16:30 The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Lee Rowley)

I am grateful for the opportunity to contribute today. In the sixth carbon budget, the Climate Change Committee emphasised the crucial role that carbon capture and storage will play in reducing emissions from industrial processes, combustion, electricity generation and hydrogen production. The energy White Paper 2020 set out the Government’s view on how to achieve a low-cost, low-carbon electricity system. Although we cannot predict exactly what the generating mix will look like in 2035, we have made a commitment to decarbonise the UK’s electricity system by then, subject to security of supply, and we are confident that renewables will play a key role. However, in order to decarbonise while maintaining security of supply and ensuring that costs are kept low, we will need to balance renewable variability against continuing demand. To do that, we will need system flexibility, energy storage and non-weather-dependent, low-carbon power generation.

In the subsequent net zero strategy, the Government committed to use consumer subsidies to support the construction of at least one power CCS plant, which is to be operational by the mid-2020s. In the round, these strategies illustrate the critical importance of carbon capture and storage technologies, and we have developed specific business models to bring forward carbon capture, utilisation and storage projects. Existing schemes are not considered fit for purpose, because such projects require specific support, given the need for co-ordination across the sector, with supporting infrastructure yet to be built. To enable this, we have developed the dispatchable power agreement. This is a carbon capture storage subsidy for gas-fired projects connected to a full carbon capture and storage system, and it is intended to provide low-carbon, flexible power generation.

The dispatchable power agreement contract is a bespoke contract based on the standard terms of the contracts for difference used previously in allocation rounds, but with specific amendments to ensure suitability for power carbon capture and storage. The dispatchable power agreement will be a key tool used to ensure low-carbon electricity generation by bringing forward investment in power carbon capture storage plants, and to incentivise such facilities to operate in a manner that benefits the UK energy market. The DPA incentivises investment in order to bring forward projects that are ready to build low-carbon generation capacity. The availability payment incentivises power CCUS projects to maintain a high level of capture rate throughout the life of a contract. It is commonly referred to in the business model and is intended to implement our commitment.

Finally, the statutory instrument amends the eligible generator regulations. Currently, an eligible generator is defined as connected to a complete CCS system, and a complete CCS system is defined as a system of plant and facilities for capturing some or all the carbon dioxide, or any substance consisting primarily of carbon dioxide, produced by or in connection with the generation of electricity by a generating station, and transporting the carbon dioxide or the substance captured and disposing of it by way of permanent storage. The proposed amendment was to add the words into limb (b) after transporting—

To confirm that this statutory instrument is the most appropriate way to approach this area, in accordance with the Energy Act 2013, a consultation was carried out last year between July and September, and a response was given two months ago on gov.uk. We received 16 responses to the consultation; some directly involved in power CCS, some trade associations, some non-governmental organisations and other interested parties. The responses were largely positive and in favour of the proposed changes. Respondents requested some clarification, which have been provided in the official published Government response.

Let me conclude in order to give Members the opportunity to comment. The draft regulations facilitate the Government’s CCUS programme generally, but the decision to award support is separate. Decisions about the specific support that will come through those remain subject to the outcome of a separate process and value for money and affordability considerations. The measures introduced by the SI are aligned with the Government’s carbon budget and net zero targets, as they help to enable power carbon capture and storage projects. I commend the draft regulations to the Committee.

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16:40 Dr Alan Whitehead (Southampton, Test) (Lab)

I cannot see a great deal that is terribly controversial in the draft regulations, so we will not seek to divide the Committee. Indeed, we substantially support the proposals. Clarifying the eligible generator regulations in terms of CCS systems of concern is an important change being made today in this SI. It is important because when we talk about CCS as a whole system, we tend to talk about the carbon being captured, transported and sequestered, and we always talk about that in terms of pipelines and how CCS is going to work.

Not only are we some way away from establishing decent pipelines for CCS transportation, but—particularly as far as energy-intensive industries are concerned—they are not necessarily going to where the pipelines might be. The question is how we transport the carbon to the places where the pipelines are, or we might want to barge entire shipments of CCS right around the country. Indeed, the Minister will know that the Acorn Project in Scotland is currently developing barge receipt facilities so that the CCS that is transported by barging methods can then be transferred to its place of sequestration efficiently.

The regulations are important. They clarify what is in and what is out of the process. I want to ask the Minister about processes that will inevitably come into view as far as the CCS process is concerned, but have other things added in front other than the CCS. I particularly refer to the so-called BECCS, the biomass energy with carbon capture and storage, which, again as the Minister will know, is recommended by the Committee on Climate Change. Also, the Government are keen on BECCS in the long term as it combines biomass power with a CCS capture arrangement, so that the whole arrangement is negative as far as energy is concerned.

Last year’s similarly named regulations, the Contracts for Difference (Miscellaneous Amendments) Regulations 2021, brought to an end the establishment of BECCS as a conversion arrangement from coal. They stated that biomass energy involving carbon capture and storage would be treated separately. The explanatory notes indicated that they would not be subject to today’s regulations because they were being treated separately, and they do not appear to have come into these regulations. We could, for example, have a conversion activity from a coal plant to biomass that included CCS in its arrangement from the start of the conversion process. Indeed, it is envisaged that conversion schemes can be included in the eligible generator regulations—that is, they are add-ons to existing activities, as opposed to schemes starting from new—which the Minister mentioned in his opening comments.

It is not clear whether a biomass scheme that had CCS from the start but was not a new scheme in its own right would be within or outside these regulations. I would be interested to find out whether the Minister has considered that knock-on from last year’s regulations. Could he clarify the situation? Are such schemes considered outside or within the eligible generators for the purposes of these particular regulations?

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16:57 Lee Rowley

I completely understand and acknowledge the points made by the hon. Member for Kilmarnock and Loudoun, but “dribs and drabs” is perhaps a little unfair. We are trying, in a careful, cautious and incremental way, to address the specific issues that we need to address to ensure that our statute book works for some of the changes that we are making, with a very ambitious and broad-based approach to transforming and decarbonising the energy system over the long term.

The hon. Member for Southampton, Test asked a number of detailed questions about biomass. My understanding is that BECCS could be eligible, provided that it is connected to the complete CCS systems that I talked about in my opening speech and that are mentioned in the broader contextual documentation that is available. However, on the broader questions about biomass, I again defer to the strategy, which will be published in due course.

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