Energy Transition Commentary:

       The July 11 Spending Review confirmed the UK Government’s support for the Track 2 CCUS projects but greater clarity is needed on precise funding and timescales, and many challenges lie ahead.

       The announcement in the Chancellor’s Spending Review confirming the UK Government’s support and provision of development support for the Track 2 CCUS low-carbon clusters (Acorn located at St Fergus near Peterhead, Aberdeenshire, and Viking based on Humberside) is encouraging news for maintaining the UK’s momentum in decarbonising industrial processes.  These are part of a wave of such clusters in the pipeline that are an essential part of the complex jigsaw of measures required to ensure that the UK meets the carbon budgets (CBs) that have been set by the Climate Change Committee as essential milestones on the journey to achieving net-zero carbon emissions by 2050.  It is disappointing that the statement gave no detail of how much will be committed nor of timescales for Final Investment Decision (FID), save that this would be ‘later in this Parliament subject to readiness and affordability’. Papers issued later committed £9.4bn for CCUS ‘within the Spending Review period’ and Ed Miliband has since announced that £200m will be provided to the Acorn project to enable the critical work needed to reach FID. We welcome the Government’s confirmed commitment to the Track 2 projects but call on them to make an early announcement to clarify the funding uncertainties and enable construction for both projects to start as soon as possible.

 

This week’s announcement is an essential but not sufficient step in ensuring that we establish a CCUS infrastructure capable of contributing about 10% of the greenhouse gas emissions reductions required to meet our climate change mitigation targets.  In this commentary we summarise the current status of UK CCUS deployment and set out the challenges that lie ahead, where continued government financial and policy support is key.

 

  1. CCUS Deployment
    1. Carbon Capture and Storage (CCS) is a proven, widely globally-implemented technology which is essential for the UK to meet its future carbon budgets and reach net-zero emissions by 2050 (as evidenced in may CCC, IEA, IPCC reports – ‘essential, not an option’). Carbon Capture and Utilisation (CCU) is an emerging technology which, instead of storing it underground, uses a small percentage of captured CO2 as a feedstock to manufacture chemicals and fuels (such as sustainable aviation fuels, SAFs).  These two different technologies – one to mitigate climate change, the other to re-use a waste product, CO2, as part of a circular economy – are often referred together as CCUS.
    2. The UK government accepts that CCUS is essential and has made it a key plank of UK climate change mitigation policy, in October 2024 committing £21.7bn over the next 25 years, followed by this week’s announcement of the release of £9.4bn of this during the course of this Parliament.
    3. Technically it is proven (TRL9) at large scale (~1Mt or more per annum) since 1996 (Sleipner, Norway), with 50 facilities in operation globally in 2024, 44 under construction and 534 in development, with a total CO2 storage capacity of 416 Mt pa; growth rate 32% pa since 2017.
    4. UK has two Track 1 low-carbon industrial clusters with construction approved: East Coast Cluster, contracts signed 10 Dec 2024, and HyNet (North West) signed 24 Apr 2025, with start-up expected in 2028.
    5. The two Track 2 clusters - Acorn (Grangemouth), Viking (Humberside) – now have Government support confirmed with some hope that FID will follow closely behind.
    6. The UK can claim to be one of the world’s leaders on CCS low-carbon clusters, with  the Alberta Carbon Trunk Line (an EOR project) and Norway’s Northern Lights project the only other active/post FID cluster projects worldwide. [CCUS low-carbon clusters are industrial sites where manufacturing and energy production processes are co-located as part of an efficient local CO2 emissions capture and transport network, connected by a single pipeline to relatively close offshore storage locations.]
    7. The UK, however, does lag significantly behind several countries in the number of deployed large-scale commercial projects and the amount of CO2 actually stored: Norway, Denmark, USA, Australia, China.
    8. Major cost decreases over the next decade will come from building multiple large-scale facilities, learning while doing and economies of scale.
    9. Improved efficiency, lower energy requirement capture processes and process intensification will further reduce the costs of financing in the 2030s and beyond.

 

  1. Importance of CCUS
    1. Where processes produce CO2 or where replacement of fossil fuels is difficult and abated fossil energy and processes provide a least cost solution, CCS does prevent release of CO2 into the atmosphere (up to ~98%); it is not a competitor to renewable energy and fuels but complements them as a carbon mitigation mechanism, alongside energy efficiency.
    2. CCUS is a broad, enabling platform technology for decarbonising multiple sectors:
      1. Difficult to decarbonise energy-intensive industries such as cement, steel, chemicals; also energy from waste.
      2. Production of ‘blue’ hydrogen from natural gas, NG+CCS, to enable the UK target of 10GW (or 0.5Mt) of H2 pa until (if ever) ‘green’  H2 can be produced at the high volumes and lower cost required in the 2030s and beyond; even in 2050 (~5MT pa total) blue:green will be 25:75. [H2 for industry, low-C dispatchable power].
      3. Providing essential back-up low-C dispatchable power (either H2 or NG+CCS)
      4. Providing CO2 and H2 for e-fuels (SAFs etc) and ammonia.
      5. Enabling carbon negative technologies, BECCS and DACCS (carbon dioxide removal, CDR), increasingly required beyond 2035 to compensate for e.g. air transport and agriculture continuing emissions.
    3. CCUS is a clear driver for regional economic development: creation of tens of thousands of jobs in a growing CCUS industry and its supply chains, and preservation/extension of existing jobs in difficult-to-decarbonise sectors as part of regeneration of UK manufacturing industry, especially in regions where re-investment and jobs are needed.
    4. Integrated assessment models show that carbon mitigation to achieve net-zero by 2050 costs by up to 250%, and on average 138%, more than if CCUS were not deployed. Most scenarios could not achieve the 2C target in the absence of CCUS and to achieve 1.5C CCUS is indispensable.  
    5. Fossil fuels are used not only for energy and fuels but also as chemical feedstocks. Changing to renewable bio-feedstocks to manufacture all the goods and materials we currently use will take many decades. CCUS is therefore a key element of enabling a ‘just energy transition’ – decarbonisation in a way that is affordable and maintains/improves employment and the quality of life, for which in the short/medium term goods and materials made from fossil fuels will be essential. The IPCC see that natural gas use globally will increase over the next decade or so as it displaces coal elsewhere and then holds steady over the century, whilst oil production will likely remain as high as  ~30 Mbbl per day even in 2100.  Yet even with these levels of fossil fuels, CCUS and CDR can enable net-zero to be achieved by 2050.

 

  1. The risks of inaction or slow implementation of CCUS
    1. Decarbonisation of industrial processes and provision of low-carbon dispatchable power (for when renewable power generation is low or insufficient) would be (a) much more expensive and (b) take several more decades to achieve (requiring more nuclear or stored renewable energy).
    2. Future UK carbon budgets will not be met.
    3. Even with Track 1 and 2 clusters, the scale of CCUS (19 Mt CO2 pa) is not large enough to meet targets (50 Mt pa by 2035 to achieve CB6 2033-37), so acceleration of CCUS implementation is urgently needed.
    4. Carbon mitigation costs will be 30-250% higher (mean 138%)
    5. Not having core CCUS infrastructure in place will preclude using essential carbon-negative technologies to meet Carbo Budgets in late 2030s/2040s (BECCS, DACCS), with a high risk of not achieving 2050 net-zero.
    6. CCUS is being shown to be financeable given investible business models. Without a supportive policy, fiscal and regulatory environment to encourage CCUS in the UK, investors and companies will grow the CCUS industry elsewhere.
    7. There is high potential for selling North Sea storage CO2 space (UKCS 78Gt CO2 storage potential) to countries without suitable stores as part of the international reach of a growing CCUS industry. However, cross-border agreements and legislation to enable this are urgently needed and other countries are ahead of the game: eg Norway (Northern Lights), Denmark (Greensands for EU, 23 partners), SE Asia.
    8. UK risks losing its status as a world leader in tackling climate change, climate technology innovation and as a hub for global investment for the energy transition.
    9. Unless the UK rapidly establishes a strong CCUS capability, the growth of CCUS and low-carbon clusters elsewhere could lead to further offshoring of energy-intensive foundation industries (cement, chemicals, ceramics, glass, metals and paper), as almost happened with our primary steel production, leading to large job losses and ultimately greater dependency on imports of resources.

 

  1. UK potential leadership
    1. Research
      1. UK universities have world-leading research in more efficient, lower cost capture methods, optimising safe and secure storage and effective long-term monitoring, measurement and verification (MMV), with large national and international funding (Imperial, Edinburgh, Sheffield, Heriot Watt, Durham, Leeds…)
      2. This is stimulated by significant government funding (Industrial Carbon Challenge Fund, Net-Zero Hydrogen Fund) as well as large industrial investment…international companies recognise UK research excellence.
      3. UK is world-leading on developing and applying advanced systems engineering approaches required to optimise the CCUS system and integrate it into low-carbon cluster systems and in turn into the UK energy transition system…a system of systems. This is needed for optimisation of costs, energy security, decarbonisation, economic benefits…and avoiding unintended consequences.

 

  1. Infrastructure
    1. Leverage of UK offshore expertise and infrastructure: repurposed for CCUS, extend life and delay decommissioning costs for decades.
    2. North Sea storage capacity for an international storage business.
    3. World-leading process engineering contractors to supply/export innovative CCUS technology.
    4. The innovative low-carbon cluster model, sharing costs and risks, and the clusters’ world-leading process engineering: eg Net-Zero Teeside building the world’s largest NG+CCS power station
    5. UK taking a lead on non-pipeline transport (NPT), essential for an international, long-distance carbon storage business.

 

  1. Policy
    1. Innovative sector-specific business models provide the basis for investible CCUS businesses without EOR income generation; lowering risk for both government and private investment with an equitable sharing of business risks, especially cross-project risks:
      1. Transport and Storage Regulatory Investment Model (TRI)
      2. Dispatchable Power Agreement for power (CfD)
      3. Industrial carbon capture contracts (ICC)
      4. Low carbon hydrogen agreement (CfD variant)

These models are now doing for CCUS what the government did to incentivise wind energy investment over the past 15 years or so. Similar approaches have been adopted by other countries.

  1. The UK has a robust regulatory regime to ensure the CCUS process is safe and secure: Ofgem, Low Carbon Contracts Office, North Sea Transition Authority, Environment Agency and others.
  2. Lowering regulatory and policy barriers to facilitate CCUS investment, extending incentives through the UK Emissions Trading System and installing cross-border CO2 transport agreements are areas where further initiative is needed.
  1. The next big challenges

Given the progress the UK has made in developing investible CCUS business models, leading to the creation of low-carbon CCS industrial clusters funded by industry aided by large initial government investment, the next big challenges going forward are:

  • to complete construction of the four initial CCUS industrial clusters successfully and have at least 20 Mt CO2 pa being stored offshore UK by 2030;
  • to lower the costs through building multiple large-scale plants, learning while doing and then introducing more efficient CO2 capture technologies;
  • to develop credible plans to remove the costs from the public balance sheet and make a growing UK CCUS industry self-sustaining;
  • to continue making the political and economic case for a decarbonised economy achieved through a just energy transition.

 

Professor Martin Blunt, Professor of Flow in Porous Media

Professor Paul Fennell, Professor of Clean Energy

Professor Sam Krevor, Professor of Subsurface Carbon Storage

Professor Niall Mac Dowell, Professor of Energy Systems Engineering

Professor Geoffrey Maitland, Professor of Energy Engineering

Professor Ronny Pini, Professor of Multiphase Systems

Professor Nilay Shah, Professor of Process Systems Engineering

Professor Martin Trusler, Professor of Thermophysics

Imperial College London, Transition to Net Zero Group