Charles Hendry's keynote speech to CCS Senior Stakeholders Conference

On his second day in office, the Prime Minister tasked DECC with leading this government to be the greenest ever. I think that shows how high…

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Charles Hendry

On his second day in office, the Prime Minister tasked DECC with leading this government to be the greenest ever. I think that shows how high on the agenda we are. And it’s a great pleasure to be with you today and talk about where I see Carbon Capture Storage (CCS) in the greenest government ever.

I think everyone here knows how important CCS is in tackling climate change. And in particular how much it can contribute in securing our energy supply.

I’m very eager that the Government and the Office of Carbon Capture and Storage works in partnership with business and others - we know the Government can’t deliver on its own.

For this reason I would like to commit upfront to holding this event on an annual basis to ensure that we continue to deliver on our ambitious agenda on CCS. Furthermore, today I can announce we will be creating a ‘CCS Development Forum’ specifically focused on holding DECC to account on its CCS promises and which will meet periodically between these conferences.

We face a dire energy challenge over the next decade. We need to diversify our energy and move to a low carbon existence. We know that CCS is a leading technology that urgently needs expanding to reap its true benefits.

Domestically, we need a combination of dynamic markets and a state playing a strategic role to tackle the challenge. And as long as fossil fuels remain a part of the energy mix, more efficient low carbon technology plays an important role in reducing carbon emissions. CCS is essential in mitigating climate change whilst maintaining energy security.

We must build new low-carbon sources of generation. Nuclear power - as long as it can demonstrate that it can be viable without public subsidy - has a role to play in our energy mix. In parallel with a massive expansion in other low carbon technologies, including renewables and CCS.

We have said and remain committed to four CCS demonstration projects to consolidate the UK’s lead.

We need to address public concerns over CCS. In some countries we have seen significant opposition to CCS - largely related to onshore storage which we are not pursuing in the UK.

In terms of offshore storage we are working with Norway, Netherlands and Germany in the North Sea Basin Taskforce looking at the crucial role of the North sea in the deployment of CCS in Europe.

In addition to this work and the Clean Energy Ministerial which the Secretary of State mentioned, DECC along with the FCO is working with other key countries to pursue common CCS aims. We are supporting bilateral research and development in CCS with the US and China.

Many here will be aware of the Near Zero Emissions Coal plant. The first phase of this work has already illustrated the significant potential for CCS in China. The UK is now working in partnership with the European Commission, China and Norway to deliver the second phase of the NZEC project.

As last year’s host of the Carbon Sequestration Leadership Forum, we will be working with China to help them prepare for the next ministerial.

And we will also continue to push the inclusion of CCS in the UNFCCC’s Clean Development Mechanism and other new instruments that may arise, to supports its demonstration and deployment in developing countries.

This international action is providing dividends. Governments from around the world have now pledged up to $36bn to support around 20 to 40 demonstration projects. There is an instant emerging market opportunity for many of you here today.

As part of this global market, Britain stands to gain £3bn a year by 2020 by retaining its existing power industry combined with the new business opportunities from the supply chain and associated services for CCS. This could double by 2030. It will help create and sustain up to 100,000 high value jobs by 2030.

As I saw for myself during my visit to Aberdeen two weeks ago, the UK has some of the world leaders in the technology and skills needed to bring CCS to fruition. I and the OCCS would welcome your views on what more the Government should be doing to help UK firms prepare for, and benefit from, this opportunity.

I’m sure many of you recognise there are investment barriers to CCS whether for instance it’s the unknown costs or uncertainty over a carbon price.

I want to see those barriers removed because we cannot realistically expect investment where there is no clarity or certainty.

On costs, we are funding 2 FEED studies to help define the costs and risks of proposals for project 1.

We want to see the UK one of the most attractive places in the world for CCS expansion and in turn, investment for that expansion.

We already have in place one of the best policy and regulatory frameworks in the world to encourage investment in CCS.

We have a commitment to a legally binding target to cut greenhouse gas emissions in the UK by 80% by 2050 which requires the electricity sector to have largely decarbonised during the 2030s.

We also have a commitment to no new coal power without CCS demonstration on a defined proportion of capacity from day one.

There are requirements for carbon capture readiness to apply to all new gas, oil, biomass, waste-to-energy and coal power station applications above 300MW.

We expect demonstration plants will retrofit CCS to their full capacity by 2025, with the CCS incentive able to provide financial support.

However, I know that even with this investment framework CCS will not happen without significant public funding. The CCS Levy, which we still support, is the first in the world and can fund both capital and operational costs for our demonstration programme.

However, I think we need to go further by introducing a floor price for carbon, by establishing a security guarantee of energy supplies and an Emissions Performance Standard (EPS).

An EPS was a commitment in the coalition agreement and will prevent coal fired power stations being built unless they are equipped with sufficient CCS.

An EPS will reinforce the clear message that coal can only play a long-term role in the UK’s energy mix if its carbon emissions are significantly reduced.

As you may be aware, the Committee on Climate Change has recently recommended that we give serious consideration to an EPS which would effectively require any new gas plant beyond 2020 to be fitted with CCS.

We are currently working to develop the best approach to take for an EPS, designing this policy so that the UK continues to move towards a low-carbon future whilst ensuring that we have a diverse and secure energy mix and demonstrate this critically important technology. We will consider the CCC’s recommendation as part of this work

I am very pleased to see representatives from the financial sector here.

If we are to truly build up our low-carbon technology infrastructure in the UK then we are going to need to mobilise vast amounts of capital.

CCS projects require large upfront investments for both the power station and the capture, transport and storage of the carbon dioxide. These may not be recouped for many years through the electricity markets and from public subsidies.

We need innovative financial services, of which UK has the best in the world, to devise solutions to the financial challenges facing CCS.

Going forward the OCCS will develop a roadmap covering the development of CCS on power and industrial sectors - it’s not just coal we need to decarbonise but also gas and heavy industry. CCS also has the potential for providing negative emissions too when linked to biomass and this is something that will need to be explored further.

Most of you here will I am sure be aware that the Committee on Climate Change has recently recommended that the Government consider demonstrating CCS on gas given the limited international effort in this area and the potential competitiveness of gas CCS with other low carbon generating technologies. There will undoubtedly be mixed views on this, even in this room. Let me reassure you that whatever we decide on gas, tackling emissions from coal remains a priority:

  • coal is the fuel with the highest carbon emissions
  • it is a reliable fuel for power generation
  • coal generation provides security and diversity of electricity supply in the UK

However, Gas CCS will be part of the energy mix in the future, both here and abroad, and it is therefore right that we take the time to consider carefully the CCC’s advice including whether it should be part of the demonstration programme. We will respond the Climate Change Committee recommendation later this year.

How we build the right infrastructure for CCS will also be part of the roadmap. Our demonstration programme already includes support for the nascent infrastructure that will be necessary to support the deployment of CCS throughout the economy.

If we are to make a real success of carbon capture and storage, we have to develop the infrastructure of pipelines and encourage clusters of those facilities in certain areas.

A number of regional bodies are considering how the development of regional CCS infrastructure will help them sustain and attract high carbon emitting industries in a carbon constrained world, and how they can stimulate the development of that infrastructure through regional partnerships. I very much welcome that work.

But, Government also has to take a long-term strategic view. I will therefore also want to look at the sort of infrastructure that will be needed to deploy CCS beyond the demonstration stage and how we can use the demonstration programme to set the seeds for that future. I will want to consider what more Government might consider to help this process, including a role for the sort of Agency recommended by our conference chair- Lord Oxburgh - in a report published before the election.

I want the Roadmap to be the basis for coordinating Government and private sector actions on CCS. It must provide certainty for investors and will therefore need buy-in from all key stakeholders.

The government also has a key role to play in supporting innovation in CCS to ensure that the next generation of technologies are available for the wider deployment of CCS.

DECC is working closely with other public funders to coordinate input to RD&D projects on CCS. Through our support to industry we encourage the development and delivery of challenging projects such as the post-combustion project in Ferrybridge.

It is vital that we continue making the most of our already strong CCS R&D base and continue developing it - something the OCCS will help facilitate.

Finally, I would like to urge you all to engage with the OCCS. Shortly Adam Dawson will outline some more detailed plans for the office going forward and next door over lunch, staff from the OCCS will be present to discuss directly with you our ideas. Please use this opportunity to share your thoughts - I look forward to hearing from you.

Published 8 July 2010