Diamond in the rough: why Scotland has a key role to play in the UK's clean growth

Carbon capture and storage (CCS) has a troubled history with the Conservative Party. Two failed competitions, two National Audit Office inquiries, and millions of pounds spent without a single operational large-scale project to show for it is hardly an endearing track record for any new Minister to inherit. But with the publication of the Clean Growth Strategy, Ministers across government have signalled renewed, albeit cautious, enthusiasm for CCS as part of new plans to decarbonise and grow the UK economy.

“It is very much a personal commitment and something I strongly believe is exceptionally important”, Claire Perry MP, Minister for Climate Change and Industry, told a Westminster Hall debate back in October 2017. “We want the prize of global leadership in this area: we want to be the people who break the deadlock, deploy CCS in the UK and capture the export opportunities”. Strong statements, considering the rocky history.

Newfound enthusiasm for CCS in the Conservative Party however doesn’t come without its caveats. “Costs must come down” has been the go-to line for Energy Ministers since the ill-fated CCS commercialisation programme was brought to an abrupt conclusion in November 2015. But as Offshore Wind Week has so aptly demonstrated, cost reduction for low-carbon technologies is as much within the gift of governments as it is of the private sector and research communities.

Consider how relative policy certainty and clear commitments to offshore wind, for example, have made the UK a global leader in the field; and then contrast that to the indecision and sporadic flip-flopping that has characterised political appetite for CCS in the UK. That’s the scale of the challenge facing Claire Perry, and overcoming it will require much more than £100 million worth of research and development and a CCUS (carbon capture, utilisation and storage) pilot.

The UK isn’t the only country grappling with the ‘how to do CCS’ question though. At the vanguard of international efforts on CCS is the International Energy Agency (IEA), who recently hosted a high-level roundtable with Ministers and CEOs from some of the world’s largest energy companies. The IEA’s Executive Director, Fatih Birol, described it as the “highest level of industry and government engagement that we have seen on CCUS”. (Unfortunately, the UK chose not to send a Minister.)

New IEA analysis published that day shows that global capital investment in large-scale CCUS projects has now surpassed $10 billion. A huge amount of money no doubt; but not when compared against investments in other low-carbon technologies, which came close to $850 billion during the last year alone.

“Without CCS, the challenge [of meeting global climate goals] will be infinitely greater”, said a joint statement from Birol and US Energy Secretary, Rick Perry, adding, “we know this is essentially a policy question”. Part of the problem with CCS policy (and politics) though is that perceptions of costs continue to dominate the discourse, often before any discussion around the benefits has even begun.

Robust policy development requires a proper understanding of the costs and benefits of different investments and different technological pathways. In the UK to date though, CCS policy has been based predominantly around cost and risk management. In its review of the second CCS Competition, the National Audit Office found that the responsible department (the Department for Energy and Climate Change, at the time) hadn’t even fully assessed the benefits of the programme.

That’s why a new study from Summit Power, a US project developer with a portfolio including both traditional and alternative forms of electricity generation, has started to turn heads.

In the aftermath of the November 2015 cancellation of the CCS commercialisation programme, Summit quietly began developing options for a new gas CCS project at the Grangemouth industrial site in Scotland. With an anchor power project helping to de-risk investments in CO2 transport and storage infrastructure, industrial emitters in the region would be able to access an affordable solution for reducing their CO2 emissions.

Working with a range of academics, consultants and other CCS organisations (including the Teesside Massive, sorry, Collective), Summit has turned the typical CCS cost debate on its head. Instead of focussing only on what CCS might cost, its first-of-a-kind analysis has also shown the economic benefits that it might bring.

Based on Committee on Climate Change (CCC) analysis and guidance from the HM Treasury Green Book, Summit found that CCS could deliver £169 billion in benefits to the UK economy between now and 2060, compared to total costs of £34 billion.

A significant portion of the benefits identified derive from avoiding CO2 emissions, but by working with the University of Strathclyde to assess ‘linked economies’, the analysis found that the project could deliver £5 billion worth of health/wellbeing benefits and a colossal £54 billion increase in domestic economic activity. Between now and 2060, the analysis estimated that more than 225,000 jobs could be created or retained as a result of investing in CCS.  

Aside from costs, the other main hurdle that CCS has struggled to overcome in the UK is the scale of commitment required. Summit’s approach, again, tackles this challenge head-on and illustrates how a UK CCS programme could be structured so that each individual phase would make sense in its own right.

Far from requiring government to commit to an endless roll-out of projects in order to justify initial investments in infrastructure, Summit’s analysis shows that a decision to invest in just two initial phases of CCS between now and 2025 could provide £8.1 billion in economic benefits to the UK in return for a total investment of £3.8 billion. What’s more, that initial investment then provides optionality for the future: invest further if more CCS is needed; don’t bother if it’s not. Nothing lost.

The coming weeks will see the first meeting of the new CCS Cost Challenge Task Force and the Ministerial CCUS Council. It’s not yet clear what impact Summit’s analysis will have on the direction of future CCS policy, but one would at least hope that it helps shift a conversation dominated by costs to one that also recognises the substantial benefit that CCS could bring to the UK. As David Cameron once said:

"This isn't a distant dream. CCS is truly within our grasp. And we in Britain have got what it takes to make that a reality. We've got an army of experts who have worked for decades in the energy sector. We've got a manufacturing and energy industry that wants to invest and get things going. What's more, we've got the depleted oil and gas fields in the North Sea in which to store the carbon.”

Theo Mitchell is Director of Enerfair Engagement, a policy and communications consultancy dedicated to industrial decarbonisation and the energy transition. Previously, he was Head of Office and Energy Policy advisor to Lord Ian Duncan in the European Parliament and Policy Manager at the Carbon Capture and Storage Association

The views expressed in the article are those of the author, not necessarily those of Bright Blue

Conservative cities are leading the way on clean energy

For too long tackling climate change has been perceived as something that makes people’s lives harder, not easier. For that very reason, those elected politicians tasked with making sure that life runs smoothly, from emptying the bins to keeping the lights on, have tended to ignore or skirt round the subject. But as the economics of renewable energy become more compelling, pragmatic local leaders are seeing opportunity rather than inconvenience in pursuing this agenda.

Local leaders choosing to seize the clean energy agenda are doing it for a range of reasons: it makes financial sense since it saves the council money (and can generate income too), it’s a growth and jobs agenda, and it can create opportunities to tackle social injustice through smart technology and markets.

Peterborough and Swindon, both Conservative-run councils, are just two such authorities, using innovative financial approaches and practical public engagement to reduce costs, make money, and provide for the community they serve. Crucially this has been achieved through building public consent less through planet-saving and much more through place-making.

Aspirational voters don’t wish for a degraded environment: being close to nature is something that many people are prepared to pay for. And ensuring that the environment is safe for future generations is close to the philosophy of many local leaders, especially those leading their local communities at council level. As devolution develops, there will be more and more opportunity for local leaders to shape the response to these challenges that meets the needs of their local community now and in the future.

Peterborough has made a reality of the aphorism that where there is muck there’s brass. Crucially they have ensured the proceeds of their new energy from waste plant stay with the council. The contract is unique in that not only does the authority own the facility outright, funded through prudential borrowing, but also that it retains the full value of the energy generated by the facility.

Almost everything residents put in their black bins is converted into heat and electricity, and it has virtually eliminated waste going to landfill. This will save the authority over £1 million per year in gate fees and tax for landfill and generate 7.5MW of electricity for export to the grid (the equivalent of 15% of residents’ electricity use), sufficient to power over 16,000 homes.

Future proofing the plant ensures it has the capacity to deal with extra waste from 26,400 more homes due to be built over the next few years.

Often local authorities do this and don’t shout about it. But they are missing a trick. It is important to tell a story that speaks to the hearts as well as the heads of residents. While saving the planet is rarely the main driver of voters’ behaviour, feeling they are part of a city’s mission to do the responsible thing increases the chances of residents supporting this activity, especially if it is combined with more immediate tangible benefits for themselves and the wider community.

Mainstreaming environmental policies is essential to their widespread deployment.  Early engagement with residents was vital for the success of this project: they were involved in every step of the process, helping to choose the technology involved and residents continue to meet on a regular basis with the council.

Making the most of the waste from the growing city is key to the vision of Peterborough as the environmental capital of the UK, and generating energy in a safe, efficient and sustainable way saves money and reduces the impact on the environment.

If the fact that it reduces the amount of CO2 equivalent the city produces by 10,000 tonnes per year sounds like an add-on, that matters less than that it is being done, while telling a story that links environmental policies with city pride and sensible savings.

Swindon Borough Council has a solar strategy that makes money for the council and for residents, issuing solar bonds to create a financial incentive for residents to buy in to the project. Their unique target of installing 200MW of renewable energy by 2020, the equivalent to 100% of all energy used in local homes has driven innovative approaches to finance, to removing red tape and bureaucracy and to working with communities to retain support.

They launched the first bond available to the general public in over 100 years, and the first “Green ISA”. The council’s first “solar bond” sold out within two months, a month earlier than the deadline. This success continues with the Green ISA. The current offer is the UK’s first council-backed Innovative Finance ISA (IFISA), giving investors an effective rate of return of 6% tax-free over the 20 year life of the investment. The minimum investment is just £5, to make the offer available to as many people as possible. The first dividend from the Swindon Common Solar Farm solar bond has just paid out, at exactly the rate that was predicted when residents signed up to invest.

The project received planning consent through the council’s innovative use of local development orders. This speeded up the planning process, provided an incentive for developers to come forward and show their hands early, remove inappropriate sites and avoided large concentrations around villages, while allowing for a full public consultation to take place.

As a result Swindon is on track to meet its stretching 2020 target. When the second farm is finished (due this month), Swindon will have achieved building 167 MW, equivalent to 83% of all energy used by local homes. And £45,000 per annum from the rent, and business rates from the second solar farm, will be used to finance a £600,000 1300m noise barrier along a dual carriageway.

Cities like Peterborough and Swindon have much to shout about but they are aware they also have much to learn from other local leaders who have also spotted the opportunities available in renewable energy and energy productivity. That is the reason UK100 was established – a network of UK cities and communities committed to 100% clean energy. Not just because it is good for the planet but for the people we serve, in terms of jobs, prosperity, health and wellbeing. Connecting the leaders to accelerate the shift to clean energy is essential so that their innovation can be implemented at scale. Local leaders on clean energy are potential allies of a government which has stretching climate change targets to meet and an industrial strategy it needs to forge that meets the challenges of the 21st century, from skills to manufacturing. A localised response to energy generation and efficiency will enable leaders to shape a programme of national renewal that meets the challenges of a post-Brexit Britain.

Polly Billington is Director of UK100, the network of cities and communities committed to 100% clean energy by 2050.

The views expressed in this article are those of the author, not necessarily those of Bright Blue

Can ‘smart power’ help deliver the cheap, low-carbon and secure energy that the UK needs?

In the Budget last month, the Chancellor accepted the National Infrastructure Commission’s recommendations on ‘smart power’. This announcement could herald a significant transformation in the UK’s electricity system. 

What is ‘smart power’?

The aim of smart power is to balance more effectively energy demand and energy supply. Rather than building expensive new power generating capacity, energy from existing infrastructure is used more efficiently. 

Smart power encompasses various new technologies, including: interconnectors, which are undersea cables that link our grid to those of our European neighbours; energy storage, which allows the grid to retain surplus energy and deploy it when demand is high; and demand-response systems, in which energy users switch their power consumption from peak demand time to when demand is lower.

The National Infrastructure Commission makes a number of recommendations about how the Government can bring about this “smart power revolution”. Among them is a call for the Government to negotiate with neighbouring European countries to build more interconnectors, especially those with an abundance of low-carbon energy like Norway and Iceland. 

Smart power has been a topic of growing importance in the UK energy debate. Interconnection in particular has been studied in quite some detail. This blog aims to set out some of that evidence. 

The opportunities and challenges of interconnection

There is a broad consensus that greater interconnection will have a positive role to play in the future UK energy mix and that, with the right regulatory framework, it can help deliver on all three aspects of the government’s energy trilemma (security, affordability, and decarbonisation). 

The literature on this topic tends to agree that bill payers will enjoy savings from further interconnection. National Grid’s report in 2014 found that just 5GW of additional interconnector capacity would save bill payers over £1 billion by 2020. They argue that, as the UK is likely to be a net importer of cheaper energy, at least initially, interconnection would reduce the wholesale price for consumers. 

Whilst generally agreeing about the financial benefit to consumers, some studies have highlighted the impact on UK energy producers. Energy UK’s Pathways to 2030 report from last month supports increasing the number of interconnectors. They express concerns, however, that imported energy currently enjoys an unfair advantage in the energy market over domestic capacity. Power generated in the UK is subject to the carbon floor support, but power which comes via interconnectors is not. Similarly, imported electricity does not have to pay UK network charges. 

There is some evidence that this imbalance could have negative consequences for security of supply and decarbonisation. The technical analysis carried out by Pöyry, which informed the National Infrastructure Commission report, highlights the inefficient and distorting differences in carbon tax rates among EU member states in the context of interconnection. Whilst greater interconnection would lead to an increase in generating capacity overall inside the EU, some individual countries could see a fall in their domestic capacity. They note that this could have implications for security of supply.

A recent study by Aurora is highly critical of greater interconnection, and is at odds with much of the other evidence. They argue that, because of the exemption of interconnected electricity from the higher UK carbon tax, high-polluting plants in mainland Europe will step up their production and displace lower carbon energy sources in the UK. The effect of this, they claim, is that net CO2 emissions across Europe could increase. 

This would only be a problem in the short-term, however, given the rapidly increasing share of renewables across Europe. In addition, the National Infrastructure Commission was explicit in its aim to build interconnectors with countries that have a superabundance of renewable power, acknowledging that the dynamics of interconnection vary according to the country being connected to.

The political context

Following the Chancellor’s endorsement, there is little doubt that smart power will now become a growing feature of our energy system. The Budget confirmed that the government would support an additional 9GW of interconnected capacity, almost double the current amount, and would allocate a fund of at least £50 million for research into energy storage over the next five years.

As more and more of our energy is derived from variable renewable technologies such as solar and wind, the need for a flexible and responsive grid will increase. Smart power has the potential to tackle this intermittency, and with it, one of the biggest weaknesses of renewable technologies. The Chancellor was right to back it in this month’s Budget, but care will be required to ensure a level playing-field on regulation and tax.