White Rose wilts under green cuts

Peterhead Power Station

Peterhead Power Station

September 2015 saw a major setback in plans to deploy carbon capture and storage (CCS) in the United Kingdom, as Drax Power withdrew support from their White Rose project even before a government decision is made on whether to award the project £1 bn in funding earmarked for the demonstration of the new technology. Planned for the site of Drax’s existing coal power station in Yorkshire, the project would see the building of a new coal plant with the means to separate its CO2 emissions and pipe them into permanent underground storage. Although White Rose is left with two committed backers, the development sends an ominous signal that the UK’s supportive policy towards carbon capture and storage may lose some of its shine amidst increasing pressure to bring down the cost of electricity for consumers. This time, the project seems to have been an indirect victim of general government cuts to renewable energy subsidies, which have hit the bottom line of Drax’s other significant interest in using old coal boilers to burn carbon neutral wood pellets.

Following last year’s lengthy and unsuccessful legal battle with the government over whether their latest coal-to-wood conversion could receive a more lucrative subsidy, it is unsurprising that the power company is less willing to embark upon expensive new ventures. However, such wavering political support for green energy subsidies also raises doubts over how long the current government’s current commitment to funding expensive carbon capture projects may last. As numerous plans for other carbon capture power stations in Europe have come to nothing over the past few years, the UK has been left as one of the few remaining standard bearers for the technology in the region. In addition to the £1 bn in investment offered to a first large-scale demonstration, a plan to offer a guaranteed ‘strike price’ for electricity sales from CCS plants to help meet their inflated operating costs offers a much more tangible reward than the plummeting CO2 price on the EU’s emissions trading scheme.

Perhaps most significantly, geological formations under the North Sea have been identified as ideal sites for storing the captured CO2, neatly avoiding the public concerns over onshore storage that blighted some of the failed continental projects. Recognition of this potentially valuable natural resource is such that the two other European countries still actively pursuing CCS also share North Sea coastlines. While Norway’s advanced plans to store CO2 emissions from the Möngstad oil refinery were cancelled two years ago, there is still ongoing research and interest in developing the technology at other industrial sites. In the Netherlands, a long-running plan to construct a new coal plant with capture is still afloat and ready to start construction if given the go-ahead by investors. With a commitment to White Rose faltering, the advantage could be handed to the other project in the running to receive the UK’s CCS grand prize: an installation planned for the Peterhead gas power plant in Scotland.

Like the proposed Yorkshire coal plant, this facility would capture around 1 million tonnes of CO2 every year and pipe it under the North Sea, filling a depleted gas field rather than the salt water aquifers which are targeted by White Rose and several other CCS projects. Using an existing gas pipeline that was once used to supply the plant, this presents the rather elegant scenario of simply reversing the historical flow of carbon back to its source. Although the project will make use of one of the most established CO2 capture technologies, applying the technique to a gas power plant for the first time brings the challenge of far more dilute CO2 emissions than produced by other emitters. In contrast, the ‘oxyfuel combustion’ technology planned for White Rose is a more novel approach to carbon capture in which coal is burnt in a mix of pure oxygen and recycled CO2 to produce a more easily captured, concentrated stream of the greenhouse gas. Having been tested at smaller scales, several other plans to apply this idea to large coal plants have stalled in the last few years for economic and political reasons.

Another unique capability offered by White Rose is the potential for mixing wood pellets with the coal and achieving ‘negative’ carbon emissions, or a net reduction in atmospheric CO2, although in practice it could be challenging to apply this to oxyfuel combustion. Whilst CCS remains in the doldrums in Europe, it is finally beginning to make headway on the other side of the Atlantic. The world’s first power plant to capture and store its emissions opened at Boundary Dam in Canada’s Saskatchewan province last year, and two more under construction in the US are scheduled to start up in 2016. The contrasting fortunes of CCS in North America owe much to the presence of a thriving market for enhanced oil recovery, in which CO2 is pumped into flagging oil wells to help boost their production. So useful is the gas for this purpose that even natural reservoirs of CO2 are tapped, and around 6000 km of CO2 pipelines is already in place. Despite the additional oil produced by the technique posing some problems for the carbon mitigation credentials of CCS, its ability to turn CO2 from worthless waste to a saleable product is, at worst, seen as a good way to get the industry going.

However, revenue from sales of the gas are still well below the current cost of capturing it from power plants, and several other factors have also been crucial in getting these plants built. SaskPower, the regional utility behind the Boundary Dam plant, saw CCS as a means of retaining the value in its long-term supply of cheap local coal in the face of an incoming Canadian cap on power plant CO2 emissions. With some of the freedom afforded by the company as a regional monopoly, the alternative of converting the grid entirely to less CO2-intensive gas power plants was seen as an unnecessarily risky exposure to the volatile natural gas market. A similar CO2 cap is faced by new US coal plants, and similarly long-lasting and low-cost coal supplies are available to the plants being built there, along with an active government agenda to develop CCS. Any CCS power plant carries a daunting up-front cost beyond the reach of most investors, and sizeable hand-outs and tax credits have been granted in both countries. Perhaps most significantly, the US offers a tax incentive of up to $20 per tonne of CO2 stored, with some talk of even doubling this amount.

Using captured CO2 for enhanced oil recovery in the oil fields of the northern North Sea has been touted as a possible option for the UK, but not one that forms part of the initial plans even for the well-placed Peterhead project. With the country’s coal mines almost all closed and North Sea gas supplies waning, the support seen in North America for preserving a cheap, home-grown energy supply is also not likely to play much of a role. Another popular idea that pioneering CCS would put the UK in good stead to sell the technology to other parts of the world becomes increasingly hopeful as other regions take the lead. Nevertheless, if the government is truly committed to decarbonising the energy supply, CCS may yet turn out to be one of the cheapest ways of achieving the task. Although the strike price agreed for a first CCS plant is likely to approach an eye-watering £200/MWh – around twice the price agreed for a new nuclear plant or a third more than offshore wind – the price of future plants is projected to drop rapidly.

First-time industrial projects tend to be beset by high costs and excessive design margins, and SaskPower estimate that the lessons learnt from Boundary Dam could help make their next CCS plant up to 30% cheaper. Besides, the economics of CO2 transport and storage become more interesting once several plants are feeding into a shared infrastructure, and the pipeline planned for White Rose has been oversized with this in mind. Based on such cost projections, a recent study estimated that the UK stands to save £32 bn if able to draw on CCS as part of its decarbonisation strategy. In the end, Drax Power’s disowning of White Rose will probably not be as decisive in the project’s fate as the course the UK government chooses to plot on energy policy. With the green agenda increasingly obliged to make concessions to energy affordability, a costly first generation of CCS could struggle to make a compelling case without many of the drivers that have spurred it on in the US and Canada. Whilst next year’s announcement of the winner of the £1 bn in funding will be a crucial moment for the future of CCS in the UK and Europe, it may not amount to much unless the remaining project backers can be persuaded there is an adequate long-term business case for getting into the risky game of CO2 storage. In this respect, this new government is yet to fully show its hand.

Toby Lockwood

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    By: Toby Lockwood

    Technical author and analyst at the IEA Clean Coal Centre

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