Time to curb enthusiasm about CCUS in the UK suggests report

Carbon Tracker's review of Carbon Capture, Utilisation and Storage (CCUS) in the UK has revealed a trend of over-promises, under-delivery and high costs.

London-based think tank Carbon Tracker published their findings in the latest report released, Curb your enthusiasm: Bridging the gap between the UK's CCUS targets and reality.

The report provides a candid analysis of the potential role of CCUS in supporting the UK’s transition to net zero by 2050, and while the government has pledged to derisk projects, its CCUS strategy is "based on optimistic techno-economic assumptions that are now outdated and unrealistic".

In an exclusive interview with Power Engineering International, Lorenzo Sani, Analyst, Power and Utilities at Carbon Tracker and report author said: “The reality is that when we start looking at CCUS project by project, you see a consistent trend, especially in projects promising high rates of carbon abatement. In reality, when the plant was built, it generally captures way below that promised target and at a much higher cost.”

“For CCUS projects, the reality is that you often need a lot of custom engineering. It’s big and complex and they involve a lot of transformation, a lot of thermodynamic losses, a lot of energy consumption. These things come with a price and come with complexity because when you build them, there are many variables, different costs, and a lot of different things that can go wrong.”

However, despite these efforts coupled with a long history of promises and investments, the UK’s CCUS industry has still failed to deliver successful projects in most sectors, according to the report.

The costs of implementing CCUS in key hard-to-abate sectors (such as cement, steel and dispatchable power plants) are still high and the technology has not been proven at scale. Furthermore, projects are often delivered late and over budget while the promised high levels of carbon capture rates are regularly not realised.

The report suggests that plans to use CCUS to decarbonise steel production and gas-fired power plants should be abandoned, with both applications likely to be out-competed by cleaner alternatives.

Similarly, it warned that the government’s plans to use CCUS to decarbonise biomass-based power generation face major risks.  The report cited the UK’s BECCS strategy to convert the giant Drax power station in North Yorkshire, cautioning that BECCS is unproven at this scale.

The report found the UK is targeting applications where CCUS would lock consumers into a high-cost and fossil-based future whereas future-proof solutions could provide lower-cost and zero-emission alternatives.

Added Sani: “The UK government needs to look seriously at recalibrating its target for CCUS because the current targets are based on assumptions that are very optimistic on the cost of CCS. We already know now that those costs will probably be much higher.

“We need to avoid locking in very expensive contracts that keep taxpayers paying for expensive projects.”

Carbon market

The report found that with a carbon price above £100 ($127) per ton, most applications could compete on a merchant basis, while higher prices of £120 ($153)/ton or above would be needed for the power sector.

The main issue is that the current UK ETS market is extremely volatile with prices having tanked to almost £30 ($38)/ton in the past six months.

This market instrument, which in the past has been a strong decarbonisation driver, is now struggling to deliver a long-term price signal.

The report recommends the Government fix the market by preferably linking it back to its European counterpart.

A strong and stable carbon price is critical to deliver the objective detailed in the UK’s CCUS vision of creating a self-sustaining and competitive CCUS sector.

“We believe that one of the most important things is to fix a carbon market so that they can delay deliver these long-term signals,” said Sani.

“Building CCUS projects should be profitable and to do so, we need a carbon market that is stable, forward-looking and strong, which is the opposite of what we have now. The future outlook is very uncertain and there is low liquidity in the market since the UK ETS market separated from Europe.

“If you want to create a market incentive for companies to invest in abatement technologies that are costly and require a lot of capital, you need to have a long-term vision on carbon market sand stable signals.”

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Recommendations

Curb your enthusiasm: Bridging the gap between the UK's CCUS targets and reality makes several recommendations to derisk CCUS and future-proof projects in the UK.

These recommendations include:

• CCUS should be prioritised in the cement sector which has no alternatives to decarbonise. In contrast, it should be avoided in the iron and steel sector where hydrogen-based green steel would be a lower-emission and future-proof solution.
• The window of opportunity for CCUS to abate emissions from gas-fired power plants is limited. The increased deployment of renewables and storage reduces the need for baseload power generation while hydrogen turbines could offer a futureproof alternative with lower costs and zero emissions.
• The UK should revisit its strategy towards negative emissions which is heavily exposed to one single very large and costly project of converting a biomass power plant. It is recommended to scale up removals starting from smaller-scale projects (such as Energy-from-Waste) that can demonstrate the technology and avoid locking in very expensive and long-duration subsidy schemes.
• Finally, the UK must fix its carbon market to create a long-term price signal above £100 per ton that can provide the right incentive to the market.

Said Sani: “The truth is that in the short term, what we've seen in the past couple of years is a steady decrease in our confidence to reach net zero.”

“In my opinion, this is due to the lack of urgency in general that we see from policymakers towards achieving the climate goals.“

“This is the most critical time to invest and we need to make sure that we invest a lot in the right technologies that we know that can deliver at the right cost.”

Despite CCUS presenting a somewhat unattractive picture, the report emphasises that CCUS remains a key feature of global net zero scenarios. This is because carbon capture and negative emissions can buy some time essential to remain below 1.5C of warming while emissions from the hardest to abate sectors are phased out.