Jul 24, 2016

The case for capturing carbon in the UK

6 min
Climate change is an inherently emotive issue — inspiring action in some and denial in others. But regardless of where the public stands, over 150...

Climate change is an inherently emotive issue — inspiring action in some and denial in others. But regardless of where the public stands, over 150 governments worldwide have formally adopted carbon reduction targets in an effort to mitigate the environmental damage caused by the combustion of fossil fuels. The UK has pledged to reduce emissions by at least 80 percent of what levels were in 1990 by the year 2050. And while solar panels and wind turbines may enjoy a positive public perception, emissions targets simply cannot be reached using renewables alone.

Carbon capture and storage (CCS) has been posited as a vital technology in ensuring that the UK’s carbon budgets are met, but with the government cancelling a £1 billion funding competition last year, many CCS proponents have been left wondering how to proceed. While the idea of capturing CO2 from flue gases, power stations and industrial processes and storing it deep underground might sound hazardous, Andrew Green, CCS Programme Manager at the Energy Technologies Institute (ETI), insists that the associated risks are financial rather than environmental.

“Don’t imagine CCS as though you’ve got a big bomb of CO2 under there that might go off. The carbon dioxide is going to be distributed through a large body of porous rock, it’s not sitting in a big tank,” Green says.

In essence, CCS involves separating carbon dioxide from the mixture of gases emitted from a tail pipe or a power station’s chimney. Once the CO2 has been captured, it can be pressurised and transformed into a liquid-like state for transport through pipelines and, ultimately, burial inside porous geological formations deep underground.

In the UK, most of the practical prospective stores are offshore — anywhere between one and four kilometres beneath the seabed. An impermeable layer of so-called ‘cap rock’ will rest over the top of an ideal CCS formation. Once underground, there are a number of natural mechanisms which will ensure that carbon dioxide doesn’t escape: Firstly, the buoyant CO2 will slowly move upwards through the porous rock until it is trapped by the cap rock.  Along the way it gets caught in the microscopic channels in the porous rock like water in a sponge. Over time, the carbon dioxide will dissolve into the saltwater already present in the formation and, over hundreds or thousands of years, harden into solid carbonate.

“If you choose the right geology you end up with a very secure long term store for the CO2,” Green says.

Carbon capture facilities can be put in place at the site of any large-scale process which produces a lot of CO2. The CCS competition which was axed earlier this year was aimed at installing carbon capture and storage facilities at two existing UK power plants.

“Obviously there’s a lot of licking of wounds going on in CCS at the moment after the cancellation of the competition” Green says. “I guess there are a number of people thinking ‘where do we go now?’ and there are a number of different routes.”

In order to get carbon capture and storage off the ground in the UK, Green believes that a private sector leader will have to be willing to come forward and invest in the installation of the technology.

“If we start at the top, the key issue is that virtually any investment an energy company makes will be driven by policy,” Green says. “Whether it’s a wind turbine, or a new gas-fired power station, or putting diesel generators in fields – all of these things are driven by policy environments.

“I guess one of the biggest challenges for CCS has been around coming up with a policy framework and the support for that will enable the private sector to make those investments and be confident that they can see a return.”

Without public sector funding, companies will need to make a significant upfront investment in CCS facilities and, in return, will receive income streams through the lifetime of the plant. However, waiting for costs to fall before implementing the technology is not the answer. The first plant to be built in the UK will always be an expensive undertaking, and will come with its own location-specific risks. Analysis by the ETI has shown that once one CCS facility has been constructed, the cost of building others will inevitably decrease.  

“The first jump is going to be a little bit expensive because you’re going to have to put the infrastructure in, although our analysis shows that with close attention to how the project is designed these costs can be manageable,” Green says. “It’s not a technology issue, there’s not a big technology development requirement: it’s about taking that first jump.”

The ETI has created a tool called the Energy System Modelling Environment (ESME) which is capable of finding the least-costly energy system designs to meet stipulated sustainability targets. When the model is run to achieve the UK’s 2050 targets in the most cost-effective way, it has consistently shown that CCS is the single-most valuable technology in the country’s carbon reduction arsenal. Renewable energy has a sizeable part to play in reducing greenhouse gas emissions, but fossil fuels will likely remain a practical, and integral, part of our energy mix in decades to come.

“You could carpet half of Southern England with solar panels, but the other issue you face is energy storage,” Green says.

“You need to provide energy when it’s needed. And when it’s not needed, if you’re making electricity, you’re going to have to store it somewhere. Fossil fuels are the most efficient way of storing energy known to man at the moment.”

Some critics of CCS have voiced concerns that capturing carbon, rather than eliminating it entirely, will further obstruct the process of fossil fuel divestment. For Green and the ETI, the perceived benefits of carbon capture technologies arise from its ability to help the UK meet its carbon capture targets over the next 35 years. In fact, fossil fuel companies, with their existing knowledge of offshore infrastructure, are well-placed to assist with the storage of CO2.

“Working with the fossil fuels and fossil fuel companies with the skills, with the incentives to do it, is a positive way forward to try and find the most cost-effective solution”, says Green.

Getting CCS under construction and into operation is going to take cooperation from multiple players. The government needs to work with industry to provide mechanisms that allow investors to see a realistic prospect of a return on their investment, and risks must be shared going forward. There is also something to be said for the careful and cost-effective construction of the UK’s first plant. This will provide the best basis for further CCS development.

Granted, getting started is easier said than done, but experts know what needs to happen — now it’s down to those with the power to act to take action.

“The innovation that is needed in CCS isn’t so much traditional technological innovation,” Green says.

“It’s innovation of the market and the investment climate.”

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Jul 26, 2021

Ofwat allows retailers to raise prices from April

Dominic Ellis
3 min
Ofwat confirms levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue

Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.

The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.

Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.  

In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue. 

Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”  

There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:   

  1. Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps. 
  2. Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold. 
  3. Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice. 

Further consultation on the proposed adjustments to REC price caps can be expected by December.

Anita Dougall, CEO and Founding Partner at Sagacity, said Ofwat’s decision comes hot on the heels of Ofgem’s price cap rise in April.

"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.

"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."

United Utilities picks up pipeline award

A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.

The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.

“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.

Camus Energy secures $16m funding

Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent VenturesWave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.

As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.

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