Scottish Power to Treasury: give us £0.5bn or we'll ditch flagship CCS project

Electricity generator Scottish Power is threatening to withdraw from a project to build a flagship pilot carbon capture & storage (CCS) facility at Longannet coal-fired power station near Fife, Scotland, unless the Treasury gives it £0.5bn more funding.

If the Treasury can't produce the money, this will be a severe blow to the UK's hopes of becoming a world leader in the technology. Urgent talks are being held between Scottish Power, DECC and the Treasury.

Do you fancy their chances, especially after Osborne's anti-green speech at the Tory Conference? I don't.

The plant is the UK's second largest coal-fired power station and Europe's third largest. If CCS proved to be successful it could capture between seven million and eight million tonnes of carbon dioxide a year and make a serious contribution to tackling the UK's overall emissions.

George Osborne had earmarked £1 billion for the project, but Scottish Power, owned by the Spanish company Iberdrola, is now asking for half as much again. It is supposed to be up-and-running in three years.

A competition to find contenders to build pilot CCS projects was begun in 2007 by the previous Labour administration, and there had been five entrants.

Now the project at Longannet is the only one remaining in the running, since E.On pulled out of constructing a coal-burning power station at Kingsnorth in Kent earlier this year.

Last May, a study by Scottish Enterprise suggested more than 5,000 Scottish jobs could be created by three proposed CCS schemes, including the one at Longannet.

Jeff Chapman, chief executive of the Carbon Capture & Storage Association, remains upbeat, saying that even if this project were not to go ahead, “there are lots of others ready to take its place”.

DECC is still insisting that a way will be found for the project to proceed, and an announcement will be made before the year's end.

It is expected that some of the funding will come from the sale of CO2 permits by the European Investment Bank that are beginning in a month's time.

The Bank is being given 300 million EU carbon permits by the European Commission, which are reserved for new entrants into the EU's emissions trading scheme from 2013, and is being told to sell 20 million units per month through next year in order to raise funds for renewable energy and carbon capture and storage projects in all the member states.

CCS has always been touted by the conventional energy sector as being a vital weapon in the armoury to fight climate change, not least because if successful it would allow 'business-as-usual' to continue without the release of climate-warming gases to the atmosphere.

Critics of the technology have always argued that its cost would prove prohibitive, that it is unproven and would take too long to implement to make a significant dent on global emissions in time to curb dangerous climate change.

The loss of the scheme would also affect proposals for a £3bn CCS-enabled coal-fired power station in Ayrshire, by Ayrshire Power, a company owned by Peel Energy Ltd, to be situated near Hunterston B nuclear power plant.

A coalition of environmental groups that includes WWF, RSPB Scotland, Friends of the Earth, Oxfam, and the Scottish Wildlife Trust had mounted a legal challenge to the plans which a judicial review over-ruled on 4th October.

Developers of several other proposed power plants are also waiting to see if they can be constructed using CCS. Scottish Power itself is hoping to fit it to a new gas turbine power station at Cockenzie in East Lothian, which has also just received planning permission.

Only in June, ScottishPower, National Grid and Shell announced plans to create an onshore pipeline to carry up to two million tonnes of CO2 from Longannet to the North Sea.

Last month the Energy Technologies Institute (ETI) launched a £3m, two-and-a-half year project involving EDF Energy, E.ON, Rolls-Royce and Petrofac, to create a modelling tool-kit capable of simulating the operation of all aspects of the CCS chain, from capture and transport to storage.

ETI Chief Executive Dr David Clarke believes that “around a third of the UK’s electricity could be generated from coal, gas, biomass or hydrogen turbines fitted with CCS by 2050".

“CCS infrastructure is complex," he says, "and will need to be rolled out rapidly to meet those targets."

The ETI has already announced £29m worth of CCS projects, including a next generation capture demonstration project led by Costain and an appraisal of the UK’s potential storage sites led by Senergy. Scottish Power has had funding to scope out its own projects.

The ETI is also commissioning a project to develop and demonstrate cheaper carbon capture technologies specifically for gas fired power stations. An announcement on who will carry out the work on this project is expected in early 2012.

There are several different types of CCS technology, depending on whether it is retrofitted to an existing plant or intrinsic to a new-build, and depending on the fuel burnt.

Costs can be reduced if the gas is used to help extract more oil and gas from the North Sea fields into which it is pumped. The most optimistic studies put a figure of £150bn on the amount of fuel that could be obtained in this manner.

An opencast mine could come to your back yard - and there is little you can do about it

Wales is still mourning the death of the four coal miners who were killed ten days ago at the Gleision Colliery near Cilybebyll, Swansea Valley. It's another reminder of just how dangerous this energy source is.

Welsh people puzzled over why the next Saturday's English newspapers led with the story of English rugby centre Mike Tindall, his wife Zara Phillips, and a certain blonde, rather than this tragedy, thinking that if the loss of four lives in a mining disaster had happened in England it would have received front page attention.

Be that as it may, the accident also served to highlight that coal has become more economic to mine in this country - and that opencast mining, while carrying more environmental risk, carries less risk to human life.

In terms of the number of people killed per unit of energy provided, coal mining certainly beats nuclear power, as this rather dissembling comparison made by pro-nuclear commentators established earlier this year.

So one might, then, welcome the fact that of 28 mines recently approved nationally, 14 are opencast; but the impetus for opencast mining has less to do with respect for life (health and safety regulations notwithstanding) and more to do with the economics of opencast vs. deep mines.

14 - the number that received planning permission in 2009, the last year for which statistics are available – is a lot when you consider that there were but 35 mines in production that year. Only six applications were refused, and they will probably be resubmitted, if they haven't been already.

In terms of area, these permitted developments total 367 hectares in England, 51 in Wales, topped by 623 in Scotland - a total of 1041 hectares - or about the same number of rugby pitches.

Coal is back. In England, production from opencast coal mining has started to increase again, following a peak in 1989 of over 12 million tonnes to a low of under one million in 2006.

Scottish production has never been below five million a year, while that in Wales has also increased over the last decade, now standing at over 1.5 million tonnes.

Residents who live near these mines experience terrible effects. Coal dust quickly dirties paintwork and washing, the noise of the huge trucks is constant and wearing, and the environment is devastated by being ripped up.

At Ffos-y-Fran, near Merthyr Tydfil, South Wales, homes lie as near as 36 metres from the pit, which is a huge scar on the countryside 200 metres deep and three kilometres wide.

Local residents are currently locked in a legal dispute, trying to obtain compensation from the pit's owner, Miller-Argent (South Wales) Ltd.

Undaunted, Miller-Argent is now planning another opencast mine at Nant Llesg next to Ffos-y-Fran.

Exploratory work began last month and will continue for six months in preparation for a potential planning application in Spring 2012. Work could start in 2014 and last for over 15 years.

Climate activists - like the Coal Action Network - argue that the best form of carbon sequestration is to leave the coal in the ground - and they have an excellent point.

With Drax, formerly the UK's largest coal-burning power station, converting increasingly to combustion of biomass, and no more coal-burning power stations in the planning pipeline, at least until or unless carbon capture and storage becomes realistic and economically feasible, demand for coal will one day tail off.

But until the UK is able to rely much more on low carbon generation, its part in the electricity generation mix is set to continue.

Wales and Scotland have laws requiring a 500-metre buffer zone between opencast mines and homes. The situation at Ffos-y-Fron (developed before this law was passed) could not be repeated in Wales.

But, astonishingly to some, English homes currently have no such protection.

However, a Private Members' Bill is slowly winding its way through Parliament that could require the Secretary of State to publish guidance on opencast mining policy in England and give residents living near proposed opencast mines the same protection as that enjoyed in Wales and Scotland.

Brought by North West Leicestershire Tory MP Andrew Bridgen, the Planning (Opencast Mining Separation Zones) Bill would bring England into line with its neighbours in this respect, "unless the circumstances are exceptional".

New, opencast mines are planned right across England - in the counties of Derbyshire, Yorkshire, Durham, Northumberland, Cumbria, Greater Manchester, Shropshire, Staffordshire, Warwickshire, Nottinghamshire and Leicestershire. Is there one near you? You might want to check.

Bridgen's Bill passed its first reading way back in June 2010 and was due to be have its second in February this year, but only received a partial discussion. It was scheduled again for 28 October – next month - but once more has been squeezed out for lack of Parliamentary time.

This is bad news for anyone living near the sites threatened by the new pits or an expansion of existing ones, like the mother of one of Bridgen's constituents from whom he received a letter which contained the following:

“They have just started an opencast mine in the field behind my mother’s house in Shropshire" (where protestors were evicted from a camp last month). "In weeks we expect her view of fields and The Wrekin to be replaced by a 9 metre high mound of earth 6 metres from her property. She is 84 years old and until the Shropshire Star did an article on her, the opencast company had not even bothered to visit her or contact her.

"With an opencast mine and then a landfill site she will no longer be able to open her windows or sit in her garden. What a way to spend the final years of your life. She would now like to move but this is now impossible. Nobody would buy it and the opencast company is not interested even though they own the property on either side of her.”

Surely the Localism Bill will help such people? I'm afraid not; it specifically excludes mineral policy, and will give no protection for local communities against developments such as this.

I repeat: if you hear of a mine – of any type - planned near your home, there is little you can do about it.

In Scotland, despite the exclusion zone, there is plenty of opposition to opencast mining, which shows that although a buffer zone provides some protection, it does not mean that residents living near to such mines are happy about them.

Despite the Coalition Government's localism agenda, planning law, now and into the future, allows developers to bulldoze their way through the wishes of local people.

The fact that such mines are opposed by MPs of every hue when one threatens their constituency shows that no one really wants them. And yet, presumably, we want the benefits they yield.

What can we do? At the very least, communities should be able to express an opinion on the way Mineral Planning Policy for their area could impact on their local Neighbourhood Plan, and obtain information from and petition their local Mineral Planning Authority.

There is still time to inscribe this in legislation, before the Localism Bill becomes law and the National Planning Policy Framework is adopted. But those wishing to do so must act fast.

You could also contact your MP and ask them to support Bridgen's Buffer Zone Bill by finding the time to take it further.

It's not just coal, but any mineral which is affected by this policy. You never know - some may be discovered in your back yard - as it has this month in the case of shale gas to the communities between Preston and Blackpool, Lancashire.

A new dash for gas is on the way

The Government's proposed Reform of the Electricity Market is unlikely to meet its goal of reaching 15% renewable electricity in the UK by 2020 as currently framed, and instead result in a dash for gas which will increase emissions and mean the UK has to buy credits abroad to offset its emissions.

Furthermore, the White Paper says that any plant that ends up being equipped with carbon capture and storage (CCS) will be able to turn it off, if having it on means it can't satisfy a peak in demand for power!

The dash for gas revisited

Open Cycle Gas Turbines (OGCT) are the cheapest kind of plant by far, and relatively quick to build. They have half the emissions of coal burning plants and they can fire up quickly to meet peak demands.

A new wave of 'dash for gas', like that in the nineties, will see a slew of these plants built - as long as they operate at a load factor of just under 85% to avoid hitting the level required for Emissions Performance Standard requirements - stipulated in the White Paper - to kick in.

This is especially likely since any plants permitted between now and the point of entry of the EPS level won't ever have to abide by the new limits - the principle known as 'grandfathering' - despite criticism during the earlier consultation that this would encourage the construction of more gas plants.

The modeling in the impact assessment suggests that there will be at least 12GW of new CCGT gas plants built over the next twenty years - greater than the average of 9GW of nuclear power expected but less than the hoped-for 21GW of renewable energy (mostly offshore wind) envisaged.

Most gas is imported and therefore this will reduce our energy security while keeping consumers subject to unpredictable price fluxes, running counter to several of the aims of the EMR.

It could also come from fracking or shale gas, which has higher environmental impact than traditional natural gas.

What's the point of carbon capture and storage?

Another of its aims is also sacrificed to meet the demand for security of supply - using CCS.

The White Paper proposes that a carbon capture and storage (CCS) equipped plant could be able to switch off their capture technology and have a greater net electricity output in order to meet a peak demand, without being penalised for the increase in emissions which could breach the limit set by the EPS (see page 15 of the impact assessment).

This is because, although CCS technology is not yet developed, it is thought that it would have a considerable parasitic load on a power station - around 20%. (This means that it has to generate 20% more power than a plant without CCS, in order to supply the same amount as that plant... very efficient.)

If the loss of that 20% were to mean the lights going out, then the plant can use this 'get out of jail free' card to meet that peak demand - but release a puff of carbon dioxide in the process.

Er, so what is the point of carbon capture and storage?

Electricity market reform unlikely to stimulate sufficient investment

The Electricity Market Reform White Paper is scheduled to be published today, the most radical change to the industry since it was privatised 20 years ago, but business is worried that it still won't provide sufficient certainty to permit the required levels of investment.

The paper is designed to shake up the way the supply industry operates and allow the construction of sufficient renewable energy to help the UK generate 15% of its electricity from renewable sources by 2020, compared with just 3.3% last year. (Only Cyprus and Malta generate a lower proportion of renewable electricity than the UK in Europe.)

The projected £200bn of investment needed by 2020, according to industry regulator Ofgem, is supposed to be sparked off by a guaranteed price for low carbon electricity, including nuclear, which will be passed on to businesses and households through higher bills.

After British Gas' price hikes - gas up 18% and electricity up 16% - announced last Friday, this announcement is particularly sensitive. But such hikes “demonstrate the problems caused for the UK by our over-reliance on energy from overseas", commented Juliet Davenport, CEO of 100% renewable electricity supplier Good Energy.

Almost 60% of the energy we use is imported and the latest rises in wholesale prices are largely due to events overseas out of our control. The proposed market reforms will help to increase energy and price security, and Chris Huhne insists that they will mean a long-term reduction in bills, also because of other Government measures to reduce household energy consumption.

“Once you take the effect on bills you actually find that we're getting overall bill down in the long-run,” he told the BBC, claiming that the UK has "the lowest energy prices in Europe".

Contracts for Difference

Under the white paper's proposals, a new scheme will come in from 2014, replacing and simplifying the current Renewable Obligation Certificate, where generators of renewable power earn tradable certificates which they then sell to utilities.

This system, called Feed-in-Tariffs with Contracts for Difference, will cut support for onshore wind and favour offshore wind and is intended to provide better value for money.

An agency - yet to be decided if it is a new institution, Ofgem or a government department - will pay a top-up premium for green power above the wholesale electricity price, up to an agreed fixed, or "floor," price.

If the wholesale price were to exceed the floor price, the renewable energy supplier would have to pay back the difference to the agency, under long-term contracts designed to promote certainty for investors.

The exact price, plus the amount of low carbon electricity the agency would buy, will be set nearer the time, but may be set by auction for "mature" technologies if there are enough bidders, as with nuclear power.

Business has warned, however, that too much delay on these crucial details could seriously put off vital decisions on investment.

Existing ROC contracts will be protected from the change. Developers will be able to choose between the ROC and the new scheme from 2014-2017.

There will not be an explicit target for utilities on how much of their electricity must be from renewable sources.

HMRC has worked out that electricity bills for an average energy-intensive business are estimated to increase by 2% and 6% in 2013 and 2016 respectively as a result of the carbon price floor, but by the late 2020s bills will be between 2% and 5% lower than would otherwise have been the case.

Reducing the monopoly of the Big Six

The established energy utility companies supply 97% of the energy consumed in households, and part of the purpose of the market reforms is to reduce their stranglehold.

Tim Yeo, Chair of the ECC Committee, has said that "radical reform" of the wholesale energy market is needed to "stop the Big Six from stitching it up".

Last week, Chris Huhne, who told the BBC, “we have to break the dominance of the big six”, met representatives of small energy supply companies who want to become the big companies of tomorrow. They told him that he had to do more to encourage independent energy generators so that smaller suppliers actually have someone to buy energy from.

They asked him to force the large companies to sell a minimum proportion of their electricity on the wholesale market, which would allow independents to undercut their prices.

Good Energy's Juliet Davenport, fresh from being honoured at the 2011 First Women Awards for the Retail and Consumer sector, told Huhne that the Government "has to balance its aim of simplifying energy tariffs with allowing smaller suppliers to innovate".

She also said there must be "complete transparency around the way Big Six generate and sell energy" to "buffer households and businesses from price hikes".

Mike Benson, of Carlton Power, said that allowing small companies to compete is crucial, because the balance sheets of the large utilities "are not strong enough”. “This really is the last chance,” he said. “If the big six are given a soft run this time round, they will lock themselves in for the next 20 years as the only ones able to play in this market.”

In another effort to support community renewable energy schemes, amongst other things, the Treasury had opened a consultation on the provision of finance for them - Tax-advantaged venture capital schemes - which Chris Huhne says will ensure that "enterprise investment schemes and venture capital trusts that invest in Feed-In-Tariff schemes through community-interest companies, co-ops and community benefit societies, will continue to qualify for improved support, as will those generating electricity from micro-hydro schemes".

Support for nuclear

The Select Committee on Energy and Climate Change warned the Government on 16 May that the long term contracts envisaged by the proposed bill at that point will work for supporting nuclear power, but that "different types of contract are needed for renewables and other clean technologies".

The white paper will reveal whether the Government has listened to this advice.

The proposed market reforms could end up giving a £1 billion windfall to nuclear power developers, who are among the Big Six, helping to consolidate their position.

This is why the ECC Committee warned in its report on the proposed bill that the Government "risks distorting its reform of the electricity market merely to save political face over implicit subsidies for nuclear power, through the use of a Carbon Price Floor Support system". It "will increase costs for consumers", they said.

LibDem MPs have also criticised the subsidy and are likely to vote against it.

The ECC Committee's report said the starting point for market reform should be a "clearly defined objective to reduce the carbon intensity of electricity generation in the UK to 50g of CO2 per kilowatt hour (KWh) by 2030".

Demand management

The report also warned that "it is too early for the Government to design a capacity mechanism given the rapid development of smart meters, interconnectors and storage systems that could remove the need for 'peaking plant'".

Reducing peak demand will reduce the amount of overall generation capacity required. Traditionally, energy planning has been done on the basis of meeting peak demand. But the roll-out of smart meters, the Green Deal and other policies will help reduce these peaks.

Greg Barker told Zac Goldsmith in the House last week that "demand reduction is not like alternative forms of energy generation. We are creating a new model, and different types of indices and accounting will be necessary. We will need a robust system of measurement as well as the market mechanism."

Goodbye to coal

Another effect of the market reforms will be to stop British power stations burning coal to generate power within the next three years, which Chris Huhne insists is also vital to bring stability to household bills.

"We've got to move to low carbon sources," Mr Huhne said. "We've got to get off that oil and gas fuel hook."

Carbon emissions from new coal plants will be limited to 450 grams of carbon dioxide (CO2) per kilowatt hour of power production, meaning they must have carbon capture and storage equipment installed.

The Tories' mad energy policy

With the relief that EON decided not to build its coal-fired power station at Kingsnorth last week, it is with dismay that we also heard the Tories policy which is to initiate the building of 5 GW coal power stations as soon as they take office.

Labour may not be much good, but the Tories would be a disaster for energy policy. Railroading big business interests through planning to an even greater extent than Labour, under the pretext of environmentalism.

There's perhaps one good policy and that is the right for every community hosting wind farms to keep for 6 years the business rates generated.

It is the fact that local communities have felt ripped off by big developers not caring about their interests that has held back wind farms in this country.

But a real revolution would be for community owned wind farms to be massively supported as they have been in Denmark for many years, as a result of which there has not been the level of public antipathy towards wind farms that there has been here.

It is the stop-start nature of British energy policy under the NFFO policy that has created this antipathy because only the big developers could stay the field and community developers were squeezed out.

The other Tory policies are to give every household in the country £6,500 to upgrade the energy efficiency of homes; and publication of the planning guidance needed for new nuclear power stations.

The first is limited: some homes will cost more to upgrade than others, and the financial support should be in the form of loans that are paid back on the property from the energy savings created.

Housing authorities also need support to do a mass roll out of renovations of particular districts and streets at the same time which is more cost effective.

It is my argument that we can do without nuclear power because it is not cost efficient and the timescale is too great. The figures produced by the nuclear industry cannot be trusted. Taxpayers will end up supporting the industry to an extent that we can afford even less now than we could before.

"Clean coal" relies on carbon sequestration which is an unproven technology that will be incredibly expensive to implement.

EON gave as their reason for not going ahead with Kingsnorth a reduction in electricity demand. If electricity demand is further reduced by a mass roll-out of energy efficiency making everybody's bills cheaper (hooray!), then why would we need to build all these power stations anyway?

The catch 23 of electric cars

Ah - is it so that we can have an electric cars? But that's robbing Peter to pay Paul! - it's a more efficient use of fossil fuels to burn them directly in a car than it is to burn it in a power station and use the electricity to drive a car.

Why? The output from a coal-fired power station fitted with carbon sequestration is around 10% less in efficiency than one without - so you will only get 20-25% of the original energy in the fossil fuel from such a power station at the plug in your wall.

By the time you have factored in the conversion factors inside the engine of the car converting that electrical energy back into motor energy, you will be lucky to get 10%. Whereas around 50% off the energy in petrol or diesel goes straight into transmission.

The only way of implementing electric cars that makes any sense is if they are fuelled from renewable electricity generated locally to the charging point to minimise transmission losses. That means building more solar, tidal and wind.