At our Energy Academy Autumn Round-up in September, we discussed Carbon Capture and Storage (CCS), and how contracting approaches for CCS combine offshore and onshore contracting concepts, along with the application of health and safety regulations and considerations which may arise in relation to CCS operations.
On the 4th of October 2024, plans to invest £21.7 billion in carbon capture projects in England were announced. Prime Minister Keir Starmer, Energy Secretary Ed Miliband and the Chancellor Rachel Reeves, confirmed the funding will be rolled out as subsidies for the development of new CCS clusters in the industry-heavy areas of Teesside, and Merseyside.
This funding is expected to generate £8 billion of private investment and around 4,000 jobs in the region as well as contributing to a further 50,000 jobs more widely across the UK. It is intended to support projects that seek to reduce emissions released during hydrogen production, waste-to-energy burning processes, or gas power generation and which will account for over 8.5 million tonnes of Carbon emissions annually.
Prime Minister Keir Starmer said "Today’s announcement will give industry the certainty it needs – committing to 25 years of funding in this groundbreaking technology – to help deliver jobs, kickstart growth, and repair this country once and for all."
Teesside Project
Under the Conservative-led Government, the UK set out a vision to become a leader in Carbon Capture Utilisation and Storage (CCUS) by 2035. At this time, the UK indicated support for four clusters, Acorn in Northeast Scotland, Viking in the Humber, the East Coast Cluster in Teesside and Humber and the HyNet cluster spanning North Wales and Northwest England. The latter are the two projects that Prime Minister Keir Starmer confirmed would be part of the funding.
Teesside, located in the North-east of the UK, is part of the East Coast Cluster, which was selected as a priority cluster in phase 1 of the CCUS cluster sequencing process. The project received development consent from the Secretary of State in February after a planning process lasting more than two years. This project aims to go into operation in 2027 and capture and store an average of 23 million tonnes of CO2 annually by 2035, decarbonising the carbon-intensive businesses in the area. The Northern Endurance Partnership (NEP) will transfer the captured CO2 to a geological storage site under the North Sea, where it will be permanently and safely stored deep underground.
Also located in the region is Net Zero Teesside Power (NZT Power), a joint venture between BP and Equinor, that provides low carbon electricity generation that will support intermittent renewables, particularly for periods when there is no wind or sun. This venture could generate up to 860 megawatts of power, further supporting the UK's decarbonisation aims.
Chris Musgrave, chairman of Teesworks Ltd, said "The Government’s support for Net Zero Teesside means real opportunities for local people – creating jobs, attracting investment, and making our region a leader in clean energy,".
Merseyside Project
The HyNet North West Project in Merseyside was granted development consent in March 2024. This project aims to capture 10 million tonnes of CO2 per year by 2030, the majority of which will be permanently stored in depleted hydrocarbon fields in the Irish Sea.
HyNet will decarbonise a cement plant, an oil refinery, a fertiliser plant and glass, chemicals, food, and beverage production facilities.
The government funding covers the granting of an Economic License for the Liverpool Bay CO2 Transport and Storage project, which is reusing the depleted natural gas field beneath Liverpool Bay. In addition, HyNet will secure £5 billion of private sector capital to enable re-industrialisation of the region, enable companies to successfully compete in international low carbon markets and attract new industries to the UK.
Jane Gaston, CEO at Net Zero North West said: "The deployment of Carbon Capture and Storage and low carbon hydrogen at a large scale will enable us to decarbonise industries such as cement production, hydrogen production and waste processing."
Track 2 Cluster Status
In our previous blog, 'OEUK Business and Supply Chain Outlook 2024 – key considerations', we discussed the DESNZ Track 1 and Track 2 Clusters, with the Hynet and the East Coast Clusters falling under Track 1 and Acorn and Viking listed under the Track 2 cluster. The latest announcement from the Government failed to mention any update regarding the Track 2 cluster and, at present, it is unclear whether this cluster will receive similar Governmental support to its Track 1 counterpart. The latest update did not specify which of the next batch of CCS projects would be next to receive support, this includes planned projects in Scotland and Humberside. However, a Labour Party aide commented: "this is our first step, and we will set out our future plans in due course". It is anticipated the first CCS projects will begin storing captured carbon from 2028, with further announcements on future investment plans expected in due course.
Private Investment
It is understood that the Government funding will be sourced through levies on energy bills and directly from the Treasury. Kier Starmer, when outlining his vision for the industry said he hoped this will 'unlock' further substantial private investment of billions of pounds into the CCS industry. It is believed the Government support over the next 25 years combined with such private investment will assist the oil and gas sector to transition from high emission fossil fuels by utilising the transferable expertise of industry professionals into the CCS sphere.
With the CCS industry anticipated to become a significant contributor to the UK achieving its Net Zero by 2050 ambitions, we will continue to monitor this evolving area for future developments and share updates as part of our UK CCS blog series.
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