Government impose ‘carbon capture levy’ to fund coal-fired power plants

Ben Webster, Environment Editor

Families will pay a new levy on electricity bills for at least the next 20 years to fund technology designed to capture the carbon from coal-fired power stations.
The Government is planning to raise £9.5 billion from the levy to subsidise up to four carbon capture and storage (CCS) demonstration plants. Details of the first plant will be announced early next year. The Department for Energy and Climate Change said yesterday that uncertainty over the commercial viability of CCS meant that public support might have to continue beyond 2030.
The Government is promoting CCS to justify approving new coal plants to replace the eight due to close by 2015 under European rules on air pollution.
Burning coal produces far more carbon than burning gas for the same amount of electricity but ministers want to build new coal plants to reduce Britain’s dependence on imported gas.

E.On announced last month that it was delaying its plan for a new coal station with CCS at Kingsnorth, Kent, for at least three years. However, the Kingsnorth plant may yet go ahead and, along with a proposed plant at Longannet in Scotland, is competing to be the first subsidised CCS demonstration project.
The department said the CCS levy, likely to start in 2011, would be about £17 a year per household. It said that the cost could be higher if its assumptions about the cost of CCS proved too optimistic.
The initial levy, which will be imposed on electricity suppliers but passed on to consumers, will run for 15 years. This will pay for the first phase of CCS, under which new coal plants will have to capture the carbon from only about a quarter of their generating capacity.
Ed Miliband, the Energy and Climate Change Secretary, said that the levy could be continued beyond the 15-year period to subsidise CCS for the entire output of the four plants.
An official from the department said it was possible that the levy could remain in place for an additional 15 years, but this would depend on the price of permits to emit carbon. If the price remained at the present low level, CCS would continue to need huge subsidies because it would be cheaper for generators to buy permits for their carbon emissions than to invest in technology to reduce them.
Mr Miliband admitted that further regulations or financial incentives might be needed to encourage the development of CCS. He ordered a “rolling review” of progress on CCS and said it would report by 2018 on whether it was “technically or economically viable”.
The department said its ambition was for any coal plant opening after 2020 to have CCS covering its full capacity from the outset.
Its draft policy on “clean coal” said it hoped that the four demonstration projects would allow CCS to be applied to existing coal plants from 2020. “Our ambition is for CCS to be ready for widespread deployment from 2020.”
It admitted that there was a risk that CCS, which has yet to be shown to work commercially anywhere in the world, might prove unviable.
“In the event that CCS is not on track to become technically or commercially viable, preventing retrofit, an appropriate regulatory approach for managing emissions will be needed.”
Keith Allott, head of climate change at the environmental group WWF-UK, said: “The acknowledgement that we need a safety net in place, in case carbon capture and storage technology doesn’t work or costs too much, is a sensible step forward. However, waiting until the 2020s to put such a plan into action is foolhardy.
“It gives us no guarantee that the advice of the Committee on Climate Change, which urges the UK to decarbonise the power sector by 2030, will be met.
“It would also do nothing to stop the building of largely unabated coal power stations in the interim.”