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Don’t rely too much on unproven and costly carbon capture, think tank warns Government

15 March 2024

Amidst growing concerns over the UK's carbon capture strategy, a new report highlights the controversial Drax power plant as emblematic of the risks associated with overreliance on CCUS technology.

(Image: Shutterstock)
(Image: Shutterstock)

The UK Government’s CCUS strategy is based on optimistic techno-economic assumptions that are now outdated and unrealistic, warns a report from the financial think tank Carbon Tracker released on 14 March. 

This strategy risks locking consumers into a high-cost, fossil-based future, despite cleaner and cheaper alternatives being available.

In December 2023, the UK outlined an ambitious CCUS strategy, aiming to capture 20-30 million tonnes of C02 per annum by 2030, backed by £20 billion in taxpayer funding. This strategy was based on the recommendations of the Climate Change Committee, published in The Sixth Carbon Budget in December 2020.

However, Carbon Tracker has found that, since then, cost estimates for deploying CCUS have more than doubled, while the need for carbon capture could be much smaller. 

For example, it estimated that the need for gas plants with CCUS could be one-third of earlier estimates due to the growth of renewables, battery storage and flexible technologies.

The think tank found that the UK is targeting applications where CCUS could lock consumers into a high-cost and fossil-based future, despite the existence of cleaner and cheaper alternatives.

For example, it argued that plans to use CCUS to decarbonise steel production and gas-fired power plants should be abandoned, with both applications likely to be out-competed by cleaner alternatives. 

Tata Steel and British Steel are already moving away from plans to install CCUS at their UK facilities in favour of a move towards Electric Arc Furnaces, while hydrogen turbines are likely to be cheaper sources of flexible power generation than gas-CCS plants by 2030.

Similarly, it warned that the government’s plans to use CCUS to decarbonise biomass-based power generation face major risks of technical challenges, stranded assets and cost premiums. 

The UK’s BECCS strategy is heavily exposed to one single, very large and costly project – converting the giant Drax power station in North Yorkshire. Carbon Tracker cautioned that BECCS is unproven at this scale: the largest current project (a 50MW biomass power plant in Japan) is dwarfed by the 2,600MW Drax plant.

The Drax conversion – the largest carbon capture project in the UK pipeline – would require a complex subsidy scheme together with a government-provided bridging mechanism that could lock taxpayers’ money into a long (15-25 years) and costly (£26-43 billion) contract, while the resulting electricity would be up to three times more expensive for consumers than offshore wind power.

Carbon Tracker Associate Analyst and report author Lorenzo Sani said “CCUS technology has proven to be much more complex and expensive than thought, while renewables cost reductions have dramatically changed the landscape. 

“While the government is playing an important role in de-risking new projects it urgently needs to revisit its targets and focus its resources on high-value applications such as cement and hydrogen.”

The research also highlighted the importance of fixing the UK’s carbon market in order to make the CCUS sector profitable.

It found that most applications require a stable carbon price of at least £100 per ton to compete with unabated technologies. 

By contrast, the UK Emissions Trading Scheme has experienced severe volatility due to low liquidity and market saturation since decoupling from the European market and recently fell to a record low of £31 per ton in February.

“Fixing the UK’s carbon market – either by establishing a rising price floor or, preferably, linking it back to the EU scheme – is the single most important action needed to deliver the government’s vision of a self-sustaining and competitive CCUS sector,” Sani said.

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