UK energy policy under fire as Drax quits carbon-capture project?

Says the FT; and so did R4 this morning (update: and the Beeb now), which is why I noticed.

A £1bn UK climate-change plan has been thrown into turmoil after the Drax power company said it was pulling out because government green policy reversals made it too risky to proceed. Drax’s decision to abandon five years of planning for a carbon capture and storage system next to its huge North Yorkshire power station is the most visible sign yet of how green energy subsidy cutbacks are jolting investors. Several “critical reversals” in government support for renewable energy had made “a severe impact on our profitability”, said Peter Emery, the Drax board member chairing the group developing the White Rose carbon capture project… White Rose is one of more than a dozen carbon capture projects the UK has tried in vain to get under way in the past eight years. Such systems theoretically offer a way for fossil fuel companies to keep burning coal or gas in power stations without affecting the climate. They trap greenhouse gas pollution before it can warm the atmosphere, and store it deep underground. But efforts to build them have repeatedly foundered around the world because they are so expensive.

[Update: and there’s also We’ve also got concerns about the government’s future support for the low carbon agenda and that’s left us in a position where we are no longer confident we can persuade our shareholders that this is an attractive investment, given the obvious risks,” ]

From an energy policy point of view, this is all consistent: govt directing investment in carbon reduction via subsidies and ragtag policies is a bad idea. Instead we should put a market price on carbon via a carbon tax and let people get on with it (per lots of people, for example Exxon). From the view point of business, they want a stable environment for making decisions, not one where a sudden govt change of heart makes years of planning redundant.

CCS isn’t all Drax is up to; according to the Beeb Drax is in the process of converting from coal to biomass, and by 2016 is expecting to generate half its power from wood pellets, though that seems either unlikely, or unlikely to be sensible.

10 thoughts on “UK energy policy under fire as Drax quits carbon-capture project?”

  1. Oh, the wood pellets come from the USA so it looks good by the British rules.

    [Yeeeesss… though you do at least have a rule of law; its better than them coming from the tropics -W]

    Like

  2. William, I basically agree with you that the ideal solution would be raising the price of carbon via a carbon tax. But there are some reasonable arguments that in the real world, it’s more productive to go with a German-style “green industrial policy” even though that’s less economically efficient than a simple tax:

    http://www.vox.com/2015/9/17/9343125/climate-policy-sequencing

    CCS is obviously not the right direction for such a “green industrial policy” compared to, say, energy efficiency plus promotion of solar/wind/geothermal/nuclear/etc.

    Note that I have not read the Science paper referred to, only the linked discussion at Vox.

    [I can’t read it either, since its paywalled. The argument is interesting; but the way Vox makes it fails to recognise the massive problems with the current subsidies. He makes it seem just a little bit less efficient; it isn’t; its massively less efficient. He’s effectively arguing for pork for powerful groups; that’s not going to end well; that’s what the US has got with its ridiculous corn ethanol -W]

    Like

  3. Instead we should put a market price on carbon via a carbon tax and let people get on with it (per lots of people, for example Exxon). From the view point of business, they want a stable environment for making decisions, not one where a sudden govt change of heart makes years of planning redundant.

    Implementing a carbon tax is no guarantee of stability. Australia repealed theirs after two years in operation.

    [Agreed; there are no guarantees of stability in politics; but that’s not really relevant -W]

    Like

  4. Nick Barnes,
    I’m not quite sure what your general views are, but I think the position is quite simple. If we want to maintain lifestyles in the developed world and improve standards in the developing world, that will probably require producing more energy per year than we currently produce.

    There would then seem to be 3 (or 4) options,

    1. Carry on as we are and hope climate sensitivity is low.

    2. Continue with similar energy infrastructure as we have today, but try to capture and store the carbon (plus, find some mechanism for drawing down CO2 from the atmosphere).

    3. Commit to installing alternatives and also replacing current energy systems with alternatives.

    4. Some combination of all 3.

    This is all going to be rather complex, so dismissing CCS out of hand seems to be ignoring a possible option. I’m also not convinced that it is indeed a pipe dream. People I’ve spoken to who work on it, think it is possible (well, at the MtCO2/yr level at least).

    In general I agree with WMC. Put a price on carbon. I do happen to think that some form of government incentivisation/investment is unavoidable, but if you don’t put the price on carbon there’ll be no desire to install CCS (or use alternatives) even if it does become feasible and affordable.

    Like

  5. It’s discouraging that the Germans are insane. I equate their wood chip plans as roughly the same level of trouble as ethanol subsidies.

    Like

  6. Russell the Stout –

    I’ts not quite as bad, actually. (And surprisingly to me, I’m naturally skeptical of bio fuels)

    World Coal prodution is c. 7 billion tonnes a year.

    World wood production is c. 3 billion tonnes per year, about half of which is already burnt.

    Allowing for differences in energy density, we’d need to raise wood production to perhaps 12-15 billion tonnes a year to replace coal. Which is just possible, probably, although turning all the world’s forests into biomass plantations would be somewhat Pyrrhic.

    Like

  7. Thank you, Andrew. I realized my opinion was based on some quite old hand-wavy factoids; and need to apply “citation needed” to my own impressions. The immediate effect of wood burning is of course more CO2 quickly rather than slow decomposition. At least the ash might provide potash for fertilizer if the supply is not tainted. I ponder dumping wood into the deep ocean trenches sometimes.
    But here’s something different I just stumbled on. I don’t feel too sharp today but is this article balanced?
    https://en.wikipedia.org/wiki/Pigovian_tax

    Like

  8. What ATTP said above. I think we’re going to need biomass plus CCS in a big way to avoid some fat tail risks, as well as dealing with overshooting whatever the reasonable target should be.

    More generally, while I support a carbon tax, I don’t think it’s an efficient way to generate technologies that will take 10 years or more before paying off. We need alternative funding mechanisms for that.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s