Once again, I congratulate my hon. Friend the Member for South Suffolk (Mr Yeo) on securing the debate. We have had some interesting contributions, and it is reassuring and encouraging to see that there is so much commitment to the subject.
The Energy and Climate Change Committee inquiry and report on carbon capture and storage highlighted several important issues. In the Government’s response, we welcomed the Committee’s report and set out the action we are taking in the field. I welcome the opportunity to set out in more detail our work to develop that
important technology and our longer-term vision for CCS. I also welcome the opportunity to celebrate the important CCS milestones that have been reached since the Committee published its report in May. Those milestones have reinforced the message about the potential of that important technology.
CCS has the potential to be a critical part of the Government’s plans for future growth in a low-carbon economy, and the need for it is absolutely clear. CCS offers us the chance to enjoy the energy security and resilience benefits of fossil fuels, including our indigenous fossil fuel resources, without the associated emissions. CCS could help us meet our emissions targets in a cost-effective way, allowing us to manage the costs of decarbonisation. The Energy Technologies Institute estimates that successfully deploying CCS could cut the annual cost of meeting our carbon targets by £32 billion by 2050, and it creates opportunities for jobs, growth and exports. The global CCS market is predicted to reach £100 billion by 2050. Because of its potential to contribute to an affordable and sustainable energy mix, its advantages for energy security and resilience, and the growth and investment opportunities it represents, we are committed to working with industry to develop and deploy CCS at commercial scale. We are taking forward a comprehensive package of measures, with significant funding, designed to develop CCS in the UK and ensure we can seize the benefits that that exciting technology offers.
We anticipate that there could be three phases of development of CCS in the UK. The first phase is the current CCS competition, about which we have heard something this afternoon. Through that competition, we want to support up to two CCS projects through to construction, but it will deliver more than that. Those projects could prove the technology at scale in UK conditions, drive down risk, lay down critical CCS infrastructure and demonstrate successful commercial arrangements for CCS. In the second phase, further CCS projects will build on the foundations of the competition, before a third phase in which we hope to see the transition to commercial cost-competitive CCS. Our policies are designed to help bring CCS to that final phase, which is the point at which it can compete with other low carbon technologies.
The Government are working hard to get the first projects up and running in UK conditions. Our £1 billion commercialisation programme is designed to help that to happen, and we have made good progress with the White Rose and Peterhead projects over the past year. In December last year, together with Capture Power Ltd and National Grid, we signed the multi-million pound front-end engineering and design contract for the White Rose project. That innovative proposal is to build the world’s biggest oxyfuel power plant at the Drax site in Yorkshire with full carbon capture and storage, which could bring clean electricity to more than 630,000 homes. That will link into the planned development of a CO2 transportation and storage infrastructure called the Yorkshire Humber CCS trunkline, which could have capacity for additional CCS projects in the area and provide the foundation for further CCS projects in the region. I hope that that will also address the clustering issue that the Select Committee referred to.
In February this year we signed a contract with Shell for a FEED study of its Peterhead CCS project, which could become the world’s first commercial-scale gas
CCS project. The proposal is to attach carbon capture technology to the existing gas power plant at Peterhead and transport the CO2 for permanent storage in the depleted Goldeneye gas field. The project could bring clean electricity to more than 500,000 homes and capture 1 million tonnes of CO2 each year.
Gas will continue to play a significant role in the UK’s future energy use. It is important for our energy security, because it provides secure but flexible generation to complement other intermittent low-carbon sources. The UK has established gas resources in the North sea, and there are also exciting opportunities from shale gas. The Government are working hard to bring forward investment in gas through the capacity market, but in the longer term, being able to use CCS on gas will be important to help us meet our emissions reduction targets. Not only do our chosen projects help to commercialise different generation and capture approaches, but they develop important transportation and storage infrastructure. White Rose involves building a new pipeline and storing carbon in a saline formation, and Peterhead intends mostly to reuse existing North sea infrastructure and a depleted gas field. That approach could allow us to commercialise and de-risk a variety of CCS-related approaches which will help pave the way for the projects that follow.
We have set aside £1 billion to support the first CCS projects in the UK, and we are investing £100 million of that now in the development of detailed engineering and planning designs for those projects. That is essential work, which the companies must carry out thoroughly, and they require time and support to do that. That work will provide information on costs that will allow the companies and the Government to take sensible final investment decisions, which we expect to be taken in late 2015 and early 2016, on whether to proceed with the projects. I hope that that will reassure hon. Members about our commitment to developing CCS and our determination finally—we appreciate that we have waited a long time for this—to achieve the production of CCS.
Our vision for CCS in the UK does not stop at those projects. We want a strong and successful CCS industry that can compete on cost with other low-carbon technologies in the 2020s, and that deploys up to 13 GW by 2030. We published “Next Steps in CCS: Policy Scoping Document” in August. The document sets out the steps that we have taken so far to develop CCS and our views on the issues that must be addressed in order to bring forward future phases of projects. We are now reviewing the responses to the document to help inform future decisions. The consultation covered a range of issues that we believe will be important in setting the policy framework for further CCS projects.
I reassure hon. Members that we are ambitious for the UK to be at the forefront of the technology, and we are always thinking ahead to ensure that we can support innovation in that field. This morning, I visited Imperial college in Kensington to look at various projects, one of which was described as carbon negative. It was not simply CCS; it actually removed carbon from the atmosphere. There is a lot of innovation in the field, and we are keen to support it. The hon. Member for Wansbeck (Ian Lavery) referred to seeding new projects, and that is exactly what we are doing. We are the only
EU country where Government funding is supported for that, so I believe that we are leading in the field. We are working with 13 CCS projects in depth, and we have supported them with a total of £20 million. Many of those projects are based at other leading UK universities. This is an exciting and innovative science, and we must spread our support around to ensure that we back the eventual winner.