The following article is from ENDS Report (subscription only) -
Major CCS projects may be jeopardised by independence vote
Carbon capture and storage (CCS) projects in Scotland could be jeopardised if the country votes ‘yes’ in its independence referendum.
Two projects are planned in the country: Scottish & Southern Energy (SSE) and Shell want to retrofit CCS to 385 megawatts capacity of an existing gas-fired power station in Peterhead; while US firm Summit Power intends to build a 570MW coal power station with CCS at Grangemouth.
The energy and climate department (DECC) has shortlisted both for its £1bn CCS competition, alongside two English projects. Awards are due to be made at the end of March (ENDS Report, November 2012).
Peterhead is considered the favourite to win funding as it is the only project on a gas plant (ENDS Report, February 2012). The UK is pushing for a large expansion of gas in coming years to guarantee security of supply, albeit without CCS (ENDS Report, 6 December 2012).
However, ENDS understands that at least one of the Scottish projects has only applied for money to undertake engineering studies so it can properly scope and cost the project.
It will not be seeking subsidies to actually construct and operate the plant until after the independence vote, at which point the UK government could decide it will not fund projects north of the border.
In that scenario, the Scottish Government may find it difficult to justify funding a CCS scheme itself as it has committed to get 100% of its electricity from renewables by 2020.
Earlier this month, a group of academics warned that Scotland could have to scale-back its offshore wind, wave and tidal ambitions if it becomes independent (ENDS Report, 18 February).
In a paper in the Political Quarterly journal they argued the UK may decide to stop providing long-term subsidies to such schemes unless they were cheaper than projects in England, Wales and Northern Ireland. Scotland would struggle to fund them alone, they added because doing so would lead to unsustainable increases in electricity bills.
Neither CCS project would speak to ENDS about the issue. All projects shortlisted for DECC’s £1bn competition have signed strict confidentially agreements banning them from speaking publicly.
However, a source close to the competition said the independence vote was “at the top of their risk register...The problem is that the big investment decisions are likely to be after the vote, so it may scupper them or may not.”
SSE has previously warned that the independence vote creates uncertainty for energy projects in the country.
There is no feeling that the issue will influence which projects DECC decides to award shares of the £1bn to as it is paranoid of facing judicial review. The money will be awarded to the projects that offer the best chance of helping commercialise CCS in the 2020s and also developing a “cluster” of projects.
The Scottish Government would not directly answer inquiries from ENDS about whether it felt a yes vote could jeopardise the projects, and whether it would continue to fund schemes regardless. Instead it said: “The case for CCS deployment in Scotland is extremely strong. We have world-leading expertise and R&D capacity, a strong industry capability and some of the best carbon storage sites in Europe.
“Scotland’s potential CCS projects also include first rate clustering opportunities which will allow linking and sharing of CCS infrastructure, an attribute favoured by the UK CCS Commercialisation Competition.”
DECC could not confirm whether long-term subsidies, known as contracts for difference, would be available to plants after an independence vote. These are being established by the energy bill, currently making its way through parliament. “We are not making plans for independence as we are confident that people in Scotland will continue to support the UK in any referendum.
“Therefore, we have not identified what the implications would be for the Energy Bill and subsidies system if Scotland voted for independence.”
Another source close to the competition told ENDS that Scotland would benefit from the growth of CCS even if the UK decided not to fund projects after independence.
“You could get English projects sending captured CO2 to storage sites in the central North Sea, which would be Scottish waters. If that was used for enhanced oil recovery operations, then Scotland would get significant tax revenue so it could end up being the main beneficiary regardless.”