AS ENERGY Secretary Chris Huhne made his way through a maze of corridors to the House of Commons on Wednesday night, he was acutely aware that the news he was about to deliver on a much-anticipated clean coal project in Scotland would ignite indignation north of the Border.
Negotiations over ScottishPower’s carbon capture project at Longannet had gone down to the wire, and that afternoon his advisers had still been in tense eleventh-hour negotiations with the energy giant and its consortium partners, National Grid and Shell.
As soon as he announced that the coalition government was pulling its £1 billion of funding for the scheme, Huhne braced himself for the backlash. He didn’t have to wait long, as energy heavyweights, environmental groups and the SNP government launched a scathing attack on the surprise decision.
In crude terms, carbon capture and storage (CCS) involves sucking carbon dioxide – one of the gases produced when fossil fuels are burnt – from the smoke stacks of power stations and turning it into a liquid before pumping it down into the holes created under the seabed by extracting oil and gas.
Scotland is ideally located to take the lead in CCS, with 50 per cent of Europe’s capacity for carbon storage located in Scottish waters and offshore expertise in the oil and gas industry. But politicians north of the Border are deeply concerned that the withdrawal of government funding will mean Scotland loses its advantage in CCS – just as it did in the wind industry in the 1970s and 1980s, with Denmark and Germany racing ahead.
With thousands of jobs promised by the fledgling industry, First Minister Alex Salmond has vowed to fight on to ensure the “planet-saving technology” is developed in this country. But Wednesday’s shock revelation has left industry experts asking: what next for CCS in Scotland?
“It’s not a case of we saw another princess at the ball who we liked more than Longannet,” said a spokesman for the Department of Energy and Climate Change (DECC). “Everyone worked very hard on the Longannet project and we’ve learned a lot of lessons. CCS is still an unproven technology but, thanks to the ScottishPower consortium and a team lead by E.on, we’ve shown it’s technically possible.
“The decision was taken on cost grounds. We believe we can get better value for the public purse from other projects because £1bn is a lot of money to be spending, especially in the current economic climate.”
Huhne blamed the 260km length of pipe needed to connect Longannet to the potential North Sea storage sites for making the scheme unviable, with the consortium suggesting the project would cost £1.3bn and the Treasury only prepared to offer £1bn. When contingency costs were added in, the bill would have reached £1.5bn.
But the DECC remains tight-lipped on the details of the issues that led to the project being scrapped and refused to comment on reports that the Treasury was concerned over who would foot the bill if something went wrong with the project and carbon dioxide began to leak.
Power generators, academics and Scottish Government officials have been summoned to London for a meeting with the DECC on 2 November, when the next steps for CCS will be at the top of the agenda.
Attention is now shifting to six smaller projects that the coalition government has put forward for a share of ¤4.5bn (£3.9bn) in European Investment Bank (EIB) funding. The UK schemes – including plans to retrofit Scottish & Southern Energy’s gas-fired power station in Peterhead for CCS – are up against six similar proposals from France, Germany, Italy, the Netherlands, Poland and Romania. Up to three British programmes could receive funding from the EIB, with the winners due to be announced next year.
While four of the British projects are in north-east England, Scotland could have a second bite at the cherry in the form of John Whittaker’s plan to build a coal-fired power station at Hunterston, in Ayrshire, which is also on the shortlist.
Whittaker’s Peel Group consulted on its proposals in August and will meet North Ayrshire Council on Monday to pitch its case. The local authority is expected to announce its decision in November, which could trigger a public inquiry.
Muir Miller, project director at Ayrshire Power – the vehicle set up by Peel Group to build the station – was “disappointed” to hear of the DECC’s decision over Longannet. “We’ve continually stressed the complementary nature of the other CCS projects at Longannet and Peterhead,” said Miller.
The importance of having more than one type of project is a view echoed by Charles Smith, an energy and environmental specialist at law firm Brodies. “I don’t think this is the end for CCS in Scotland,” said Smith. “Scotland has about 50 per cent of Europe’s offshore storage capacity, and that’s a resource that can’t be ignored. There has been a lot of public concern about onshore storage in aquifers in countries like Germany and the Netherlands, and so offshore is still a desirable option.”
Richard Dixon, director of environmental charity WWF Scotland, questioned whether the economics of power generation mean that Peel will ever build at Hunterston, due to the rise of renewables. He also questioned whether ScottishPower would come back with a further CCS demonstrator proposal for its power station at Cockenzie, in East Lothian, which will be converted from coal to gas-fired.
“Given officials from ScottishPower and DECC couldn’t agree on Longannet, I think their relationship has turned poisonous,” said Dixon. “I can’t imagine DECC looking favourably on any CCS submission for Cockenzie, no matter its merits.
“The big question now is how long will it take DECC to decide on which project to support. Even if the UK government decides quickly, it could be a further 18 months before work begins. If the deal with Longannet had been finalised then ScottishPower could have been breaking ground early next year.”
Tim Fox, head of energy and environment at the Institution of Mechanical Engineers, believes the UK is still in a leading position globally when it comes to CCS for power stations. At the institution’s annual CCS conference last week, Fox judged the UK industry was still in “good health”, with university research continuing and progress on legal and policy issues.
“But we need to get DECC to outline what it wants from the next round of CCS projects as soon as possible,” Fox said. “The UK is still ahead of its rivals, but it’s hard to judge how long that will last without clarity. Financiers and researchers need to know which way we’re heading.”
The DECC maintains it has learned lessons from the initial CCS competition and it is working on a “streamlined” second competition that would be shorter than the first four-year process. A spokesman said the department remains committed to its target of having a project in place by 2018 and will publish details of a second competition “as soon as possible”.
ScottishPower said the expertise learned from the Longannet project won’t go to waste. The firm will use the technology developed to help build a gas-fired power station in Kent and also when it retrofits Cockenzie to burn gas.
However, questions have arisen over what implications the Longannet decision could have for Scotland’s coal miners.
“If I was a coal miner, I’d be waking up this morning and thinking I may have only a decade left in business,” said Dixon. “If ScottishPower had won the CCS competition then it would have pumped funding into Longannet to keep it going for a long time. Now it will have to make some serious decisions about investment.”
But Alan Somerville, energy director at infrastructure consultancy Capita Symonds, argues the CCS decision will have little effect in the short term for miners.
“About 70 per cent of the coal burned in the UK is imported, and so Scottish suppliers help to make up the remaining requirement,” he said. “That will carry on in the medium term. But there is a question mark over what will happen to coal production in the longer term. The conversion of Cockenzie from coal to gas is a key example of what could happen.”
ScottishPower says the sulphur dioxide scrubbers fitted to the chimneys at Longannet power station will allow it to comply with the European Union’s “large combustion plants” directive, which was designed to reduce pollution. The firm says the station will remain open until at least 2020 as planned and Decc’s withdrawal will not alter that timetable.