The Government has been under pressure to fund demonstration projects of "clean coal" technologies for many years.
In the 1990s, the decline of the UK coal industry fuelled calls for a new generation of integrated gasification and combined cycle (IGCC) power stations. But as climate change rocketed up the agenda, the focus shifted to carbon capture and storage (CCS) as a way of retaining a significant role for fossil fuels.
The Government has taken some convincing. Only last summer, the Department of Trade and Industry argued that CCS was unlikely to be proven or commercially viable until 2020 (ENDS Report 355, pp 44-45 ).
In mid-June, however, the DTI issued a new carbon abatement technologies strategy which offers a much more bullish stance. It now says that all the key components of CCS systems "are developed and deployed in other applications and could be brought together within five years if a market demand existed."
The strategy aims to ensure that the UK takes a leading role in the development and commercialisation of technologies that can make "a significant and affordable reduction in CO2 emissions from fossil fuel use".
The strategy, which is intended to run for ten years, differs from the previous clean coal programme in several respects. Firstly, it covers all fossil fuels rather than just coal - and industrial processes as well as the power generation sector. Secondly, the strategy goes beyond R&D to offer capital grants for demonstration projects totalling £25 million over four years.
Technologies covered by the strategy include higher efficiency conversion processes, including IGCC and advanced boilers and turbines, which could reduce emissions by 10-30% compared with existing plant. It also includes co-firing with biomass - although eyebrows will be raised if this secures significant funding given that it already benefits from support under the renewables obligation.
However, CCS, which can reduce emissions by up to 85%, is the most radical element of the package. The DTI expects to fund demonstration of "capture-ready" technology, in which efficient power plants are designed to allow easy retrofitting of CCS at a later stage. This entails little additional cost, and could "be implemented rapidly, in the next 3-4 years."
A demonstration of CO2 storage is also expected to go ahead. It is not yet clear what scale the project would have, or whether it would be linked to "capture-ready" plant or to an alternative, lower-cost source of CO2. The aim would be to confirm the long-term feasibility of CO2 storage overseas, without duplicating experience overseas.
Importantly, the Government says it will use its ongoing review of the climate change programme to examine measures to "encourage the initial commercial deployment of CCS technologies in the UK" by about 2010-2012. A single project could avoid emissions of 0.5-2 million tonnes of CO2 per year.
Key issues to be resolved include the treatment of CCS under the EU emissions trading scheme. This will require agreement on monitoring and verification, and also careful allocation to reward low-emission plant.
Enhanced oil recovery, in which injection of CO2 is used to boost yields from a depleted oil field, has been seen as a likely first candidate for CCS. The oil industry initially proved lukewarm, although BP is now developing a pilot project (ENDS Report 364, pp 7-8 ).
The strategy hints that changes to the North Sea tax regime may be applied to bring the option forward.
The Government is also working to amend the OSPAR and London Conventions to make explicit provision for carbon storage under the sea-bed. The generally accepted view is that the current treaties do not permit injection of CO2 from offshore oil and gas platforms for storage alone - although EOR or injection from purpose-built platforms would be allowed.
The decision to embrace CCS appears to have been driven by two key factors.
Firstly, modelling for the climate change programme review has shown that CCS - or, by implication, the alternative of nuclear power - may be needed on a large scale to deliver the Government's aim of a 60% cut in CO2 emissions by 2050. The strategy suggests that it may be necessary to capture 10-25 million tonnes of CO2 per year by 2020 - 6-15% of current power sector emissions - rising to 100-150 million tonnes by the middle of the century.
Modelling now suggests that higher gas prices and cheaper clean coal technology could lead to "a significant expansion" in the use of coal for power generation after 2020. The work suggests that CCS "is cost competitive with most renewables technology options" and "has costs comparable with nuclear power" (see table).
The second factor is the view that CCS will play a crucial role in reducing global emissions. The strategy aims "to provide a springboard to tackle the much larger markets that will emerge overseas."
The International Energy Agency forecasts that world energy demand will increase by 60% by 2030, with fossil fuels providing more than 80% of the total. Some 800GW of new power capacity is expected by 2010, and a further 1,300GW by 2020. China alone is expected to commission 400GW - five times the total UK capacity - by 2020.
The DTI points out that this plant will operate for 40-60 years, and have a major influence on future CO2 emissions. Such thinking underlies the strategy's focus on demonstrating "capture-ready" technologies.
The framework for the demonstration programme will be put together by a new Hydrogen Coordination Unit, proposed in a recent consultants' report to the DTI (ENDS Report 360, pp 42-43 ). The Government has yet to decide whether the unit will be a stand-alone body or sit within another organisation such as the Carbon Trust.
The DTI says that "previously disparate efforts on hydrogen and fuel cells' R&D will be brought together for the first time." However, the unit is unlikely to have its own R&D budget - instead it is expected to coordinate existing funding streams and identify strategic directions for research.
The consultants' report called for policy and fiscal measures to be developed to create mass markets for hydrogen. However, the DTI argues that "the costs of fuel cell powered vehicles would have to fall very significantly before such incentives would have any significant effect on hydrogen demand." It says that the new unit will "play a useful role" in ensuring that the case for establishing a support framework "at the appropriate time" remains on the agenda.