Will UK’s new CCUS strategy open doors to multi-billion global supply chain market?

The UK, just like other countries around the globe, is looking to accelerate the deployment of technologies that can curb its carbon footprint to reach its net-zero aspirations. Within its decarbonisation arsenal, carbon capture, usage, and storage (CCUS) is quickly rising through the ranks to earn its place in the history books as a profitable and climate-friendly venture. This is illustrated by a new carbon capture supply chain strategy, which is expected to pave the way for Britain to gain entry into the global supply chain market.

The United Kingdom is on a mission to wean itself off fossil fuels and plans to replace them with home-grown renewables and nuclear power to propel the energy transition to a net-zero future forward. However, striking the right balance between the security of supply and the green shift is considered to be vital to avoid undermining Britain’s energy security, as hammered home by a recent report, which warned that Britain might need to import 80 per cent of its oil and gas by 2030 without new investment in domestic production.

As oil and gas are anticipated to remain within the UK’s energy mix for decades to come, the required balancing act within the energy industry is expected to be maintained with new technologies, such as nuclear, wave, tidal, and renewable energy along with carbon capture and storage (CCS). This was confirmed at the end of April 2023 by Britain’s Energy Security Secretary, who believes that the space being exploited by removing oil and gas is what will partially create the space to be able to store the CO2 in the future.

Grant Shapps, Energy Security Secretary, said at the time: “In line with our net zero 2050 commitment, we will not shy away from awarding new licences where they are justified, and where they can benefit Britain. It is very important to understand that even the Intergovernmental Panel on Climate Change, the IPCC, recognises, we will still need some oil and gas, even in 2050, even when we’re net-zero. So it simply makes no sense whatsoever to deny our own oil and gas, and instead import it – with twice the embedded carbon – from elsewhere in the world.”

While extolling the virtues of carbon capture, Shapps points out that the UK needs to diversify, decarbonise, and domesticate its energy production to take control of its energy security and usher in a clean energy era. Even though he recognises the offshore wind opportunities that the UK Continental Shelf (UKCS) offers, he also underlines that the North Sea floor provides numerous and vast storage reservoirs. Thus, filling the spaces partially left by oil and gas extraction with the storage of CO2 “could avoid the cost of today’s emissions trading price, about £90 per tonne of carbon, which could in theory provide a sector in the region of £5 trillion,” claims Shapps.

In a bid to provide more insight about the UK’s CO2 storage potential, Shapps elaborates that the UKCS can have enough capacity to store about 78 billion tonnes of carbon, which is equivalent to the weight of about fifteen billion elephants or about 234 million Boeing 747s. Most organisations and governments agree that reaching net-zero targets will require decarbonisation of the hard-to-abate sectors in tandem with embracing clean energy sources.  

Looking at this through a CCS and CCUS lens, Shapps is of the opinion that the UK has an opportunity to not only store its own CO2 but also to get value from storing other countries’ CO2. For the CCS industry to spread its wings, costs of the technology need to be cut and regulatory barriers to moving CO2 across borders need to be removed as transporting CO2 will be a core part of the CCS story.

After the North Sea Transition Authority (NSTA) offered 12 companies awards for 20 carbon storage licenses in the UK’s first-ever CO2 storage licensing round –  launched in June 2022, with applications closing in September – Offshore Energies UK (OEUK) interpreted the decision to offer 13 areas off the UK’s coast as sites for permanently storing millions of tonnes of CO2 to mean that the UK could pioneer a technology that would be “essential” in the fight against climate change.

The licences cover 12,000 square kilometres at offshore sites near Aberdeen, Teesside, Liverpool, and Lincolnshire, with some of the sites expected to be in operation in as little as six years, reducing the UK’s total greenhouse gas emissions by up to 10 per cent. It is estimated up to 100 CO2 stores could be needed for the UK to meet net-zero by 2050.  

While the carbon capture and storage opportunity could be worth £100 billion to the UK’s energy supply chain by 2050, the NSTA’s offer follows the UK government’s announcement of allocating up to £20 billion in support of developing carbon capture, usage, and storage, starting with projects in the East Coast, Merseyside, and North Wales.

The UK has set its cap on establishing two industrial clusters by the middle of this decade –  the HyNet and East Coast clusters in the North West, and North East of England – to form what it is calling Track 1. These Track 1 clusters are expected to be expanded to include Humber later in the year, while Britain also plans to develop a further two clusters as part of Track 2, which it intends to have up and running by 2030. As a result, CCUS could support some 50,000 jobs by 2030, benefitting places like the North East, Humber, Scotland, and Wales.

“We now have the potential to lead the world once again, not just harnessing the wind of the North Sea, but the spaces below the bed of the North Sea, to store extraordinary volumes of carbon dioxide in the very place where fossil fuels laid buried for millions of years,” underscored Shapps.

The Carbon Capture and Storage Association (CCSA), the trade body for the CCUS industry in Europe, has launched – jointly with the CCUS Council Supply Chain Working Group, which advises ministers on deploying and scaling up carbon capture technology – a CCUS Supply Chain Strategy, setting out a number of actions to deliver a thriving CCUS industry that has the potential to safeguard 77,000 existing jobs in heavy industries such as steel and cement while creating 70,000 new jobs in the green economy.

Ruth Herbert, Chief Executive at the CCSA, remarked that the report: “emphasises the massive opportunity that CCUS represents for the UK. Our strategy concludes that developing a UK CCUS supply chain, together with skills and training programmes, is urgently needed to decarbonise our heavy industries and protect jobs in regions such as Yorkshire & Humber, Wales, the North-West of England and the North-East of Scotland. The prize is significant – the opportunity for the UK to access a multi-billion-pound global supply chain market for CCUS equipment, goods and services.”

This supply chain strategy sets out three key actions for the government and industry during the early phase of subsidised deployment to enable the country to achieve a target of 50 per cent UK content in the manufacturing, goods and services underpinning new CCS technology. These actions entail a clear timetable for when and where government support will be allocated to projects to drive confidence and raise the profile of the sector; flexibility in bilateral negotiations on cost and delivery dates where there is an opportunity to secure higher UK content; and targeted financial support for building capacity and transitioning existing supply chain businesses to serve the CCUS programme.

“This strategy requires government to target investment on manufacturing yards which have the potential to supply high-value items to the CCUS industry and will be delivering multiple large strategic infrastructure developments over the next decade. From the industry’s side, by following the guidance we aim to improve the transparency of the procurement process and ensure that local supply chain engagement is prioritised from early on in the development cycle,” added Herbert.

Furthermore, the strategy includes a good practice guidance document for the industry which, provided the above actions are met, sets out a pathway for delivering the UK content ambition. The guidance aims to support developers and contractors in building local supply chains by improving planning and engagement at an early stage and throughout the procurement process.

In line with this, the guidance document covers six key areas of focus, which target an increasing volume of local manufacturers and businesses to build and operate CCUS clusters; promote the introduction of homegrown technology; enhance the quantity and quality of local jobs created or protected; drive investment in skills and training to support CCUS; encourage transparency in the supply chain process; and create wider economic benefits to the UK from investing in CCUS.

Lord Callanan, Parliamentary Under Secretary of State (Minister for Energy Efficiency and Green Finance), commented: “A successful UK supply chain is key to sustaining existing, and creating new, high-skill, high-value green jobs and supporting growth in industrial clusters. To achieve this, industry and government must work together and today’s new report from the Carbon Capture and Storage Association is a crucial step forward to harnessing the full potential of Britain’s CCUS industry.”

In addition, the CCSA submitted a paper on CCUS skills to the green jobs delivery group, which was convened by the government to support the creation of almost half a million green jobs by 2030. The CCSA Workforce & Skills Position Paper sets out the strong linkages between developing the CCUS supply chain and skills and highlights the need for urgent action to coordinate the skills requirements across the entire low-carbon economy.

Lord Hutton, Chair of Make UK and Chair of the CCUS Council Supply Chain Working Group, stated: “It’s encouraging to see the CCUS industry take the lead in developing supply chain guidance and if projects follow this guidance, together with government providing strong support, then a reliable, high quality and secure domestic supply chain can be achieved.”

This strategy comes on the heels of a report, titled A Remarkable New Infrastructure System, which was published by the UK’s Department for Energy Security and Net Zero to outline opportunities for economic growth in the country’s CCUS industry. This report aims to glean more insight into the opportunities for economic growth that carbon capture, utilisation and storage can offer the UK, including particular high-value opportunities for UK supply chains, encompassing a full-value chain taxonomy for CCUS-related goods and services.

According to Offshore Energies UK, the industry-led CCUS Supply Chain Strategy and the accompanying government’s Opportunities for economic growth in the UK’s CCUS industry report mark “a big leap” forward in terms of understanding the economic growth that CCUS can offer, thus, this is expected to support the scaling-up of Britain’s carbon capture economy.

Enrique Cornejo, OEUK’s Head of Energy Policy, emphasised: “This industry-led strategy, supported by a supply chain report commissioned by government, provides a clear basis for creating a common understanding across the CCUS value chain – which is pivotal if the UK is to scale up this technology as a commercially viable carbon cutting solution.

“It includes voluntary supply chain reporting mechanisms to support the delivery of the voluntary 50 per cent UK content target and it identifies high-value supply chain items and a taxonomy for CCUS goods and services – a positive step to potentially facilitate procurement, increase UK content, create thousands of domestic jobs.”

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Moreover, these two publications outline how the UK can reap the benefits of CCUS not only in terms of its decarbonisation efforts but also to boost jobs and export potential while taking advantage of high-value opportunities for the country’s supply chains. In its 2022 CCS Supply Chain Report, OEUK analysis showed that supply chain companies in the UK offshore oil and gas sector are in a prime position to win work in CCS if urgent action is taken from industry and governments to give the supply chain transparency and visibility.

Cornejo further underlined: “It’s clear the UK stands to win big from CCUS if we can learn to utilise the skills of our offshore energy industry and build upon our existing engineering and technical expertise to design for a sustainable future. The UK already has many of the components necessary for a successful CCUS sector – a big potential market for exports of technology and expertise, large industrial clusters, extensive gas transport infrastructure and a good scientific understanding of the geological requirements needed for long-term CO2 storage.

“But there are challenges that need to be addressed if we are to fully capture the lion’s share of work here in the UK – domestic fabrication capability, supply chain visibility, and bottlenecks in demand for supply chain services, to name a few. This report, alongside the CCSA’s new CCUS Supply Chain Strategy, provides the basis for consensus, collaboration and coordination across sectors to ensure the economic benefits are felt by communities here in the UK.”

Recently, Offshore Energy wrote about how hard the energy sector is working to get to grips with new challenges such as upskilling woes facing its workforce while the UK is navigating treacherous waters with storm clouds encroaching, as a legal battle awaits on the horizon, with three organisations – Friends of the Earth, ClientEarth, and Good Law Project – setting the wheels into motion to take Britain to court for the second time in two years over its “feeble and inadequate” strategy for tackling climate change and “weak” net-zero plans.

Another plot twist comes with Britain’s alleged plans to toss out its £11.6 billion (close to $14.9 billion) climate pledge, which is the UK’s contribution to meeting the global £78.6 billion ($100 billion) annual commitment to developing countries in a bid to help tackle the impacts of climate change, fund solutions and protect nature.

While reports indicate that this is getting dropped as the country is unable to foot the bill due to insufficient money in government coffers, environmental groups and organisations dismiss this as balderdash and point out that the UK government is giving tax breaks to fossil fuel companies to the tune of £11.4 billion(nearly $14.55 billion) at the same time.

These are not the only challenges the UK is grappling with as it is also facing an upskilling crisis in the energy transition era while it works on building a workforce capable of bringing a low-carbon and green energy future to life. These woes are perceived to be damaging the country’s chances to hit net-zero goals.

A report – which surveyed 500 energy workers in high-carbon energy industries (oil and gas), and 500 in low-carbon industries (wind, solar and nuclear) – shows that many of Britain’s energy workforce is under the impression that the sector is not adequately prepared for a green future.

However, it seems the UK government may have changed its mind about throwing out its climate pledge, as Shapps said during the recent Climate Finance Mobilisation Forum: “Billions has been spent so far to accelerate the green transition already underway, and the UK is delivering its £11.6 billion of International Climate Finance to support countries around the world – but if we want to deliver real change, we must go further and do it together.

“The scale of this transition requires trillions in private investment in addition to the public funds we are spending. Today is about uniting with our U.S. allies and key enablers, using this world-leading expertise for the benefit of not just our own economies but those that will be most affected by climate change impacts.”

As part of President Joe Biden’s visit to the UK, Shapps and U.S. Special Presidential Envoy for Climate hosted this Climate Finance Mobilisation Forum earlier this week in Windsor to rally efforts that increase support for emerging and developing economies to accelerate a net-zero, resilient transition by unlocking private capital.

Estimates indicate that annual clean energy investment in these countries needs to expand by more than seven times by 2030, to above $1 trillion for clean energy alone, to put the world on track to reach net-zero emissions by 2050. Additional investments are also needed to reduce non-CO2 emissions, halt deforestation and reverse forest loss, and adapt and build resilience to climate change.

With this at the forefront, organisations were encouraged to bring examples of recent and new activities that represent significant investments to drive climate action and harness the environmental, economic, security, and social benefits it brings – building momentum on implementation efforts that contribute to achieving the goals of the Paris Agreement.

John Kerry, U.S. Special Presidential Envoy for Climate, outlined: “The climate crisis is here. It’s caused by the unabated burning of fossil fuels, and it’s going to get worse without action. No government can solve this crisis by itself. We need to work together with the private sector and philanthropy to speed up the net-zero, resilient transition.

“One important outcome of today’s event will be the ideas and potential collaborations that are seeded and the tangible action and ways private finance and philanthropies can collaborate to accelerate action on the road to COP28.

“Since day one, President Biden has taken decisive action to mobilise an unprecedented effort to tackle the climate crisis, and that work continues today in partnership with the UK to raise ambition through concerted action between the public, private, and philanthropic sectors.”

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In the wake of the Ukraine crisis, governments are redoubling efforts to keep 1.5 C alive while boosting cleaner, more secure and cheaper energy that moves away from fossil fuels, but emerging markets and developing economies account for two-thirds of global greenhouse gas emissions, and many are highly vulnerable to climate hazards.

As these economies are perceived to be crucial for tackling climate change and halting nature’s decline, the UK and the U.S. believe they can capture a huge economic opportunity by supporting the global transition, whilst building closer relationships with high-growth emerging markets and developing economies as they seek to meet their own financing needs.

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