Question:

I recently received your leaflet through my letterbox, and have a question for you regarding your policy on carbon capture and storage. I am slightly confused that you would want to 'pull the plug' on this, given you label yourself as an MP who wants to face up to reality. Whilst I agree every scheme to reduce carbon emissions must be carefully considered (especially where it ultimately raises prices), and there are many schemes which are not worthwhile, (subsidising people who drive electric cars for example - where does the electricity come from?) carbon capture has shown itself to be very promising. One need only flick through the most recent New Scientist to see that not only does it provide a way of reducing carbon emissions, but also reducing the price of oil. 

http://www.newscientist.com/article/mg20627546.500-texas-oil-companies-will-soon-be-locking-away-carbon.html

Answer:

Of all the ways of burning money and wasting energy, carbon capture and storage is possibly the most effective yet devised.

The critical point about CCS is that it reduces the energy-efficiency of power plants by about one-quarter. If, like us, you are concerned about resource depletion and dependence on imports of fossil fuels as much as by the risk of anthropogenic global warming (AGW), that is highly significant. Almost every other method of responding to the risk of AGW has parallel benefits with regard to reducing our consumption of and dependence on fossil fuels. Only CCS has the effect of dramatically increasing the amount of fossil fuels that we need to burn in order to meet our energy needs.

Additionally, the potential storage capacity at safe pressures is only a small fraction of what we would need in order to deal with our emissions for any sustained period. Recent research has highlighted the over-simplification and exaggeration of earlier studies with regard to the feasible pressures and volumes. See:

http://www.guardian.co.uk/business/2010/apr/25/research-viabilty-carbon-capture-storage

The timescales and effects on investment are also a problem. It will be at least a decade before we have useful results from the small and expensive demonstration projects at which money is currently being thrown. If those trials are successful, and the (in our view) powerful technical and economic obstacles can be overcome, it will still be several years after 2020 before full-scale plants can be installed and operated. In the meantime, politicians imposed burdens on the energy industry as though the technology is just round the corner, deterring investment and risking blackouts. As with so much that our main parties do, they are counting the benefits many years forward and the costs many years behind.

As a member, in my professional capacity, of the Association of Electricity Producers, I can assure you that all the Vertically-Integrated Large Energy companies have made this point about the timescale, and government bodies responsible for energy and climate-change policy (such as the Climate Change Committee) are aware of it. Although the VILE companies will not admit it in public, they are playing along with the CCS story mostly because pretending that new stations are "CCS ready" is the only way that they can get permission under these circumstances for new plant that they know is needed desperately. They will take the relatively modest costs of "CCS readiness", in the knowledge that, when the choice is between keeping the lights on at manageable cost, or risking the lights going out or prices going through the roof, governments will take the pragmatic view that it is sensible not to force them to install CCS as currently envisaged.

Even if these obstacles were to be overcome, there is yet another problem. All parties wish to diversify our energy supplies away from fossil fuels. Yet few of the electrical alternatives can be used to produce power when it is needed. If renewables and nuclear power supply an increasing proportion of our electricity, our fossil-fired capacity will be used increasingly for "mid-merit" and "peak-lopping" production, i.e. intermittently. The capital investment required for a CCS plant will be the same whether it is running 7500 hours per year, or 2500 hours per year. But the return on the investment will be two-thirds lower. An already expensive technology will be tripled in cost.

Investors have some difficult choices to make if we are to be realistic about our future energy mix. It may be that you will say in that case we should have less nuclear and/or renewables. And you might be right. Investors should judge that on the economics. But we shouldn't pretend, as our politicians currently do, that we can just add these technologies together to deal with the one-third of our primary fuels that are consumed in the production of electricity. The complexities should be judged by experienced investors on the basis of impartial and reliable incentives, not by politicians with no experience in the energy industry picking the technologies that lobbyists most successfully hoodwink them into picking.

Nevertheless, as with any other technology, there may be circumstances in which CCS is the most economic solution, in which case we would not oppose its implementation. For instance, where it is twinned with Enhanced Oil Recovery (EOR) to increase production from our North Sea oil and gas fields, it may have economic benefits additional to the carbon sequestration. CCS should be entitled to its carbon value like any other technology, as it would be under our proposals. It is highly unlikely that the carbon price alone would be sufficient to justify the massive capital investment and to offset the significant loss of efficiency. But where the carbon value plus the EOR value justifies the investment, then let it happen. I doubt that will be often, if at all, but that's a judgment for investors to make. Unlike other parties, we vehemently oppose politicians picking winners.

What we should not do is plough billions of British and European taxpayers' money into disproportionate subsidy for a technology that is probably a red herring at best, and may well be of significant harm to our economy and environment. It is this diversion of funds, which could be used to much better effect (principally by returning them to taxpayers), that we propose to pull the plug on.

I believe this approach is consistent with our determination to face up to reality. The irrational (and failed) approach is for government to pick climate-change "winners". The rational approach is to apply a carbon-price (via our proposed carbon levy of £30/tCO2) to all fossil fuels at point of import or production, in order to internalise the social cost of carbon, and discover which options are the most efficient responses to that cost in each circumstance. That may or may not include CCS. Probably not.