Ninety miles from Middlesbrough, a mass of sandstone under the North Sea that was once drilled for oil in vain will become a critical weapon in Britain’s struggle to reduce carbon dioxide emissions.
The 25km by 15km aquifer is at the heart of a £ 12bn project to create a giant carbon store that could inject 20 million tonnes of greenhouse gases a year by the end of the decade, shutting it off from the atmosphere .
Major industrial companies and investors have stood to gain support for similar UK projects since Prime Minister Boris Johnson declared carbon capture, use and storage technology last year “Needed worldwide” to reduce emissions from some of the most difficult sectors to reduce carbon.
Johnson’s support follows previous broken-down efforts to get the technology off the ground in Britain. Businesses have been researching carbon capture ever since mid 2000s but the government has withdrawn funding amid cost concerns, most recently in 2015.
Bystanders say CCUS is an expensive diversion that supports the continued use of fossil fuels and still results in harmful emissions. Projects elsewhere came to a standstill technology and financing problems as the cost of renewable energy continues to decline.
Critics also say the government is more comfortable working with established industry groups from the oil and gas sector, and possibly overlooking alternatives in terms of technology and new ventures that want to drive the UK’s energy transition.
But British ministers are expected to select at least two of the five billion-pound projects being developed in Britain in October, with a view to carbon capture by the mid-2020s. The business division said Friday that all five proposals met the initial criteria, illustrating the strong competition in the industry.
The prime minister wants four ‘bunches’ at the end of the decade, aiming to capture up to 10 million tonnes of carbon a year, although project developers say only one or two could easily achieve the ambition.
It is estimated that around 350 million tonnes of carbon will be released by the UK this year.
The projects also promise to promote jobs and investments in so-called carbonless hydrocarbons, which are produced by using gas as a power source in the process of electrolysis to split the water molecule.
Ministers must soon deliver a hydrogen strategy, as a way to reduce carbon emissions from areas such as domestic heating and steelmaking.
Businesses, including BP, Eni, National Grid and Total, are supporting the East Coast Cluster project near Middlesbrough, with the aim of transporting carbon transported by industrial plants, power stations and hydrogen facilities in Teesside and Humberside via giant pipelines to the “Endurance” “to carry aquifer.
ExxonMobil, Royal Dutch Shell and a company backed by the Kuwaiti Sovereign Wealth Fund and the JPMorgan Infrastructure Investments Fund sign preliminary transactions in July with Acorn, a project in Scotland to remove and store CO2 from gas terminals in St Fergus, north of Aberdeen.
Vitol and US energy group Phillips 66 recently partnered with Harbor Energy, the UK’s largest oil and gas producer, to bury carbon in the former Viking gas field in the southern North Sea.
Two groups are also being developed in the north-west of England and South Wales with a strong focus on hydrogen production, although the latter relies on the transmission of CO2 to remote shops.
The developers say the UK needs to make progress, given other governments – notably the oil and gas – dependent economy Norway is also working on large-scale CCUS projects.
But the industry still has its doubters. They want British workers to stimulate the growth of a technology that already exists in countries like the US on a smaller scale, especially to obtain oil that is difficult to reach rather than a solution to the climate crisis.
Many of the British groups are also looking at storing carbon from Europe as a trading opportunity.
‘The UK and Norway collectively have 90 per cent of those currently identified [carbon] storage geologies across Europe, ”says Nick Cooper, CEO of Storegga, the Macquarie Bank-backed company behind the Scottish Acorn scheme. ‘Although I have no doubt, there will be other stores in Europe in time. . . they will still be dwarfed by the North Sea. ”
‘There is a global [CCUS] movement. . . and once we can get there, if we can really develop and get our supply chains going, there’s a big opportunity, ‘says Olivia Powis, head of the UK office at the Carbon Capture and Storage Association, a trade group . “If we miss it, of course others will take the place.”
Obstacles, however, remain not just funding. Project developers insist that a large portion of the capital comes from the private sector, but financing techniques are needed to encourage businesses and investors to dig deep.
The UK Business Division is examining different business models, with further clarity expected next year.
Developers expect a ‘regulated asset base’ model, which is commonly used for infrastructure such as energy networks and which ensures investors a steady return, which will be used for pipelines and carbon stores.
According to project supporters, there are probably also ‘contracts for difference’ for some of the emitters. It is already widely used to encourage the growth of renewable energy and to guarantee an agreed price per unit of electricity generated. Consumers pay the cost of CFDs via their energy bills. The British government is also investigating the addition of a new levy for domestic gas bills as a subsidy to hydrogen producers.
The British government has recovered £ 1 billion in funding for CCUS, which is in line with the amount offered for previous schemes, but was withdrawn in 2015 by former Chancellor George Osborne.
But developers say they hope not to rely on subsidies for long, especially if carbon prices riseThis makes it more cost-effective for industry and power stations to tackle emissions rather than pollution.
“All of these business models are, in a sense, considered temporary,” said Andy Lane, managing director of the Northern Endurance Partnership, which is part of the East Coast Cluster and vice president of CCUS services at BP.
‘The goal is to be subsidy-free decarbonization here. . . and we have to work in that direction, but you have to start somewhere. So it is the business models that set it in motion and set it in motion. ”