DECC Consultation On A Framework For The Development Of Clean Coal

On 17 June 2009, the UK’s Department of Energy and Climate Change (DECC) launched a public consultation on its proposals to encourage the development and deployment of carbon capture and storage (CCS) technologies. These proposals were first outlined in DECC’s paper ‘Building a low carbon economy: a framework for the development of clean coal’ published in April 2009.

Objectives

The Government has confirmed that tackling emissions from coal power stations is its priority in the challenge to balance security of supply with a reduction in CO2 emissions. The proposals set out in DECC’s consultation paper are intended to create a new regulatory and financial framework to drive the development of clean coal. It is hoped that this will achieve the following objectives:

• accelerate the development of CCS technology both in the UK and globally;
• reduce the costs of investing in CCS technology;
• deliver a transition to a low carbon economy while maintaining the security of electricity supplies; and
• develop a new CCS infrastructure and industry in the UK, helping to create jobs and economic opportunities.

The proposals are in addition to the requirements for carbon capture readiness (CCR) for all new combustion power stations with a rated electrical output at or over 300MW in England and Wales from April 2009.
The proposals set out in the consultation will not only be of interest to parties currently involved in or considering CCS projects and operators of coal power stations, but also to operators of other generation facilities and industry more widely, for although the focus is currently on coal fired generation it may only be a matter of time before the principles established for clean coal are extended to other CO2 emitters.

Proposals

The key proposals under consultation are:

• Provision of financial support for up to four commercial-scale CCS demonstrations. The consultation considers how funding would be derived for the demonstration projects, either from an ongoing obligation to supply CCS electricity (similar to the Renewables Obligation) or a levy on electricity suppliers whereby suppliers would pay a specified amount per unit of electricity supplied. It also invites views on how payments would be disbursed to the demonstration projects, either by a fixed payment per unit of CCS electricity supplied (similar to a feed-in tariff), an additional payment per unit of CCS electricity supplied over and above the wholesale price or a payment based on a ‘contract for differences’ for carbon abated by CCS linked to the price of allowances in the EU Emission Trading System. In addition, the consultation invites views on how the successful demonstration projects might be selected and managed.
• Any new coal power station in England and Wales must be able to show that it is designed and intended to capture, transport and store at least 20 million tonnes of the CO2 emitted from at least 300MW net of its capacity. Coal power stations with a smaller capacity will need to be able to show that they are designed and intended to capture CO2 from their full capacity with the quantity of CO2 to be stored to be decided on a case-by-case basis. This proposal sits alongside the requirements to demonstrate that the power station is carbon capture ready and has all necessary planning and environmental consents.
• New coal power stations must retrofit CCS to their full capacity within 5 years of CCS being independently judged technically and economically proven. DECC anticipates CCS to be proven by 2020. Once CCS is proven, new coal power stations must install CCS on their full capacity from the outset. DECC is undecided whether existing coal power stations will also be required to retrofit CCS and is inviting views on this as well as the requirement to retrofit for new coal power stations.
• Development of a contingency plan should CCS not be proven as early as expected. If CCS does not prove to be a viable approach either technically or economically, DECC is proposing three possible alternative approaches to limit emissions from coal power stations: a cap on CO2 emissions from individual power stations, a running hours limit and an emissions performance standard to limit the amount of CO2 that could be emitted per unit of electricity generated.
• Maximising the benefits to the low carbon economy. The consultation invites views on how the programme of up to 4 CCS demonstration projects can be designed to facilitate deployment of CCS in the UK and globally, including the development of “business clusters” (i.e. a grouping of businesses with a common interest located in the same geographical area), the development of CCS infrastructure and retaining momentum in CCS innovation.

Next Steps

DECC intends that the responses received will inform:

• the development of primary legislation to enable the creation of a new financial mechanism to support CCS demonstration; and
• decisions to be made on whether and how to amend the current regulatory framework for the construction and operation of coal power stations.

Until such time as the consultation process has been completed, no decisions will be taken on applications for new coal power stations.

DECC’s consultation is open for response until 9 September 2009. The full text of the consultation paper can be found here.