On 23rd April 2009, the Secretary of State for the Department of Energy and Climate Change ("DECC") presented DECC's strategy on coal and carbon capture and storage ("CCS") to the House of Commons. This coincided with the publication of the Government's response to its 2008 consultation on the EU's then proposed CCS Directive and specifically the implementation of provisions of the proposed Directive dealing with carbon capture readiness ("CCR").
Carbon Capture Readiness
The policy set out in the Government's response will be relevant for decision making by the Secretary of State in relation to applications for new power stations in England and Wales under Section 36 of the Electricity Act ("Section 36"). Although the responsibility for taking Section 36 decisions in Scotland has been devolved to the Scottish Ministers, the Government intends that the policy set out in the response should be a material consideration in decision making by the Scottish Ministers too. It is expected that Northern Ireland will be consulting on CCR in due course.
The CCS Directive was approved on 17th December 2008 and finally adopted on 6th April 2009. Article 33 of the CCS Directive addresses CCR and requires applicants for new combustion power stations to carry out an assessment of whether suitable storage is available as well as technical and economical assessments of transport and retrofitting CCS technology. Only if these assessments show that CCS is ultimately feasible does the CCS Directive require appropriate space to be set aside to accommodate carbon capture technology.
Summarising the Government's response to the CCS consultation, DECC has announced:
- CCR will be mandatory for all types of new combustion power stations (including coal, CHP and biomass) with a rated electrical output at or over 300MW in England and Wales from April 2009. All such new combustion power stations will have to demonstrate that they have been designed with operational CCS in mind and that carbon capture technologies can be installed once the technologies have been proven. This will apply to all new applications for such combustion power stations as well as those applications currently being considered.
- The Environment Agency will play a leading role in assessing whether CCS has been technically and economically proven.
The Government's response sets out in some detail what CCR will mean for such new combustion power stations. The Government's policy goes further than the requirements of the CCS Directive in that it places a mandatory requirement on all new combustion power stations with the required rated electrical output to have and maintain appropriate space set aside for carbon capture technology. This is to avoid the likelihood of a power station not being able to find space to retrofit carbon capture technology and to avoid the power station in time becoming a stranded asset. What is an "appropriate" amount of space will be site specific and will depend on a number of variables, including the type of capture technology to be chosen.
The Government has also indicated that all such applicants should apply for a Hazardous Substances Consent at the same time as the Section 36 application if any of the substances proposed to be used during the capture process are subject to the planning regulations on hazardous substances.
In addition, to demonstrate CCR the following assessments will be required:
- Storage – applicants will be required to identify a preferred storage area of sufficient size to include 2 or more fields or aquifers meeting certain criteria laid down in a DTI study entitled "Industrial carbon dioxide emissions and carbon dioxide storage potential in the UK". If the applicant wishes to select an area beyond those covered by the DTI study, a comparable level of assurance on the proposed storage site's suitability for CO2 storage must be provided. The Government provides advice on how it intends to deal with two or more applicants selecting the same storage site. An applicant will be free to choose another storage site (meeting the relevant criteria) when it comes to retrofit the CCS technology.
- Transport – the CCS Directive requires a technical and economic assessment on transport. On the technical side, applicants will be required to demonstrate "no known barriers" to a broad transport corridor (up to 10km wide), with greater detail on planned routes in the area immediately surrounding the plant. On the economic side, the applicant must take into account the potential economics of the planned transport route for future CCS when determining the location of the new combustion station. The applicant will be free to choose different routes to those explored at the CCR stage if the alternative is more feasible when it comes to retrofit CCS technology.
- Technical feasibility of retrofitting – the applicant will have to demonstrate to the relevant advisory body (the Environment Agency) that there are no foreseeable technical barriers to deployment for the expected carbon capture technology, by drawing up plans and designs of sufficient technical detail. It should be noted that when the operator of the facility submits a further Section 36 application for consent to retrofit carbon capture technology, it may choose a different type of capture technology to that envisaged under the original Section 36 application. Applicants will also have to carry out a high level assessment of the economic feasibility of retrofitting the carbon capture technology.
There will be an ongoing reporting requirement from operators of combustion plants to DECC as part of the CCR consent condition to ensure that CCR remains in a dynamic state.
The Government intends to implement CCR via Section 36, drawing on advice from the Environment Agency, the Health and Safety Executive, the Oil and Gas division of DECC and the British Geological Survey.
The Government has produced draft guidance for applicants seeking consent under Section 36 for new combustion power stations at or over 300MWe. DECC is consulting on the draft guidance for an 8 week period until 22nd June 2009. A copy of the draft guidance can be found by clicking here.
Coal and Carbon Capture
Summarising DECC's proposals (and the Chancellor's budget) in relation to the development of CCS and clean coal, the Secretary of State announced:
- Funding for up to three additional CCS demonstration projects – the Chancellor's budget had suggested funding would be made available for up to 4 commercial scale CCS demonstration projects overall. DECC has confirmed it is proceeding with its CCS competition launched in 2007, which could provide financial support for 1 post-combustion, commercial scale demonstration project provided the necessary criteria are met. The Secretary of State's announcement indicated that similar funding would be available for up to a further 3 CCS demonstration projects, enforcing the UK's position at the forefront of CCS demonstration.
- 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 competitive process, perhaps similar to the existing CCS competition, will be used to select the additional projects for funding.
- The new funding mechanism, aimed at addressing one of the key issues for CCS projects, 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. These proposals will be set out in more detail in a consultation to be published in the summer.
- A proposal to require any new coal-fired power station seeking development consent in England or Wales to demonstrate CCS on at least 300MW net (around 400MW gross) of its capacity. This is to further incentivise the timely and effective development of CCS at commercial scale.
- A proposal to require all new coal-fired power stations in England and Wales to retrofit CCS to their full capacity within five years of the technology being independently judged technically and economically viable (expected to be in the early 2020s). This is to avoid investment in new coal-fired power stations without a clear acceptance of the need for future CCS installation. Once the technology has been proven any new coal-fired power station would be required to install CCS technology on its full generating capacity from the outset.
- A proposal to set emissions performance standards to improve the efficiency of coal-fired power stations in England and Wales and further reduce CO2 emissions, which will also help prepare for the possibility that CCS is not proven as early as expected.
Next Steps
DECC is expected to issue a further consultation document setting out the above proposals on coal and carbon capture together with proposals for the new funding mechanism in more detail this summer. In the meantime DECC is proceeding with a Strategic Environmental Assessment as part of the preparatory work for its consultation document and the Environmental Report resulting from this will be published alongside the consultation document to inform responses. Decisions on any applications to construct new coal-fired power stations will be taken once this consultation process is complete.
By opening up potential additional funding to both pre- and post-combustion technologies, the Government has made a significant step forward from its position under the current CCS competition. However, to enforce the UK's leadership position at the forefront of CCS demonstration and deployment, the consultations planned for the summer must not bring about further unnecessary delay. The new competition process needs to begin as soon as possible to ensure that the successful projects are on track to meet the Government's 2020 objectives.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
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The original publication date for this article was 29/04/2009.