Complexity and expense overshadow UK’s carbon capture strategy

In December 2023 the UK outlined its CCUS strategy, which aims to capture 20-30 million tonnes of C02 per annum by 2030. Backed by £20bn in taxpayer funding, the strategy was based on the recommendations of the Climate Change Committee in its Sixth Carbon Budget in December 2020.

According to Carbon Tracker, cost estimates for deploying CCUS have since more than doubled, while the need for carbon capture could be diminished as the need for gas plants with CCUS could be one-third of earlier estimates due to the growth of renewables, battery storage and flexible technologies.

The think tank found that the UK is targeting applications where CCUS could lock consumers into a high-cost and fossil-based future, despite cleaner and cheaper alternatives coming online.

Carbon Tracker argued that plans to use CCUS to decarbonise steel production and gas-fired power plants should be abandoned as cleaner alternatives for both applications look viable; Tata Steel and British Steel are moving away from plans to install CCUS at their UK facilities in favour of Electric Arc Furnaces, while hydrogen turbines are likely to be cheaper sources of flexible power generation than gas-CCS plants by 2030.

Similarly, it warned that the government’s plans to use CCUS to decarbonise biomass-based power generation face major risks of technical challenges, stranded assets and cost premiums. 

The UK’s BECCS (bioenergy with carbon capture and storage) strategy is currently focused on converting Drax power station in North Yorkshire, which has four 645MW biomass fired units. Carbon Tracker cautioned that BECCS is unproven at this scale: the largest current project (the 50MW Mikawa Biomass Power Plant in Japan, capturing and temporarily storing biogenic CO2 at a rate of 500t/ CO2 day) is dwarfed by the Drax plant.

According to Carbon Tracker, the Drax conversion – the largest carbon capture project in the UK pipeline – would require a complex subsidy scheme together with a government-provided bridging mechanism that could lock taxpayers’ money into a long (15-25 years) and costly (£26-43bn) contract, while the resulting electricity would be up to three times more expensive for consumers than offshore wind power.

In a statement, Carbon Tracker associate analyst and report author Lorenzo Sani said: “CCUS technology has proven to be much more complex and expensive than thought, while renewables cost reductions have dramatically changed the landscape. While the government is playing an important role in de-risking new projects it urgently needs to revisit its targets and focus its resources on high-value applications such as cement and hydrogen.”

The research also highlighted the importance of fixing the UK’s carbon market to make the CCUS sector profitable. It found that most applications require a stable carbon price of at least £100 per ton to compete with unabated technologies. By contrast the UK Emissions Trading Scheme has experienced severe volatility due to low liquidity and market saturation since decoupling from the European market and recently fell to £31 per ton in February.

“Fixing the UK’s carbon market – either by establishing a rising price floor or, preferably, linking it back to the EU scheme – is the single most important action needed to deliver the government’s vision of a self-sustaining and competitive CCUS sector,” said Sani.

The report - Curb your Enthusiasm: Bridging the gap between the UK’s CCUS targets and reality - can be downloaded here.