Carbon Capture and Storage (CSS) demonstration projects

On 8 July 2010 DECC announced the start of a market sounding process for the UK’s CCS Demonstration Programme. This was not a formal consultation, but was intended to help the Department to explore workable options for the CCS demonstration project selection and funding processes and learn about projects being considered by industry.

The Market Sounding Information for Industry document contains information for interested parties to inform their feedback in the market sounding process.

Section two provides the background to the programme; section three discusses a number of key elements for projects, on which we sought views, and section four explains some of the background to the arrangements for providing financial support including options for risk sharing.

The market sounding period ran from 08 July to 15 September 2010.

Tel: 0300 060 4000 Email: occs@decc.gsi.gov.uk Post: Liz Kitchen

OCCS Department of Energy and Climate Change

Area 4B, 3 Whitehall Place

London

SW1A 2AW

Respondents to the market sounding exercise shared details of a number of projects under consideration and provided very informative feedback on the scope of the programme, the selection process, regulatory and risk issues, and options for public funding provision.

The feedback covered a wide range of issues, including:

• financing risks and the economic climate in the power industry
• regulatory uncertainty, including the possible introduction of an Emissions Performance Standard and the ongoing Energy Market Review
• potential public funding arrangements
• the Committee on Climate Change’s recommendation that we extend the programme to include at least one demonstration on a gas-fired plant
• cross-border transport and storage of CO2
• imposing size restrictions on the eligibility of demonstration proposals
• the alternatives of a competitive unfunded FEED process versus an ‘open-book’ approach in which developers would provide government with total transparency on costs and negotiations with suppliers
• storage liabilities and the EU’s draft guidance document on how these might be managed
• insurance against the risk of leakage for the carbon dioxide storage site

DECC is reviewing this feedback and will be using it to inform the design of the demonstration programme’s objectives and deliverables, and the selection process and criteria against which proposals will be assessed. We aim to set out further details by the end of the year.

The respondents DECC met with over the course of the exercise are listed below:

• 2Co, ADAS, Air Liquide, Alstom, Alstom-Drax, Ayrshire Power / Peel Energy, B9 Coal, BP, C.GEN, CO2 Deepstore, Doosan Babcock, ESBI Investments, National Grid, One North East, Powerfuel Power, Progressive Energy Ltd, Rio Tinto Alcan, RWE Npower, Scottish Power CCS Consortium, SEGEC, SSE, Stanbridge Capital, Statoil

Any queries on the market sounding exercise should be directed to Liz Kitchen at occs@decc.gsi.gov.uk

Many respondents indicated they were happy for DECC to share their written responses publically. These responses can be found below:

Responses to the market sounding for CCS Demonstration Programme Projects 2-4

CCS Market Sounding: Information for Industry

CCS demonstration project: Market Sounding form