UK power CCUS projects could get 15-year availability payments: BEIS

UK natural gas-fired power stations fitted with carbon capture, usage and storage would receive availability payments under a proposed Dispatchable Power Agreement model for up to 15 years, the Department for Business, Energy and Industrial Strategy said in a consultation document.

The government is consulting to June 10 on the proposals, with a view to setting up competitive auctions for power CCUS projects this decade.

Agreements would be "based on the Contracts for Difference for Allocation Round 4 standard terms and conditions but adapted to enable natural gas fired power CCUS facilities to play a mid-merit role in meeting electricity demand, displacing unabated thermal generation plants," BEIS said.

Power CCUS generators would receive an availability payment linked to facility performance, "to incentivize the availability of low carbon, non-weather dependent dispatchable generation capacity."

The payment would be paid regardless of whether a facility was dispatching, avoiding any incentive for power CCUS stations to displace lower cost, lower carbon sources such as renewables and nuclear.

"To ensure that a power CCUS Facility generates electricity ahead of higher carbon alternatives, we propose that a Variable Payment will account for the additional cost of generation for a power CCUS facility compared to an unabated Reference Plant," BEIS said.

The reference plant would be combined cycle gas turbine power station with the highest defined thermal efficiency, assessed on a lower heating value basis operating on the GB electricity system, it said.

The first projects, regardless of whether they were new build, repowered or retrofitted, would have flexibility to choose "an appropriate term length that is between 10 and 15 years," it said.

The government's Net Zero Strategy aims to begin competitive allocation for power CCUS projects in the 2020s.

"We intend to launch a call for evidence later this year to gather views and evidence on how we can best achieve this ambition and support the continued deployment of power CCUS Projects into the 2030s," BEIS said.

In February, UK utility SSE said it and Norway's Equinor had jointly submitted two large gas-fired power CCUS projects to the government's Cluster Sequencing Process.

Keadby 3 in Lincolnshire, England, and Peterhead in Scotland would be 910-MW CCGTs with carbon capture equipment attached.

S&P Global Commodity Insights forecasts UK gas CCUS generation to average 1.8 GW in 2030, rising to 3.9 GW in 2035 in its long-term European Electricity report, published March 29.