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What the UK could learn from Alberta
This week the Government of the United Kingdom announced the revival and relaunch of a £1 billion competition for the first carbon capture and storage (CCS) demonstration projects. This is a positive step for the country’s CCS industry and global deployment of the technology as a whole. However, with the stumbles in the previous bid process and the withdrawal of Scottish Power’s Longannet project, all eyes are on the UK Government. And it is for this reason that the UK can lean on lessons learnt in Alberta, Canada.
In 2008, the Government of Alberta launched a similar process for divvying up CA$2 billion in funds to support the development of large-scale, integrated CCS projects in the province. This funding decision was driven by recommendations from the government-established CCS Development Council that completed a deep-dive of CCS potential in the province. The multi-stakeholder CCS Development Council made key recommendations about how to deploy the technology; one of which being that government funding for demonstration projects is crucial to success.
Alberta Energy launched a call for proposals from industry and received over 54 ‘Expressions of Interest’, proving that there is a strong appetite to undertake CCS for fossil fuel development. The Government then evaluated the proposals and shortlisted 10 projects to submit full project proposals. After in-depth evaluation, four fully-integrated CCS projects were selected in a variety of industries (project information is available on ICO2N’s website). The entire RFP process was transparent, and encouraged broad interest and engagement with stakeholders. The selected projects are now at various stages of development and all are set to be operational in the 2015 timeframe.
So, what lessons can be learnt from the success of the process?
1) A Strong Funding Structure Matters
Industry needs certainty in what it can expect in terms of funding and support, and government needs assurance that their dollars will be well spent. Creating the right balance is difficult. By putting checks and balances in place it is possible to ensure both objectives are met.
The Alberta Government aimed to ensure that projects received adequate funding while simultaneously putting controls in place to ensure projects actually reached operation. Alberta partnered with the Canadian Federal Government which contributed an additional CA$526 million into the projects. The Government also put payment milestones into effect so that projects did not receive all the funding up front; instead it is on a 40-20-40 split basis.
- First 40 per cent – awarded during construction and backed by a security so if operation isn't achieved the money is reimbursable to the province.
- Second 20 per cent – a lump sum payment on achievement of commercial operation. The Government included a test to limit the total funding at this point to no more than 75 per cent of total project costs to date
- Final 40 per cent – paid out in the operation phase up to 2025 based on actual tonnes stored. It is a pre-determined dollar per tonne payment based on the initial project plan and projections. This measure was put in place to encourage companies to begin operations as close to 2015 as possible (i.e. more years in operation pre-2025 will result in more tonnes stored and more funding money from the Government).
The final check that the Government established was an absolute end date. And if any projects aren’t operational by 31 December 2017 then all funding must be refunded to the Government.
2) Big volumes equal big success
Albertans are now viewed as a world-leader in CCS technology and this is not only because of the number of projects that are going ahead, but also their volumes. No project that was selected is under 1Mt of CO2 per year. This scale is necessary to prove the technology and further improve its performance.
3) Diversity and longevity are key
In choosing projects, the Government was careful to test out various technologies in the diverse applications that are applicable to Alberta’s industrial future. From straight coal-fired electricity, to oil sands applications, to enhanced oil recovery, the Government considered all of its potential CCS resources.
It is exciting to see other jurisdictions moving full-steam ahead on CCS, and by remembering a few simple principles it should be possible to ensure success of the technology well into the future.
Topics:Policy legal and regulation
This post expresses the views of this author and not necessarily of their organisation or the Global CCS Institute.