Net Zero Teesside Power (NZT Power) and the Northern Endurance Partnership (NEP) are starting to make strides in the UK’s carbon capture, utilisation and storage (CCUS) industry.

NZT Power is a joint venture between BP and Equinor. The venture is developing what would be one of the world’s first commercial-scale gas-fired power stations with a CCUS component.

NEP, meanwhile, is planning to build CO2 transportation and storage infrastructure. This infrastructure will be required to serve East Coast Cluster (ECC) carbon capture projects, which include NZT Power.

In mid-March, NZT and the NEP announced they had selected engineering, procurement and construction (EPC) contractors for their projects. These deals have a combined value of around £4 billion. The contractors have been selected on a preliminary basis, with letters of intent (LoIs) signed.

Final contracts are conditional on the receipt of outstanding regulatory clearances, as well as on final investment decisions (FIDs). Nonetheless, the LoIs show progress towards FID being made, especially as they come after the UK government granted development consent to NZT’s project application in February.

“It’s movement in the right direction,” Wood Mackenzie’s senior research analyst for CCUS Lucy King told E-FWD. “Receiving development consent and signing letters of intent with contractors are key milestones for these projects on route to FID. But taking FID remains a hurdle to overcome, especially when funding allocation for the emitters appears to still be ongoing.”

Selecting contractors

NZT and NEP have selected nine contractors across eight contract packages for the projects. On the CCUS side, NEP chose TechnipFMC to provide an offshore CO2 subsea injection system. In keeping with the goal of using these projects to minimise emissions, TechnipFMC said it would be providing an all-electric subsea system, including manifolds, umbilicals and pipe. These will collect and feed the pressurised CO2 into an aquifer for permanent storage.

Technip Energies also won an LoI, in a consortium with GE Vernova and construction partner Balfour Beatty. This contract covers the construction of a power plant. This facility will integrate a carbon capture facility that will use Technip Energies’ Canopy, powered by Shell’s Cansolv CO2 capture system.

Costain also won work on the ECC, to provide the onshore CO2 gathering system and associated utilities. The company recently completed front-end engineering design (FEED) for this project. It expects this to be the world’s first wholly aboveground CO2 gathering network.

The NZT power plant should generate up to 860 MW of electricity, while the NEP infrastructure will be designed to capture up to 2 million tonnes per year of CO2.

NZT Power is one of three projects selected by the UK Department for Energy Security and Net Zero (DESNZ) for first connection to the ECC, along with H2Teesside and Teesside Hydrogen CO2 Capture. As such, it has benefited from UK government funding.

NZT and NEP are targeting FIDs on their projects by September this year. The aim is to have them up and running in 2027.

Cranking CCUS

Awarding LoIs shows much-needed momentum building for the UK’s CCUS industry. The involvement of IOCs with deep pockets, plus government funding, adds to confidence that the projects will advance. However, there is still a long way to go – and significant hurdles to overcome.

“Company collaborations such as those at NZT/NEP bring investment and experience and builds confidence and credibility in the projects, which certainly helps to kickstart the industry,” said Wood Mackenzie’s King.

“More importantly, though, is having the right support and incentives. At this stage, CCUS still remains a high risk, high-cost industry, that without the right support, incentives and regulation, companies will be hesitant to progress projects within.”

Pressure is therefore on the UK government to provide the incentives and regulatory framework that will attract private investment into the country’s CCUS sector. This will be particularly important given that other Northern European countries, including Norway and the Netherlands, are pursuing the development of their own CCUS industries.

The UK government sees CCUS as a significant part of its decarbonisation plans, touting favourable geology and the capacity to store up to 78bn tonnes of CO2 offshore. It has earmarked up to £20bn of funding for CCUS over 20 years. It aims to reach 20-30mn tpy of CO2 across four CCUS clusters – including the ECC – by 2030.

The government has also set targets for implementation. For instance, it has said projects should aim to capture at least 95% of CO2.

Cluster plans

It made significant progress last year. The government selected eight projects from its Track 1 cluster sequencing process, as the HyNet and ECC options. These moved ahead into negotiations for government support.

Later in the year, the government selected another two clusters – Acorn and Viking – for Track 2.

The government unveiled its CCUS Vision in late 2023. This set out plans to create a competitive CCUS market by 2035. The plan includes moving to a competitive allocation process for carbon capture projects from 2027. The aim is to speed up the development of the UK’s CCUS industry.

“The UK’s business model approach is much more complex than the approach other northern European countries are taking,” said King. “However, the regulated nature of the UK’s business models ensures that these initial projects will receive an agreed rate of return, whilst the government absorbs the majority of the risk involved.”

King said there was a need for the government to do more to provide clarity to potential investors beyond the early projects.

“What’s needed now is clarity around future support mechanisms for projects after the initial Track 1 and 2 projects,” she said. “The UK has stated its ambition to transition to a self-sustaining CCUS market from 2035, but the details on how it will do so are so far lacking.”

The government closed the Track 1 expansion programme for projects at the HyNet cluster on March 28.

Strengths

Not all proposed CCUS projects will go ahead. King identified some crucial factors.

“In the early stages, looking at who’s involved in the project is key,” she said. “Do they have experience in delivering a project of similar scale? Are there any synergies with existing operations in the area (eg. upstream)? And do they have the investment required to progress the project?”

On this count, NZT and NEP and the large players involved seem to be at an advantage. They have collective experience in developing complex, technologically challenging projects.

“Having discussions with, and securing emitters, is also critical,” King continued. “Signing MoUs [memorandums of understanding] with emitters is a clear sign that the project is moving in the right direction.”

NZT and NEP will serve as a litmus test for progress with FIDs nearing. “For NZT/NEP, the next milestone will be FID later this year,” said King.

“Following this, focus will shift to project delivery. The first UK projects will be among the largest and most complex CCS projects undertaken globally, so there could be significant risk of delay to first injection.”

The government takes the approach on the basis that it is more important to get plans right, than be first. However, as the 2030 target comes closer and closer, companies must get construction under way.

Successfully reaching FID would provide impetus to the sector. Such a move would trigger more companies to consider the UK for investments. All these are required if the country is serious in achieving its targets.

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