5 implications of the UK’s CCUS push
Carbon capture, utilisation & storage (CCUS) has been a mirage for more than two decades. A promising concept in academic papers and policy models, but with little tangible progress within a visible horizon. That is about to change.
If you’re sceptical, so were we… until 2021. So what has changed? The UK government and a ‘who’s who’ of big investors are backing the development of several CCUS clusters as a key pillar supporting the road to net zero.
In late October, the UK government is set to announce the first two of these CCUS clusters which will receive ‘fast track’ status. These are targeted to be online by the mid 2020s, followed by a further two clusters online by 2030.
In today’s article we summarise the 5 CCUS clusters that are vying for the two fast track slots, setting out project goals and the investors that are backing them.
We also look at 5 implications of the UK’s CCUS push, including how clusters should be pivotal in unlocking hydrogen deployment, industrial decarbonisation and power plant abatement. Here they are…
1.UK to be the European (& global) leader in CCUS
CCUS progress over the last 20 years has been hampered by lack of a credible policy framework. The UK is now addressing this with its CCUS cluster support scheme combined with tangible targets, for example:
- 10 mtpa CO2 capture & storage by 2030
- £1bn CCS Infra Fund (CIF) to support capex on T&S networks
- 5GW low carbon H2 production by 2030, with direct policy support (likely CfDs)
Momentum behind policy support is supported by strong political tailwinds. This is about creating economic growth and jobs in the north of the UK, a key issue for all political parties.
The announcement of the two ‘Track 1’ clusters will define the geographical focus areas for initial CCUS deployment (Phase 1). Shortly after, the government intends to announce support for a set of key projects which will connect to the clusters. These cover hydrogen production, industry & power plants.
If you are still sceptical, take a look at the companies backing the Track 1 clusters in Table 1.
5 Track 1 cluster summary table
|Neptune Energy (led by ex Centrica CEO Sam Laidlaw) – investors CIC, Carlyle & CVC||• 1.8GW blue H2 plant at former Theddlethorpe gas processing site|
• H2 connection into Sth Humber industrial/power complex
• Repurposing of existing CMS pipeline for CO2 T&S offshore (Cygnus gas production link?)
East Coast Cluster
|Northern Endurance Partnership (inc. Equinor, BP, Shell, ENI, Total, Grid)|
+ local power & industry (e.g. Drax, SSE, British Steel)
|• Aim to capture 20mtpa of CO2 from Teesside & Humberside|
• ~3GW of blue hydrogen production
• Carbon T&S using Endurance offshore field (450mt potential capacity)
|Progressive Energy (Eni, Cadent, Hanson, CF Fertilisers, INOVYN, Essar)||• 3.8GW blue H2 capacity by 2030 + salt cavern H2 storage|
• Targeting industrial decarb. e.g. cement & ammonia in Nth West & Nth Wales
• Aim for 10mt CO2 reduction by 2030 with storage in depleted gas fields in Liverpool Bay
|Acorn CCS (Storegga, Shell, Harbour Energy)||• Target ~7mtpa capture by 2030 in North Sea depleted fields |
• Decarb of St Fergus gas terminal & 9 industrial emitters
• Target 1.3GW blue H2 production by 2030 + 1.5GW of low carbon power
V Net Zero
|Harbour Energy||• Target CO2 T&S in Viking depleted gas field|
• Onshore pipeline connecting Immingham & Theddlethorpe gas terminal
• Aim to decarb. a range of power & industrial emitters around Immingham
2.CCUS to unlock blue hydrogen production
The deployment of carbon transport & storage network infrastructure is the key hurdle to scaling blue hydrogen.
The Steam Methane Reform (SMR) process is widely used in hydrogen production today, with carbon extraction relatively straightforward (compared to power plant extraction). But hydrogen producers need a means to remove & store the CO2 extracted.
Blue hydrogen is not perfect. There is still a residual CO2 footprint (in the order of 5-10% of emissions). But it is a huge improvement versus status quo emissions. It enables rapid scaling of hydrogen deployment, while a viable business model and cost structure for green hydrogen evolves.
The UK government has recently published a consultation paper on the hydrogen policy support framework it intends to roll out into next year. While several support mechanisms are presented, the front runner looks like a hydrogen based CfD to support rapid scaling of production.
3.CCUS to kickstart industrial decarbonisation
Decarbonisation of industry is one of the key challenges on the path to net zero. Rapidly rising carbon prices and a reduction of free allocations mean that large industrial companies also face a challenge remaining competitive.
The list of companies participating in the CCUS clusters covers many of the UK’s largest industrial, power & gas producers. The clusters tackle two important hurdles that facilitate decarbonisation:
- CCUS infrastructure enables the removal of CO2 emissions that can be extracted from production processes e.g. from power plants & industrial processes
- CCUS underpins rapid scaling of blue hydrogen production that can be used as a low carbon fuel (or e.g. as a reducing agent for steel production).
Part of the vision of these clusters is to create a vibrant, interactive local carbon & energy economy (see our 5th implication). Large industrial players represent the demand side.
4.Direct CCUS may trump hydrogen in power sector
There is currently much excitement about using hydrogen as a fuel in power plants. This is theoretically compelling because it allows the production of flexible electricity to complement storage, at high levels of renewable penetration.
Policy makers and market analysts have been quick to project capacity mixes in the 2030s and 40s which have significant volumes of high load factor hydrogen fuelled thermal power output e.g. via CCGTs. While this is a convenient solution in theory, there are some major practical challenges associated with the cost of hydrogen as a fuel.
Burning hydrogen in a power plant involves large efficiency losses. This includes the usual 45-50% efficiency loss of the power plant itself. But there are also significant energy losses in producing hydrogen from other energy sources (e.g. electricity in the case of green hydrogen and gas in the case of blue). It is going to take some huge technological breakthroughs for hydrogen to be anything more than an expensive peaking fuel for power production e.g. via reciprocating engines.
Direct CCUS on power plants is also a major challenge. But a significant portion of the costs associated with this relate to CCUS transport & storage. The cluster infrastructure reduces that hurdle. This increases the chances that direct capture power production (e.g. on CCGTs) may be able to help plug the looming energy deficit the UK faces as power demand rises and thermal capacity closes across this decade.
5.Clusters to spawn local network economies
The UK’s industrial & energy clusters have historically been carbon intensive, but they have also been a source of substantial economic & employment growth. For example the success of ‘mushroom-like’ UKCS offshore infrastructure growth on the back of critical-mass keystone projects (Forties, Brent, St Fergus, Bacton).
The same thing is now needed ‘in reverse’, after which smaller (this time onshore) branches can grow organically, incrementally on the back of existing CCUS infrastructure.
There are likely to be strong positive feedback loops within these clusters. And they have the potential to spawn growth in low carbon industry & power production, particularly given economies of scale. If done right, the UK has the potential to reinvent its industrial base via technology innovation and competitive low carbon production.
These clusters also have the potential to spawn organic network growth at three levels
- Local cluster expansion i.e. adding incremental demand & production sources
- UK cluster interconnection e.g. linking North East with North West & Scottish clusters, via midstream hydrogen & carbon transport infrastructure
- Potential cross border linkages in the longer term e.g. to similar clusters within the Netherlands & Norway.
There is an enormous amount of investment and work to be done to realise this vision. But bold targets, an effective policy framework & committed investors are the right ingredients to make it happen.