Energy Act brings incentives for carbon storage

Energy Act 2010 CCS Levy funds carbon capture and storage via Ofgem from electricity bills, advancing decarbonization, demonstration projects at coal-fired plants, and market oversight to accelerate UK CCS deployment.

Energy suppliers in the United Kingdom can look forward to growing financial support for carbon capture and storage CCS projects, following the acceptance of the governments wideranging Energy Bill.

The bill, which is now the Energy Act 2010, has received Royal Assent and was originally presented to Parliament last November. A key part of the Energy Act is the governments plan to fund up to four commercialscale CCS projects by introducing a levy on consumer electricity bills that will be used to accelerate the development and rollout of CCS projects.

The levy will be applied to electricity bills and will be paid to energy regulator Ofgem by the suppliers. The amount paid will be based on the suppliers share of the electricity market. The Department of Energy & Climate Change DECC believes the incentive will guarantee the UK a leading position in the development of CCS solutions and a clean electricity standard approach for power.

However the government has come under fire recently by its own Energy and Climate Change Committee for being too slow to get CCS projects off the ground. The committees report Low Carbon Technologies in a Green Economy stated: Government has done well to develop a regulatory system for carbon capture and storage CCS, but slow progress on demonstration projects has put the UK behind international competitors such as the U.S. and Canada today. Faster deployment of CCS technology is essential if the UK is to exploit the huge export potential within any future global CCS market.

The government finally started the next stage of funding in midMarch by awarding undisclosed sums to German energy giant E.ON AG and ScottishPower to move their CCS projects at the Kingsnorth and Longannet coalfired power plants to the next phase.

A week later, the newest CCS contender, Scottish and Southern Energy plc, secured £6.3 million US $9.7 million in funding from the government to advance its carboncapture pilot at the Ferrybridge coalfired power station in West Yorkshire. At 5 megawatts, the facility is the UKs largest proposed CCS pilot, as new emission rules in Alberta highlight global momentum.

As well as clearing the way for a CCS incentive, the new Energy Act 2010 provides support for the fuelpoor and ensures that the government must report regularly on the decarbonization of UK electricity and CCS progress. The act also bestows Ofgem with more power to tackle market exploitation as tough UK energy regulation decisions loom by increasing the window of time it can prosecute energy companies for breaches of their licences from one year to five years.

The new Energy Act 2010, as Britain's energy security bill moves toward law, has been welcomed by numerous industry groups.

Historically, the UKs energy regulatory model has failed to reflect the changing demands on the sector, in particular the need to move to a decarbonized energy supply, said Tom Foulkes, director general of the Institution of Civil Engineers ICE. Ofgems revised remit will hopefully give utility owners new confidence to invest in renewable and clean energy technologies, as will the new financial incentives such as CO2 credits for the development of carbon capture and storage. However, we really need to look beyond the CCS demonstrations projects. While reliance on carbon fuels is still a global reality, upscaling CCS technology for commercial deployment could be a very lucrative export opportunity for the UK economy.

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