Carbon Capture and Coal-fired Generation – DECC Proposals

On 23rd April, the Secretary of State for the Department of Energy and Climate Change (DECC) outlined DECC’s strategy on carbon capture and storage (CCS). He announced:

• Funding for up to three additional CCS demonstration projects – the Chancellor’s budget had suggested 1-4 CCS demonstration projects overall. It is therefore unclear at this stage precisely how many projects will be funded in total and whether the process for allocation of this funding will follow the same route as the previous CCS competition.
• Funded demonstration projects would represent a mix of pre- and post-combustion technologies – a change from the previous policy of supporting only retrofittable post-combustion technologies.
• A new funding mechanism aimed at addressing one of the key financing issues for CCS projects, although the initial mechanism will apply to only four CCS demonstration projects in the UK. This was also referred to in the Chancellor’s budget and could, for example, be a new incentive mechanism based on feed-in tariffs allowing CCS projects to receive a fixed price for electricity, or a fixed price for stored emissions.
• Making CCS mandatory for all new coal fired power plants: this involves all new coal fired power stations to commit to retrofitting CCS within five years of the technology being proven commercially viable (expected to be in the early 2020s). It should be noted that DECC held a public consultation process on the then proposed EU CCS Directive and on “capture readiness” which closed in September 2008. The response to this consultation was published on 23rd April and can be found at http://www.berr.gov.uk/files/file51115.pdf.
• The Environment Agency will play a leading role in assessing whether CCS has been proven to be technically and economically proven.

DECC is proceeding with the Strategic Environmental Assessment on the consenting process for new coal fired power stations. In order to be eligible for a permit, a new coal fired power station will have to:

• demonstrate at least 300MW net capacity or 400MW gross output as a condition of the consent; and
• commit to fitting CCS technology on 100% of the plant within five years of the technology being proven.

A consultation on the above proposals, including whether these can be achieved by a new emissions performance standard, will be launched this summer alongside a consultation on the proposed new funding mechanism mentioned above.