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By Bob Duncan
Pressure was piled on the UK Government last night to finally back plans for a pioneering green energy scheme in the north-east of Scotland after a Peterhead plant failed to win a huge Brussels grant.
The bid to build Britain’s first carbon capture and storage (CCS) plant at Peterhead was dealt a significant blow when it was placed on a reserve list for EU funding of up to £1.2billion.
Eight other projects have made it to the shortlist for the first round of the £10.5 billion NER300 competition, according to a new European Commission report. Only the first two or three bids are likely to win financial support.
However, Scottish and Southern Energy and Shell, the partners who are spearheading the plan for Peterhead Power Station, were undeterred last night, insisting their scheme - which could create nearly 1,000 jobs - remained a strong contender in the UK Government’s own £1billion CCS competition.
Carbon capture and storage (CCS), refers to a set of technologies designed to reduce carbon dioxide (CO2) emissions from large-point sources such as coal-fired power plants to mitigate greenhouse gas production.
CCS technology (or sequestration) involves capturing CO2 and then storing the carbon in a reservoir, instead of allowing it to be released into the atmosphere where its accumulation contributes to climate change
Supporters claim that CCS has the ability to revolutionise how the world combats global warming. But even advocates admit that there is a lot of work to be done to prove that the technology can succeed in practice.
A complete CCS system involving geologic carbon storage includes four basic steps with different technologies required for each step:
(1) capture the CO2 from a power plant or other concentrated stream;
(2) transport the CO2 gas from the capture location to an appropriate storage location;
(3) inject the CO2 gas into an underground reservoir; and
(4) monitor the injected CO2 to verify its storage.
Technologies that are commercially-used in other sectors are currently available for each of these components, but no production scale system which combines all four has yet been completed.
The Peterhead project would combine all four CCS technologies in a single production system. It will also be the first industrial scale project in the world to combine three separate technologies - hydrogen production, power generation and carbon capture and storage - to generate electricity using hydrogen from natural gas.
Yesterday, the project secured the UK’s first licence to store carbon dioxide (CO2) offshore under the seabed. An agreement for lease (AfL) was announced by the Crown Estate, confirming that carbon from the gas-fired power plant at Peterhead can be pumped to Shell’s depleted Goldeneye field, about 65 miles off the Buchan coast.
A Scottish Enterprise study revealed last year that the north-east CCS plan could create 937 jobs and lead to £590million of investment during construction.
Peterhead Power Station was put forward as a potential CCS base several years ago but the BP-led initiative was abandoned in 2007. The plans were later resurrected by a consortium involving SSE, Shell and Petrofac.
Shell UK chairman Graham van ’t Hoff said: “For most countries, using more gas instead of coal in power generation can make the largest contribution at the lowest cost to meeting their emission-reduction targets in this decade.
“However, CCS will need to be applied to gas in the future, where it will have a lower CO storage requirement than coal, so it’s important we demonstrate the technology now. The Peterhead CCS project is well positioned.
“Almost all of the infrastructure needed is in place and is suitable for use. With government support it has the potential to provide an important UK and global contribution to understanding, developing and implementing CCS applied to gas-fired power generation before 2020.”
A spokesman for the Crown Estate said: “We see CCS as an important technology in helping manage climate change and security-of-energy-supply issues as part of the various ways of continuing to deliver power and industrial processes to the UK with low or zero emissions.”
He added: “Much work still has to be done to progress CCS and in particular transport and storage infrastructure. We look forward to working with those developers who are successful in the UK Government’s commercialisation-funding competition.”
Banff and Buchan MP Eilidh Whiteford said it was more important than ever for ministers to “press on and make an early funding decision”.
She said: “We need the UK Government to put its money where its mouth is and deliver the funding to make this happen. It is essential that the UK Government seize the moment. Ministers must now recognise the very strong case which exists for the Peterhead project going ahead.
"This project would put Peterhead at the cutting-edge of carbon capture technology. The UK Government must now recognise the very strong case which exists for this project going ahead and the investment it will bring to the North-east of Scotland.
"People have not forgotten that Peterhead could already have been four years ahead of where it is now had the last Labour Government not decided to pull back from its support for the previous carbon capture project.
“Scotland has some of Europe’s largest carbon-storage reserves in our North Sea oil and gas fields, combined with the expertise on how to access them and carbon capture investment can also be a key driver of economic recovery in Scotland. For the sake of both the environment and the economy, we need progress now.”
Scotland was previously due to be the location for two major CCS projects, but both were cancelled by the UK government.
Last year, the Coalition Government pulled the rug from under another CCS project at Longannet, and created uncertainty over the future of the £1billion Treasury fund.
At the time, SNP Westminster Energy spokesperson Mike Weir said:
"The UK Government keep announcing competitions, but there never seem to be any prize winners. If Ministers are serious about creating a CCS industry then we need to see real investment to get a project operational.
"The last Labour Government torpedoed the Peterhead CCS project - which would have been the world's first pre-combustion carbon capture plant – which then went to Abu Dhabi instead of Scotland.
"And last year the present Coalition Government pulled the rug from under the Longannet coal CCS project.
"Other countries are powering ahead with their projects, leaving us in their wake rather than leading the race."
“Scotland has some of Europe’s largest carbon storage reserves in our North Sea oil and gas fields combined with the expertise on how to access them. And carbon capture investment can also be a key driver of economic recovery in Scotland. For the sake of both the environment and the economy, we need progress now.
“The Scottish Government is showing that we have what it takes to become the pre-eminent location for clean energy research, development and delivery in Europe – the UK Government needs to stop mishandling Scotland’s renewable future.”
Longannet followed Peterhead which faced CCS uncertainty from a Westminster government in June 2007, shortly after the SNP won the Holyrood election by one seat.
Following the election result, the then Labour chancellor Alistair Darling confirmed that the UK government would not be committing funds to a waiting carbon storage project at Peterhead – the project was scrapped as a result.
If Peterhead fails in its latest bid for Westminster funding it will be the third time Scotland’s CCS potential has been hampered by decisions of the UK government.
Environmental campaigners hailed Peterhead as the front-runner for a £1 billion flagship clean energy fund, after two major energy giants announced they would collaborate on the project.
Dr Richard Dixon, director of WWF Scotland, has said Peterhead must now lead that race. The fact that Scottish and Souther Energy (SSE) and Shell had come together “must confirm this scheme as the front- runner for the Government’s £1bn test project”, he said.
SSE and Shell both warn that their plans cannot work without UK Government funding.
Ian Marchant, chief executive of SSE, said the development of the CCS technology on a commercial scale presented significant challenges and would require support from both EU and UK Governments. But he welcomed the Government’s decision to include gas-fired as well as coal-fired power plants in the scheme.
Scottish Secretary Michael Moore confirmed to MPs last year that the £1bn fund was available and encouraged the Peterhead project to bid for it.
The SSE and Shell agreement was hailed as an important step forward by First Minister Alex Salmond who said it was “essential” Westminster demonstrated its support for the technology.