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CCS legal and policy – May / June 2010
Feature Articles, June 15 2010 (Carbon Capture Journal)
- Calum Hughes, principal consultant in CCS regulation and policy at Yellow Wood Energy, begins a regular column covering developments in the legal and regulatory aspects of CCS.
Over the past few months the UK has seen developments in both government policy and the legislative framework surrounding its nascent CCS industry. In March, the Department of Energy and Climate Change (DECC) published Clean coal: an industrial strategy for the development of carbon capture and storage across the UK and in April the Energy Act 2010, which introduces a new state funding mechanism for CCS demonstration projects in Great Britain, be-came law.
The Energy Act
The Energy Act 2010 gives the Government powers to provide financial assistance to projects in Great Britain which demonstrate and assess CCS technology through its use in commercial electricity generation. The Act also provides for the establishment of a levy on electricity consumers to fund this financial assistance.
For those considering whether to progress along a road of investment in CCS, a venture beset with uncertainties and risks, both the new Act and the strategy document provide welcome guidance to help in discerning the surest route. However some of the sign-posts are still confusing.
One observation is that while the Energy Bill, as introduced to Parliament, included a restriction that financial assistance should only go to projects based upon coal-fired electricity generation, this restriction was removed, following some interesting debate at the Commons Committee stage, opening the way for assistance under the Act to support CCS demonstration on power generation fired by natural gas and possibly biomass.
Official policy remains, however, that the demonstration projects receiving support under the Act shall all be coal-fired (the title of the strategy document is testimony to this). Policy also states that a maximum of four projects will be supported and that the total funding raised by the levy will be be¬tween £7.2bn and £9.5 bn, a sum that has been calculated as that required to support those four projects. However, these facts are hard to reconcile with the removal of the restriction in the Act; if the money raised is to be allocated entirely to the four projects, and these are to be coal-fired, why expand the ambit of the scheme?
The debate rationale in favour of the amendment centred around the need to build flexibility into the law but this flexibility would only be required if policy were to change, either with regard to the number of projects to be supported, or their fuel type, or both. Hence a seemingly certain policy objective now appears a less sure guide even if it has not been explicitly changed.
CCS clusters
A second area in which the alignment be-tween the new law and policy is less than clear is that of CCS ‘clusters’. The strategy document recognises the potential for clusters to offer increased value for money as well as attracting businesses and jobs to cluster regions and expounds a fair amount of support for ‘co-located’ demonstration projects. Accordingly, it is explicitly stated that two projects sharing infrastructure would be considered as separate demonstrators and would therefore, presumably, be eligible for two lots of funding.
What is less clear is whether this policy would include the support of co-located projects where one is based upon a non-electricity generating plant. Funding could be allocated to such a project if the restriction in the Act that financial assistance shall only be applied to projects based upon commercial electricity generation were construed as being satisfied by the inclusion of one power plant within the cluster project as a whole.
A project of this nature has the potential to deliver unique insights into the way in which a CCS network which includes power and non-power generation CO2 exporters would operate. This would potentially provide valuable lessons, not only for the way in which the operational constraints applied by the need to balance an electricity network would interface with those of the rest of the components in the CCS chain, but would also demonstrate how this scenario would operate when a non-power generation emitter, with wholly different operational requirements, were inputting CO2 into the same system.
Given that the central aim of the sub-sidised programme as a whole is to demon¬strate CCS at a commercial scale, and that a large part of this is the acquisition of operational expertise, it is not unreasonable to sup¬pose that policy would be to support such a co-located project, but whether this is actually the case is not clear.
These two examples demonstrate how easy it can be for messages delivered by pol¬icy and legislation separately to be confusing; I suspect that clearer, and more permanent, route-markers will be required before enough decision-makers feel secure enough to commit the levels of private investment required to fund CCS development at the speed which is apparently required by the Climate Change Act 2008.
