Forming the CCUS clusters: keeping CCUS ambitions on track

United KingdomScotland

A February 2021 consultation (the “Consultation”) published by The Department of Business, Energy and Industrial Strategy (“BEIS”) sets out the Government’s proposal for sequencing of carbon capture usage and storage (“CCUS”) “clusters”, which, as anticipated , will be regional groupings where several CCUS facilities share infrastructure, especially for transport and storage. We consider the timetable ambitions and the gaps that projects seeking to submit cluster plans will need to navigate around.

The Consultation sets an ambitious timetable for deploying the first four CCUS clusters in the UK, aiming for commercial operation of the two “Track 1” clusters by the mid-2020s and two “Track 2” clusters by 2030. This is largely in line with the ambitions set out in the Energy White paper which the UK government published in December 2020 (on which more here) and which stated that Government will invest up to £1 billion to support the establishment of CCUS in 4 industrial clusters, creating ‘SuperPlaces’ in areas such as the North East, the Humber, North West, Scotland and Wales.

Track 1 will be split into two phases:

  • Phase 1 – the “Cluster Lead” (most likely the transport and storage (“T&S”) operator) submits a “Cluster Plan” setting out its proposal which must include a T&S network and at least two proposed initial capture projects capable of operation by 2027. The Government will evaluate the Cluster Plans and provisionally identify two preferred CCUS clusters. This decision is non-binding and no funding is granted at this stage.
  • Phase 2 – emitters included in a Phase 1 cluster plan will benefit from having the first opportunity to negotiate with Government. However, standalone emitters that are not part of a Phase 1 Cluster Plan but which could, based on geographic location, connect to one of the clusters are encouraged to apply for inclusion. Government will then finalise the cluster selection and the specific projects, taken from a Cluster Plan or Phase 2 application.

The Consultation provides a proposed agenda for Track 1 clusters as follows:

Indicative date


April 2021

Phase 1 cluster sequencing launched

July 2021

Deadline for submitting Cluster Plans

August 2021

Phase 1 eligible clusters announced

Phase 2 call to capture projects in eligible clusters

October 2021

Phase 1 provisional cluster sequencing announced

Deadline for submitting Phase 2 capture project applications

November 2021 onwards

Phase 2 project assessment, negotiation and due diligence

This agenda is set in the context of the anticipated timeline for provision of further CCUS policy, as was set out in BEIS’ December 2020 update on business models for CCUS, available here. For our commentary on the update, see here.

Indicative Date

CCUS Policy

Q1/Q2 2021

Cluster consultation

Q2 2021

Hydrogen business model consultation

Q2 2021

T&S Regulatory Investment model update (incl. revenue model, economic rate of return and Government Support Package)

Q2 2021

Dispatchable Power Agreement model update

Q2 2021

Industrial Carbon Capture business model update

Q2 2021

Supply chain update

Q3 2021

T&S decommissioning regime

Q3 2021

Biomass strategy position paper

Q3 2021

CCUS regulatory framework update

Q3 2021

T&S connection arrangements

As can be seen from the table, a range of CCUS policy is anticipated in Q2 2021 – and a challenge for the Track 1 projects submitting Cluster Plans may be doing so without sufficient clarity around the T&S Regulatory Investment model or the business models for hydrogen projects, both of which are expected to be published in Summer 2021. Clearly this is a dynamic field where projects will need to provide sufficient clarity and commitment while being cognisant of the evolving landscape.

A key incentive for early movement, is going to be availability of government funding. Track 1 clusters may be eligible for a capital contribution from the £1 billion Carbon Infrastructure Fund (“CIF”), if required. BEIS have indicated that one possible application of the CIF would be closing the T&S operator’s revenue gap (during the period between initial operation of the T&S network and full utilisation of the T&S network by emitters).

In the recent 2021 budget announcement, the Government provided information on further funding assistance that may be available for green infrastructure projects such as CCUS clusters which both Phase 1 and Phase 2 projects will no doubt watch with interest. Namely:

UK Infrastructure Bank: the bank, which is the UK’s post-Brexit answer to the European Investment Bank, will have the core objective of investing in infrastructure projects which help to (i) tackle climate change and achieve the UK’s 2050 “net zero” target, and (ii) support regional and local economic growth. The bank will have a £22 billion financial capacity, £12 billion for debt and equity capital (£4 billion of which is to be allocated to local authorities) and a further £10 billion available in guarantees. For CCUS projects, the development of “SuperPlaces” means that ability to contribute to regional and local development may allow them to seek some of the funding allocated at local authority levels.

Green gilts: money raised via these Government bonds will be applied to help fund green infrastructure projects within the UK. The bonds will constitute a further source of capital available to the Government for applying towards green projects such as CCUS clusters. Given the significant infrastructure costs, the ability to secure bond financing for some of the infrastructure, will depend on the progress made on the business models, in particular the TRI model for transport and storage.

Freeports: several “freeports” were identified throughout UK industrial hubs, which will be subject to simplified planning rules, infrastructure funding and lower customs and tax so as to encourage private sector investment. These are located at East Midlands Airport, Felixstowe and Harwich, the Humber region, the Liverpool City Region, Plymouth, Solent, Thames and Teesside. There is an overlap between the freeport locations and those “SuperPlaces” named in the 2020 Energy White Paper as places where the Government wishes to develop low caron industrial hubs incorporating CCUS. Please see our comments on freeports here.


Detailed information has not yet been provided as to how projects can apply for funding via the CIF, UK Infrastructure Bank or capital raised via the green gilts. In respect of the bank, a framework document is anticipated ahead of the institution’s launch in spring, which may provide further clarity on the means of securing support. The first issuance of green gilts is expected in summer 2021. However, given the maturity of the CCUS projects to date and the timelines for the CCUS cluster plans, the first green gilts are unlikely to include CCUS projects.

Still, in designing their Cluster Plans, Cluster Leads can take some comfort from the variety of potential funding options available to them, as well as the benefits associated with the location within a freeport (if applicable). However, this will need to be balanced against development of the TRI model to ensure that the transport and storage infrastructure is able to accommodate and is incentivised to add additional emitters in the successful SuperPlaces while also giving the T&S system operator assurance that it would not be penalised for underutilisation or risks of outages that may be caused by additional users being added to its system.

Clearly the momentum in the policy arena remains with CCUS and hydrogen project development. Yet, while this may be a helpful evolution to encouraging more coordinated regional plans supported by local governments, Government will need to ensure that sufficient clarity is provided to the market to ensure projects can start construction in good time to meet the ambitions of having commercial operation of the two “Track 1” clusters by the mid-2020s.