UK Budget supports development of CCS

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Following the launch of a competition for a carbon capture and storage (CCS) demonstration project in November 2007 and proposals for an offshore regulatory regime for CCS in the Energy Bill published last January, the UK Government announced 2 further measures yesterday as part of the Government’s 2008 Budget Statement. These measures will be of primary interest to large electricity producers planning to build new coal-fired power stations but are also likely to affect companies interested in the construction of component parts for CCS projects.

CCS retrofitting

The key measure set out in the 2008 Budget is the Government’s announcement that it would shortly be launching a consultation on CCS regulations and, more particularly, on whether all new coal-fired power stations should be required to be in a position to retrofit CCS technology once this technology is proven on a commercial scale, which is not expected to happen before 2014. This consultation is also expected to look into the detail of what the retrofitting of CCS technology would consist of.

This announcement follows the EU Commission’s recent proposals to introduce a regulatory framework for CCS both onshore and offshore. In particular, the EU Commission’s proposed directive suggests amending the Large Combustion Plant Directive to require all new combustion plants of 300 megawatts or more to have suitable space on the installation site for the installation of CCS retrofitting equipment and to assess the feasibility of installing such retrofitting equipment. It is likely that the EU Commission will also be looking in due course into the detail of what this retrofitting requirement should entail and UK retrofitting measures will therefore eventually need to be in line with these EU guidelines.

Development of CCS component parts

The Government also announced that it would shortly make a new call for expressions of interest under the Environmental Transformation Fund (ETF) to support the development of component parts of CCS. The ETF is a fund that has been set up to allocate over £400 million to ensure that technologies that are in the later stage of development can be brought to the market and demonstrated.

To read our Law-Now on the UK’s proposed offshore regulatory framework for CCS, please click here.

For further information on the latest announcements and regulatory issues affecting CCS projects, please contact us.