UK carbon capture projects proceed: an update on the UK Government’s two stage approach

On 10 February 2021, the UK government published a consultation paper seeking views on an approach to sequencing the deployment of carbon capture, usage and storage (CCUS) clusters.

The findings of this report were released in May 2021, and show a willingness by the private sector to participate in the government’s ambitious plans for CCUS. 

Subsequently, the government on 8 May 2021 launched Phase-1 of its selection process for Track -1 of its program.  In Phase-1, the government will receive submissions from cluster organisations, and provisionally sequence those which are most suited to deployment in the mid-2020s onto Track-1, in accordance with government’s stated objectives.  The government’s timetable provided a deadline of 9 July 2021 for finalised submissions for Phase – 1.

Overview of the UK Government’s Plan

The government plans on using CCUS clusters to help achieve its goal of net zero carbon emissions by 2050.  A CCUS “cluster” is a transmission and storage network for carbon dioxide, and an associated phase of at least two carbon capture projects at industrial facilities and power generators. 

The plan involves a “Two Stage Approach”, deploying two such clusters by the mid-2020’s (Track – 1) and a further two by 2020 (Track – 2).  The aim is to capture 10 MtCO2 per annum by 2030.

Track - 1 would be subdivided further into two phases. Phase – 1 would sequence two cluster locations and Phase – 2 would select the individual projects within, or that could connect feasibly to, these cluster locations and allocate support to these projects.  The current selection process relates to Phase-1 of Track-1.

Consultation Results

The results from the consultation published in May 2021 show a strong appetite among stakeholders to get on with developing CCUS clusters in the UK.  The government has taken this on board with regards to the Two Stage Approach, with stakeholder views being considered and acted upon. 

Some stakeholders expressed the view that, in order to best advance decarbonisation, all clusters should be allowed to develop at their own natural pace.  This would mean providing the necessary funding at the stages at which clusters need it, rather than staggering deployment.  This might mitigate the potential for projects not named in Track-1 to be delayed or cancelled. 

It was suggested replacing the two-stage development process with a “readiness assessment” approach with the government committing to supporting all viable clusters, informed by their natural development timelines, as opposed to being driven by pre-set dates. In the alternative, should the government not agree to adopt this “readiness assessment” approach, stakeholders requested greater visibility in relation to Track – 2. This would mean further clarity in relation to timing as well as the process that would be used to select Track – 2 clusters and projects. 

In response, the government agreed to bring forward the release of details of a process to select Track – 2 clusters alongside the Track – 1 result in October 2021. It has also provided further clarity in relation to Track – 2, namely in terms of:

1. Timing – Deployment of Track – 2 could be facilitated from as early as 2027. Deliverability will be assessed as per the process for Track – 1.  Detailed engagement is expected to take place on Track – 2 developments from 2023.
2.  Flexibility – if more than two clusters are deliverable in the mid-2020s, and these are affordable and represent value for money to the taxpayer, the government will consider sequencing these additional clusters into Track – 1.

The government has not however made any firm commitments at this stage to the “readiness assessment” approach suggested by stakeholders that would see CCUS clusters developed as they are ready.

Cluster Business Models

The government is keen to have stakeholders commit to a minimum level of CO2 reduction, and have an idea of the numbers of stakeholders involved and their CO2 contribution. 

Some stakeholders mentioned the difficulty in committing to a project and CO2 reduction levels without clarity around business models, in particular for hydrogen and industrial carbon capture.  The government subsequently published updates to the business models.

The government understood that stronger agreements may not be feasible for all projects at this stage of the consultation and noted the difficulty in making commitments without full clarity on business models in place. A signed Letter of Intent or Memorandum of Understanding was suggested by the government as a minimum level of commitment from each cluster. This would protect against emitters being double-counted in multiple cluster proposals and provide the government with a level of assurance that the CO2 volumes from these projects will materialise.

Stakeholders may be reluctant to sign up to projects without further details of timeframes and the process on how these CCUS clusters will be developed.  However, the government’s plan, whilst ambitious, is doable, provided deals can be struck providing an acceptable level of risk and cost to private sector stakeholders, the tax payer and consumers alike.

The Governments call for submissions from organisations wanting to take part in Phase-1 of the CCUS cluster sequencing process is set out here.