What is being said about UK’s £20 bln funding for carbon capture and storage projects?

As part of the UK’s 2023 Spring Budget, £20 billion (nearly $24.2 billion) funding has been unveiled to scale up carbon capture and storage (CCS) projects. The energy industry sees this funding as a way to speed up decarbonisation across the UK and step up the shift towards renewables.

Chancellor Jeremy Hunt announced the Spring Budget 2023 on Wednesday, 15 March 2023, aimed at achieving long-term, sustainable economic growth that would deliver prosperity for the people of the United Kingdom, breaking down barriers to work, unshackling business investment and tackling labour shortages head-on.

Jeremy Hunt, Chancellor of the Exchequer, remarked: “Our plan is working – inflation falling, debt down and a growing economy. Britain is on a lasting path to growth with a revolution in childcare support, the biggest ever employment package and the best investment incentives in Europe.”

According to the UK government, the Ukraine crisis and Russia’s weaponisation of gas supplies to Europe along with global supply chain pressures, have contributed to global high inflation. Due to this, the government is committed to supporting households and businesses with the rising cost of living.

In a bid to increase resilience to future energy price shocks, the UK government is supporting investment in the energy system by launching Great British Nuclear to support new nuclear builds, making up to £20 billion available for carbon capture, utilisation and storage (CCUS), and extending the Climate Change Agreement scheme for a further two years to encourage energy efficiency.

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Regarding the two-year extension of the Climate Change Agreement scheme, it was agreed that energy efficiency targets would be entitled to reduced rates of Climate Change Levy in 2025-26 and 2026-27 and the extension would be open to new participants in eligible sectors.

The UK’s up to £20 billion funding for early deployment of CCUS is expected to help the nation meet climate commitments. The Spring Budget 2023 is anticipated to unlock private investment and job creation across the UK, particularly on the East Coast and in the North West of England and North Wales while also kick-starting the delivery of subsequent phases of this new sustainable industry in the UK, taking advantage of the country’s natural comparative advantage in CCUS.

Moreover, a shortlist of projects for the first phase of CCUS deployment will be announced later this month. In addition, further projects will be able to enter a selection process for the Track 1 expansion launching this year, and two additional clusters will be selected through a Track 2 process.

The UK underlines that certain oil and gas assets can be repurposed for use in CCUS projects, generating cost and development time savings, thus, the government will introduce legislation in a future finance bill to establish the tax treatment of payments made into decommissioning funds by oil and gas companies in relation to the repurposing of oil and gas assets for use in CCUS projects.

When it comes to the launch of GBN, the country intends to do this to address constraints in the nuclear market and support new nuclear builds while working towards net-zero goals. To this end, GBN will launch the first staged competition for small modular reactors with an ambition to select the leading technologies by the end of this year and if demonstrated to be viable the UK government will co-fund this new technology.

Furthermore, the country emphasises that nuclear energy will also be included in the green taxonomy, subject to consultation, encouraging private investment. While small modular reactors will be the initial focus of GBN, further gigawatt-scale projects will also be considered in the future.

Additionally, the UK will set out plans to refresh the existing Control for Low Carbon Levies (CLCL), which was published in 2017, before the government’s commitments to net-zero, and will be replaced by a new framework to reflect the country’s energy security priorities.

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The industry’s views on the UK government’s new carbon capture and storage (CCS) funding commitment run the gamut of reactions. However, most welcomed the announcement, although, many also felt that more is required to meet the UK’s net-zero target.

In line with this, the Global CCS Institute was one of those that welcomed the announcement. In a statement on Thursday, 16 March 2023, the international think tank underlined that the new funding, which would be rolled out over a period of twenty years, would support the development of CCS initiatives, building on the government’s cluster sequencing process, where £1 billion was previously announced to scale up CCS efforts, selecting the Hynet Cluster and the East Coast Cluster as initial beneficiaries.

Guloren Turan, General Manager of Advocacy and Communications with the Global CCS Institute, commented: “This new funding commitment will lead to significant emissions reductions from industry across the UK, and will ensure that CCS clusters will play their part in tackling the climate crisis. This £20 billion pledge will also provide investors with the confidence they need to pursue their CCS ambitions. The Institute keenly looks forward to the upcoming projects that will be part of the cluster sequencing process overall.”

The Global CCS Institute underscores that the UK government’s CCS efforts are part of its broader climate target to reach net-zero by 2050, which was signed into law in 2019. During the budget announcement, Chancellor Hunt reaffirmed the government’s aim to capture 20-30 million tonnes of CO2 per year through CCS by 2030 and anticipates 50,000 jobs will be supported through CCS investment.

Responding to the announcement of £20 bn of CCS funding in the UK Chancellor’s Spring Budget, Mike Hodgson, Strategy Development Manager at James Fisher Renewables, stated: “We welcome the Chancellor’s £20 bn of funding for carbon capture announced today, but we’d urge the government to think bigger to drive the industry forward. Investment is only one piece of the puzzle to reach net-zero while ensuring energy security.

“The UK is making good pace towards its 2050 target, but in order to get there the industry also needs a competent energy workforce, built through skills and on-the-job experience, as well as an overhaul of consenting and applications processes.”

In response to the announcement of £20bn of CCS funding, James Larnder, Managing Director, Aquaterra Energy, said: “The significant funding of £20 bn for UK carbon capture and storage is a landmark for the industry. Alongside our ambitious targets, it should be the catalyst for the country realising its potential as a global CCS leader. With the policy, funding and ambition established, the onus falls onto operators to seize the opportunity.

“The UK’s existing skillset from North Sea oil and gas provides a key advantage and much of the essential technology and expertise is already in place. Operators who can adapt these existing practices for CCS will have a significant head start in this vital industry for the UK’s net-zero ambitions.”

The environmental groups are not happy with the items included in Chancellor Hunt’s Spring Budget, as they think that the UK government had a great opportunity to tackle the cost of living, energy and climate crises at the same time within this budget but did not rise to the occasion.

Greenpeace claims that the budget included news on energy bills, some “bizarre” funding decisions, and “a few big gaps.” The environmental group underlines that it is important to ease the immediate pain of the energy crisis, however, without a lasting solution, the UK will be “stuck with cold, draughty houses” and will not be shielded from the next global gas crisis.

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In regards to the nuclear power provisions within the budget, the government said it would co-fund companies developing small nuclear reactors, but these reactors do not exist at the moment. Therefore, Greenpeace claims that if they ever do manage to generate energy, it is very likely it will be much more expensive than wind and solar power.

As nuclear power is being classified as green energy, the environmental group says that this could give it access to the same investment as renewable sources. As nuclear power plants take years and years to build, Greenpeace outlines that the UK does not have that time to tackle the climate emergency, thus, renewables are seen as a much quicker way, allowing the country to reduce emissions now.

As the government also plans to support carbon capture technology, the environmental group emphasises that carbon capture has never worked on a large scale despite decades of trying. Based on Greenpeace’s statement, “it allows polluting factories and power plants to keep running by capturing and burying their carbon emissions. But so far the real-world results have been disappointing.”

The group underscores that carbon capture is not a zero carbon solution when it requires fossil fuels to be produced because of so-called upstream emissions, so it will be “extra hard” to get to net-zero emissions using it.

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Moreover, Greenpeace elaborates that the government had a chance to fix some of the things they have been getting wrong within the budget, but they have “kept ignoring these problems.” The environmental group explains that the UK needs “a bold, nationwide insulation programme” along with modern electric boilers (known as heat pumps), which are “a proven alternative to polluting, wasteful gas boilers.”

Aside from this, Greenpeace highlights that solar panels and wind turbines on land are “the cheapest sources of energy” the UK has, but they could be doing much more, thus, the government should “scrap the needless barriers” to building more onshore wind power and invest much more in solar energy. The environmental group also claims that closing the windfall tax “loophole” for oil and gas would go a long way towards covering costs for these measures, but “this budget failed to take that opportunity.”

Overall, the UK is missing out on the benefits of green tech, says Greenpeace, while adding that “a good government would invest in renewable energy across all our heat, power and transport systems. Doing this would get us on track to meet our climate goals. To keep our position as a global leader on climate change, we need to match the U.S. and EU’s generous new funding for green industries.”

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