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Reports warn of risks for UK CCUS delivery

The UK has ambitious plans for carbon capture and storage to do much of the heavy lifting behind industrial decarbonisation. Yet a brace of reports in recent weeks have highlighted that the scale of that ambition also comes with a “significant risk” should projects founder or fail to deliver.

The good news first. Recent analysis by Westwood Global Energy Group found that the UK should have “no issues” in meeting its 2030 CCS targets – and could in fact exceed proposed injection levels – if all projects maintain their proposed timelines.

By 2030, there is potential for up to seven carbon storage sites with capacity for over 45 million tonnes per annum – double the lower end of the UK government target for between 20-30m tonnes. 

Beyond that, it finds the UK equally well-placed in terms of capacity to meet its 2035 ambitions, with the potential to achieve more than double its 50m tonne per annum target by that time.

The less positive news is that Westwood’s assessment that any further delays, project cancellations or under-delivery from those CCS schemes may mean falling short of national goals.

Currently eight projects are set to receive support across the two ‘cluster’ schemes – East Coast Cluster and HyNet – which secured backing under the 2021 “Track 1” sequencing process, with a further ten CCS elements in the two confirmed “Track 2” clusters, Acorn and Viking.

Westwood notes that very few of any of these projects are expected to make a final investment decision until funding has been awarded, though the timing and the mechanisms through which that funding will be released remain unclear.

 “The UK Government risks becoming a bottleneck in project schedules as it progresses with the Track-1 and Track-2 clusters,” analysts said. 

They also flag risks around procuring supplies of CO2 itself.

“The rate of progress made by carbon capture projects could also impact the construction of associated T&S infrastructure, with operators unwilling to construct T&S systems that have the potential to remain idle for an extended period while awaiting a supply of CO2,” the report notes.

It’s feasible that competition amongst storage operators to get hold of the climate-warming gas could in itself limit progress, while access to foreign supplies also remains uncertain.

“Some projects are likely to be considering importing CO2 from abroad and while bilateral agreements between countries can help circumvent the London Protocol, which prohibits the transfer of CO2 between countries for permanent storage, there is still uncertainty of how the UK Emissions Trading Scheme (ETS) and EU ETS will interact. For instance, whether a UK storage operator will be able to take on liabilities for allowances awarded to an EU ETS emitter,” analysts note.

All told, Westwood suggests that  announced by project developers based on their initial announcement are ambitious in their assumption of no further complications during development.

Yet a nomial delay of just two years for all projects outside the initial Track 1 cluster schemes would already see the nation miss the vital 2030 threshold.

Busting the budget

Meanwhile, a separate report along similar lines from the Institute for Energy Economics & Financial Analysis (IEEFA) finds that operational capacity is unlikely to meet levels required by the Climate Change Committee (CCC) in its Sixth Carbon Budget.

The analysis – which considers only the eight schemes contained within the pair of Track 1 cluster projects – are expected to capture around 6 million tonnes of CO2 per annum during their initial phase, meeting only 27% of the CCC’s 2030 forecast of 22m tonnes. (Track 2 projects were not considered due to the nascency, though it should be noted that were their 15m tonnes of capacity to be brought online, CCC targets would likely be within reach).

At the same time, the authors point to a “severe lack of support” for CCS schemes which help decarbonise electricity generation or which are being retrofitted to gas-fired power, while instead promoting an “excessive” focus on blue hydrogen.

IEEFA found that Track 1 projects are set to meet only 16% of the 12.4m tonnes per annum required to support the decarbonisation of electricity supply by 2030, while sufficient capacity from blue hydrogen-related schemes would deliver 444% of CCC requirements.

“It is clear that the UK government needs to focus its attention on supporting CCS projects that increase decarbonisation of electricity supply while the UK energy mix transitions to lower-carbon sources,” said Andrew Reid, co-author of the report and a guest contributor at IEEFA Europe.

“A disproportionate amount of support is currently targeting blue hydrogen production, which not only risks meeting the CCC targets but is questionable longer term as the UK increases renewable power generation and the potential for green hydrogen production.

“The announcement in July this year increasing the number of clusters that would be considered for support to include Acorn and Viking presents an opportunity for the government to prioritise power generation projects over blue hydrogen, getting back on track with the Climate Change Committee’s projections,” he added.

Slow progress

Their findings chime with that of E-FWD’s Global CCUS Investment Index, in which the UK places fifth largely because of its track record is wanting.

Analysis by E-FWD and GaffneyCline found that while there UK has strong policy drivers – even this year hosting its first licensing round for offshore acreage and exploration – its investability is hampered by slow progress in moving these projects along. 

And while there are signs of big plans coming together in those major clusters – and indeed outside of them too – the competition is not sitting idly by.

As our recent E-FWD launch event heard, time is very much of the essence if the UK wants the reality of CCUS delivery to resemble its ambitions.

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