Industry coalition demonstrates financial case to seed clean industrial growth in Tees Valley


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6 Feb 2017

Industry coalition demonstrates financial case to seed clean industrial growth in Tees Valley

• Teesside Collective publishes viable finance proposal to support unique Industrial Carbon Capture and Storage (CCS) network.
• Finance mechanism would see Government and industry share costs to clean up energy-intensive facilities.
• Total cost of this model, including access to a transportation and storage network, is £58/tonne CO2 – making Industrial CCS as significant as offshore wind (£200/tCO2) and new nuclear power (£128/tCO2) in enabling Government to meet its carbon reduction obligations.
• Project would transform Tees Valley economy and be replicated across the country as part of the UK’s Industrial Strategy.

The Tees Valley could be the birthplace of vital clean industrial growth, attracting inward investment and job creation, under finance proposals published today by industrial cluster Teesside Collective.

The report, funded by the Department for Business, Energy and Industrial Strategy and commissioned from Pöyry Management Consulting, sets out the business case for an Industrial CCS support mechanism that would grow the UK’s industrial base while substantially reducing carbon emissions.

Paul Booth, Chair of Tees Valley Local Enterprise Partnership and board member of Tees Valley Combined Authority, said:

“There is no doubt the technologies involved in CCS are tried and tested and that Teesside has the concentration of facilities that make it the ideal place to start. The benefits in terms of long term industrial growth and emissions reduction are also clear.

“The question this report answers is whether there is a cost-effective way of making this a reality. The answer is a resounding yes. We know the demands on the public purse are great, but these are also lean industries with low margins. Working together, sharing the costs and risks opens up vast opportunity for all involved.”

Lord Oxburgh, who chaired the cross-party Parliamentary Advisory Group that published a report on CCS in 2016, said:

“Applying CCS to industry represents some of the cheapest available carbon abatement in the UK economy. The Teesside Collective proposals offer a triple win – the greening of energy-intensive industry, meeting national carbon reduction targets and local industrial rejuvenation. I strongly recommend that Government commits to helping finance the project as a cornerstone of its emerging Industrial Strategy.

EEF, the manufacturers’ organisation, stated:

“As the UK continues to develop its post-Brexit Industrial Strategy, this proposition for industry and government to work together to sustain and regenerate manufacturing hubs around the country in a carbon-constrained world is welcome.

With Industrial CCS essential to the decarbonisation of many energy-intensive manufacturing sectors, affordable ways must be found to get projects underway. This proposal offers a valuable insight as to how that might be achieved.”

The total cost for this model, including access to a transportation and storage network, is £58/tCO2, making Industrial CCS a less expensive form of carbon abatement than offshore wind (£200/tCO2) and new nuclear power (£128/tCO2). For Government to meet its carbon reduction obligations, Industrial CCS needs to be implemented alongside low carbon energy sources.

Teesside Collective’s proposed model is designed as an attractive proposition to both Government and energy-intensive industries, with a compelling business case for both parties to invest while also considering compatibility with other sectors such as power. Teesside Collective’s model proposes:

• Government – A Government-run CCS Delivery Company would provide 50% of upfront capital in the form of a grant. Government would also provide capex support and 100% opex during the 15-year lifetime of its contract with energy-intensive industries. Incremental operating costs, including payment for use of the transport and storage network, are covered by Government.

• Energy-intensive industries – Investing a portion of its 50% capex contribution up-front, energy-intensive industries would then receive a payment from Government to pay back the capital with an agreed return on investment. Some EU-ETS downside protection is included as carbon savings are shared. After the 15-year support period, energy-intensive industries gain a CCS system long-term that they can use without additional Government payments.


LINKS

Industry coalition demonstrates the financial case to seed clean industrial growth in Tees Valley
Teesside Collective Report: A business case for a UK Industrial CCS support mechanism


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