Next phase of UK carbon capture and storage projects ‘ready to move forward’

North Sea operators including Spirit Energy are “ready to move forward” on the next phase of UK carbon capture, utilisation and storage (CCUS) projects, but developers say a lack of clarity from Labour ministers is holding back progress.

In its recent spending review, Labour committed to spending £9.4 billion on UK CCUS projects over the course of the current parliament.

Most of that funding will go towards the development of the so-called track-1 clusters, including the East Coast Cluster in Teesside and the HyNet project in the North West.

The spending review also included development support funding for second stage track-2 projects, including the Acorn Project in Scotland and Viking CCS in the Humber.

The funding came as part of a commitment from the UK government to spend £22bn over the next 25 years to support the nascent CCS sector.

But uncertainty remains over the long-term support for Acorn and Viking, including when the CCS projects will begin construction.

Meanwhile, developers outside the track sequencing process, such as Spirit Energy, are unsure what funding model the government will use to support future projects.

UK ‘CCUS Vision’

In 2023, the previous Conservative government outlined its plan to develop a “self-sustaining” UK CCUS market from 2025.

Dubbed the CCUS Vision, it sets out how the UK will transition the CCUS sector from early state-supported projects to a competitive market.

Under the track-sequencing process, the government is providing funding to early-stage projects through a combination of direct funding and revenue support mechanisms.

As the industry scales up from 2030, the CCUS Vision states that the UK government will retain a regulated asset base model of economic regulation for CO2 transport and storage to provide investors with long-term revenue certainty.

A “commercial and competitive” market will emerge, supported by cost reductions and market factors such as the UK emissions trading scheme (ETS).

© Supplied by Shell

But while the government has outlined an overall vision for the future of the UK CCUS sector, a lack of detail is holding back progress on projects outside the track sequencing process.

Ahead of the spending review, the Carbon Capture and Storage Association (CCSA) called for the government to provide “clear commitments on future allocation rounds and funding”, which it said “would provide the predictability needed to drive investment and innovation in these key industrial sectors”.

UK carbon capture technology firm Carbon Clean also called for a contracts for difference mechanism to be introduced for the sector.

Carbon Clean’s Anniruddha Sharma said such a move would “unlock private investment, drive down costs, and accelerate deployment by providing the necessary clarity for future business models”.

Morecambe Net Zero

Centrica-owned Spirit Energy is among the North Sea operators that secured a licence in the UK’s first carbon storage licensing round in 2023.

Spirit is developing the Morecambe Net Zero (MNZ) project in partnership with a group of UK cement and lime producers known as the Peak Cluster.

Based in Derbyshire and Staffordshire, Peak Cluster members account for 40% of the cement and lime produced in the UK.

Together, Spirit and the Peak Cluster members are exploring options for permanent CO2 storage off the coast of Barrow-in-Furness.

Located at the depleted South and North Morecambe gas fields, the MNZ site has the potential to store up to one billion tonnes (1Gt) of CO2, making it one of the largest potential stores in Europe.

Spirit Energy chief executive Neil McCulloch told Energy Voice that the spending review support for Acorn and Viking was a “positive signal”.

“We want to see a self-sustaining CCUS industry, and that’s a crucial part of the government’s own CCUS Vision,” McCulloch said.

© Supplied by Spirit Energy

“What’s missing though, is clarity for projects outside of the government’s ‘Track’ process on how they can move forward.

“Like them, our project requires an economic licence and unless your project is part of the track process, it’s not clear how to obtain one.”

‘Not all CCUS projects are the same’

McCulloch said that while there remains “lots of interest” from UK and international investors, “not all CCUS projects are the same”.

“The capacity of the geological stores, the suitability of infrastructure, the subsidies required, the origin of the emissions – it all varies project to project,” he said.

“But if we look at our own project as an example, we’re technically and commercially mature. We’re ready to move forward.

“We have the UK’s biggest carbon store at our fingertips – depleted gas fields in the East Irish Sea providing one billion tonnes of carbon storage.”

With cement and lime producers having no alternative to decarbonisation apart from CCUS, McCulloch said the MNZ project alone would remove 40% of the industry’s UK emissions.

Altogether, Spirit Energy estimates the MNZ project will deliver £5bn in private sector investment and 13,000 new jobs.

McCulloch said MNZ will “safeguard traditional roles in industrial heartlands” across the North West, and generate up to £7bn in tax over the project’s life.

Most importantly, Spirit can do this “all with no extension of the government’s CCUS funding envelope”, McCulloch said.

“We’re ready to progress now,” he said.

“We just need ministers to provide industry with clarity on the next steps.”

Severnside 7Co2

Industrial emitters in the south of England are also awaiting clarity on regulations for non-pipeline CO2 transport.

While industrial emitters in Teesside, the Humber, the North West and Scotland have ready access to depleted offshore fields , those in the south of England and Wales are having to explore non-pipeline transport (NPT) options to storage sites.

Projects getting underway include the Milford Haven CO2 Project in south Wales and the 7CO2 development in Severnside near Bristol.

7CO2 director Paul Davies told Energy Voice that while the investment in UK CCS projects has been “excellent” so far, it has largely focused on the decarbonisation of industry at pipeline clusters.

“But of course the majority of businesses are not located at pipelines,” Davies said.

“So to ensure CCS becomes a UK-wide alternative, we need to develop ‘non pipeline transport’ – alternative ways of capturing CO2 and transporting it to long term geological storage.”

© Supplied by 7CO2

Davies said there around 60 energy-from-waste power plants in the UK, which emit 20 million tonnes of CO2 per year. However, he said “only a handful are located at pipeline clusters”.

“We need NPT to allow them to decarbonise,” he said.

7CO2, Acorn and Veri Energy

“And half of their emissions are biogenic CO2 from paper and food, so if this is captured and stored, it becomes ‘negative emissions’ actually reducing the amount of CO2 in the atmosphere.”

Located at Avonmouth, the 7CO2 partners are planning to build a CO2 hub at Bristol Port.

Project partners will transport captured CO2 emissions to the port, with rail among the options being considered.

The 7CO2 developers will then transport captured emissions by ship to alternative storage sites in Scotland.

These include the Acorn project at Peterhead, and Veri Energy’s CCS project at the Sullom Voe terminal on Shetland.

Davies said the regional decarbonisation plan could protect 30,000 jobs in the South West of England, alongside creating 15,000 new jobs.

Future CCUS funding models

But there is uncertainty over how the UK government will fund the next phase of CCUS projects, and which projects will be eligible for support.

The key immediate ask from government is that non pipeline transport supported emitters are allowed to bid for [Contract for Difference] support in the next bidding round,” Davies said.

“We hope the economics will then speak for themselves, as NPT CCS projects will be competitive but at the same time open up future investment in both the South West of England and Scotland.”

Other UK CCS projects in development include The Solent Cluster, which previously centred on ExxonMobil’s Fawley refinery, and the Medway Hub Camelot CCS project.

© Supplied by National Grid Grain

Medway Hub developer Synergia Energy has previously said it is developing a “merchant model” for the CCS project, located near the Isle of Grain.

This involves Synergia providing transport and storage services to high carbon dioxide emitting companies and industries, without needing government funds.

It’s a model that Acorn developer Storegga has also advocated for, with the company previously telling Energy Voice that its merchant model projects in Norway and the US are progressing much faster than those in the UK.

But while the UK’s North Sea neighbours Norway and Denmark are making rapid progress in developing CCS projects based on international shipments, the UK is lagging behind.

With North Sea operators Eni, Shell, Veri Energy and Perenco all developing UK CCS projects, some of which could rely on international CO2 shipments, progress on alignment with EU carbon abatement measures will be key for continued progress.