The government will make final investment decisions in 2015 on the construction of the two carbon capture and storage projects announced as winners of its £1bn competition in the Budget.
The Peterhead Project in Aberdeenshire and the White Rose Project in Yorkshire were named as the two preferred bidders in the UK’s CCS Commercialisation Programme Competition.
Shell and SSE are the developers for the Peterhead Project, which involves capturing around 90 per cent of the carbon dioxide from part of the existing gas-fired power station at Peterhead before transporting and storing it in a depleted gas field beneath the North Sea.
Alstom, BOC, Drax Power and National Grid are developers for the White Rose Project, which involves capturing 90 per cent of the carbon dioxide from a new super-efficient coal-fired power station at the Drax site in North Yorkshire, before transporting and storing it in a saline aquifer beneath the southern North Sea.
However, a final investment decision will not be taken until early 2015, shortly before the next general election, on whether to proceed with the schemes.
Both will now work up front-end engineering design studies, which are expected to take up to 18 months to conclude.
PwC energy and clean tech director Ronan O’Regan said that while the announcement represented a “further step” on the road to a UK CCS industry, “the reality is that these projects will not be operational before the end of this decade and will have a limited impact on a looming capacity crunch”.
He added: “The government should be looking to accelerate the best projects, regardless of whether they are in the competitive process, to fast-track the CCS industry in order to deliver the cost reduction required to make CCS a viable long-term low-carbon generation option.”
“Today’s announcement moves us a significant step closer to a carbon capture and storage industry”
Ed Davey, energy secretary
However, energy secretary Ed Davey said: “These two are major infrastructure projects potentially worth several billion pounds and could support thousands of construction jobs over the next few years.
“We had four excellent bids and I’d like to thank each one of them for their hard work. We will now be working swiftly to progress our preferred two, while making sure we continue to provide the best possible value to taxpayers.”
The two preferred bidders were selected following negotiations with four projects, shortlisted from an original eight in October last year.
The government had relaunched the process in April 2012 after it had collapsed the previous October due to the costs of advancing the technology for the last remaining contender, Scottish Power, at Longannet in Fife.
CBI director general John Cridland said the commitment to take forward the projects was a “welcome step towards achieving a balanced and secure energy mix”.
The government will now undertake discussions with the two preferred bidders to agree terms by the summer for Front End Engineering Design studies, which will last approximately 18 months. A final investment decision will be taken in early 2015 on the construction of up to two projects.
Captain Clean Energy and Teesside Low Carbon, the remaining two bidders with whom the government has been in discussion, will be appointed as reserve projects.
These bids may be called to participate in the next stage of the competition if one or both of the preferred bidders fails to enter into a FEED Contract by the summer.
- By summer 2013: Signature of FEED contracts with two projects;
- By early 2015: Final investment decisions from the DECC taken on up to two projects; construction commences;
- Between 2016-20: Projects become operational.