IEEFA Report Flags High Costs And Risks In UK’s Net Zero Teesside Carbon Capture Project

New research from the Institute for Energy Economics and Financial Analysis (IEEFA) says that large UK government subsidies planned for a gas-fired power plant with carbon capture and storage (CCS) should act as a warning for European Union countries that are considering similar projects. In the United Kingdom, around £23 billion in subsidies has been set aside for a project called Net Zero Teesside.

This plant is intended to become the world’s first gas-fired power station equipped with CCS technology. Most of the cost will ultimately be covered by UK electricity consumers through their energy bills. However, according to the report, even with this huge level of financial support, the project will contribute less than 3% toward the UK’s CCS target for 2050. Because of this limited impact, the study argues that EU countries should rethink any plans to rely on CCS to decarbonise gas power plants.

At the same time, the European Commission introduced its Industrial Carbon Management Strategy in February 2024. This strategy focuses on promoting carbon capture and storage mainly for industrial sectors such as cement, steel, and chemicals. However, it does not clearly rule out the use of CCS in power generation.

This leaves open the possibility that EU member states could still try to apply CCS technology to gas-fired electricity plants. The IEEFA report warns that this approach carries high risks. According to Andrew Reid, an energy finance analyst at IEEFA and the author of the report, CCS combined with gas power requires very large subsidies and has not shown reliable performance in practice. He says EU countries should be careful, because investing in this technology could take money away from cheaper and more proven options like renewable energy.

The report outlines several major problems with using CCS for gas power plants. First, there is no successful large-scale example in Europe of CCS working with gas-fired electricity generation. Second, the costs are extremely high, and private companies have little reason to invest without heavy public subsidies or government support.

Third, existing carbon capture projects have not achieved their expected performance levels, with lower-than-expected capture rates, which raises doubts about efficiency and could increase costs further over time. Another issue is the long development timeline. CCS projects often take 10 to 15 years to complete because they require complex planning, permits, and cross-border infrastructure agreements.

In addition, Europe currently does not have a fully operational carbon dioxide pipeline network, which is needed to transport captured emissions to storage sites. There are also ongoing concerns about the long-term safety and reliability of storing carbon dioxide underground or in offshore locations.

Because of these challenges, some countries are also considering hydrogen as an alternative fuel for decarbonising gas power plants. However, the report notes that hydrogen is currently very expensive and still relies on technologies that are not yet fully developed. In many cases, hydrogen-based power generation could cost up to ten times more than gas plants fitted with CCS when measured on a levelised cost of electricity basis.

The report concludes that the most cost-effective way to reduce emissions from gas power generation is not to retrofit existing plants with CCS or switch to hydrogen, but instead to reduce dependence on gas power altogether. This can be achieved by expanding renewable energy sources, improving energy storage systems, and strengthening electricity grid infrastructure.