in a move that could see it grant approval for two further demonstration plants before 2020, as well as a new fleet of "CCS-ready" coal-fired power plants, according to reports over the weekend.
A spokesman for the Department of Energy and Climate Change (DECC) dismissed the weekend's reports as "speculation", but admitted that the department will be announcing a definition for the term CCS-ready "in the next few weeks".
Industry experts believe that legal clarification on whether a power plant is deemed "CCS ready" will enable the government to give the go-ahead to controversial plans for a new coal-fired power plant at Kingsnorth in Kent, on the understanding that CCS technology will be fitted at a later date.
Stuart Hazeldine, a CCS expert at Edinburgh University, said that it was vital the government set a definition rigorous enough to ensure CCS technology is fitted at the earliest opportunity. "A further challenge will come in enforcing the transition from capture-ready to actually doing CCS," he warned. "This means having 15 to 20 per cent extra capacity in the grid to say to companies, "we will close you down if you don't comply"."
According to reports, the decision on what constitutes "CCS ready" could be accompanied by plans for a further two CCS demonstration plants on top of the £1bn competition already being planned by the government.
Some industry insiders believe there could be an announcement on new plants in this week's budget, but contrary reports claimed that concerns over funding would lead to a delay.
Climate change secretary Ed Miliband is understood to be pushing for further demonstration plants to be given the go-ahead as a key part of the government's plans to cut emissions by at least 26 per cent by 2020. But the Treasury is concerned about how the costly technology will be funded, given that the commercial case for CCS is not yet strong enough for power companies to justify the investment without state support.
The government has already agreed to provide £1bn for one CCS demonstration plant due to open in 2014 and is currently running a competition to allocate that funding. The UK is also eligible for some €200m of EU funding for CCS announced earlier this year, and experts claim the auction of permits in the EU emissions trading scheme from 2013 will raise a potential £3bn a year, some of which could be spent on CCS technology.
However, industry insiders argue that the Treasury will have to find a way to provide some of the £1bn each demonstration plant requires earlier than 2013 if the UK is not to lag behind other countries in the development of the technology, possibly through charging consumers through higher electricity bills.
Jeff Chapman, chief executive of the Carbon Capture and Storage Association, said the industry is "very frustrated" at the gap between the government's stated CCS ambitions and the slow progress in securing funding.
"The government has moved from having a virtual lead on CCS to being overtaken by a number of countries," he said. "As well as the EU money there has to be new money from the Treasury, and soon."
He added that while the UK was among the first countries to announce a CCS demonstration project, the US, China France and Australia have all overtaken it in the race to have CCS plants up and running.
The costs of CCS are likely to fall rapidly after the first wave of demonstration plants, with initial estimates saying that a carbon price of between €30 and €50 will eventually be enough to drive investment in the technology alone.
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