Making a success of Carbon Capture and Usage, and Storage (CCUS) was first tried in the UK between 2005 and 2007 by the previous Labour Government who wanted us to “lead the world” in this “exciting new technology”.
The BP Peterhead demonstration project would extract hydrogen for fuel from natural gas and pump the waste CO2 into the soon to be decommissioned Miller oil field, extending its life with a process known as enhanced oil recovery. The project was always about “half a billion in subsidies” away from being viable, and was eventually buried, along with the Miller field when the Treasury said no. A highlight of Gordon Brown’s record.
Skip ahead 15 years through several competitions, task forces, £100 million bungs, Alistair Darling, Ed Davey, and Boris Johnson and the industry is far from starting, let alone leading the world. In consequence we have Ed Miliband relaunching a boosted Tory promise of £21.7 billion over 25 years to generate up to 50,000 CCUS jobs by the 2030s, starting with 4,000 in Teesside and the Northwest / North Wales. He again hopes to “lead the world” in this “exciting new technology”.
Cruel cynics might suggest money spent in 2040-50 is unlikely to generate any jobs in the 2030s, or that a £400,000 subsidy for each job is not the best use of taxpayer money. Or indeed that this administration should be more cautious about schemes that require a cosy relationship between Ministers and a handful of corporations to the exclusion of the public. £21.7 billion is a lot of Taylor Swift concerts.
However, the flaws are more fundamental. First, near twenty years of failure, and a quarter century demand for ongoing state support should be more than a sufficient hint for the Government to think this is not an industry that will succeed on its own terms.
Second, it is patently obvious that the nation most likely to deliver CCUS at scale, if at all, is China. They have the coal plants, the gas plants, and crucially the heavy industry clusters that we and the rest of the West have been offshoring to them throughout this century.
Third, carbon capture makes industrial processes less efficient. Estimates of a 15-40 per cent reduction show that all carbon capture will do is render that industry uncompetitive. You can offset some of that disadvantage for the home market with carbon border tariffs, but those are further costs on your citizens and industry, damaging investment.
They don’t yield global export champions, but Potemkin village industries. Ultimately we can’t grow the economy by making everything more expensive, which is the problem with net zero.
Fourth, clustering may help, although never in history has any real industry needed to be told by the Government where to stick a factory. However, much of British industry and power generation isn’t in a cluster or remotely close.
The relocation costs for many will render closure more attractive than moving, while the cost of extending transit pipelines is likely prohibitive. The initial impact of this industrial strategy then will be the ongoing destruction of British industry.
Fifth, the ongoing decision to collocate CCS with hydrogen projects appeals to the beautiful fantasy of an imminent hydrogen economy, and less romantically the commercial interests of some investors. But it is a fantasy.
For hydrogen to have a serious future in a net zero economy it must come from the surplus of renewable or nuclear energy generation, not fossil fuels. Even then there are challenges that speak to niche and expensive uses such as smoothing the output of intermittent wind farms. We will not see this at scale until the late 2040s, and likely later, if at all.
There is a sensible approach to CCS in the UK, and it’s the same as the sensible approach to all matters net zero. Set a carbon price and let investors decide how to invest. Don’t pick winners, or more commonly losers. British taxpayers shouldn’t foot the bill for these useless vanity projects.