Chris Paul and Diana Lupa, Trowers & Hamlins LLP
We all understand that getting to Net Zero creates real challenges. It means reducing greenhouse gas emissions, with any residual remaining emissions being offset by measures that remove greenhouse gases from the atmosphere. That means planting trees, but carbon capture and storage offers the potential for more scalable reductions. That is why Carbon Capture, Utilisation and Storage (CCUS) forms a key part of the UK Government’s strategy to reach Net Zero.
Just weeks after the UK became the first G7 country to phase out coal-fired power plants as part of its energy mix, the Government confirmed its commitment to carbon capture and storage with up to £21.7bn of funding over the next 25 years to support two major CCUS sites – the East Coast Cluster on Teeside and the HyNet site in the North-West and North Wales. The recent Budget also committed £3.9bn (between 2025 and 2026) for CCUS Track-1 projects aimed at accelerating decarbonisation within the industrial sector and supporting flexible power generation.
Scaling up CCUS needs investment, but the Government also has a key role in developing the regulatory and policy landscape to develop the market. In this article we’ll explore how CCUS fits into the UK’s energy transition.
Developing technology
Carbon Capture and Storage (CCS) refers to a range of technologies that either remove CO2 directly from the atmosphere (which can help address historical CO2 emissions), or extract CO2 produced from emission point sources such as heavy industrial processes, power generation or hydrogen production.
The extracted CO2 is compressed, transported and injected into deep geological storage, such as depleted oil and gas reservoirs or saline aquifers. This secure storage is critical in ensuring that captured carbon does not escape to the atmosphere. Carbon Capture, Utilisation and Storage (CCUS) takes things a step further by utilising the captured CO2 as a feedstock in other practical applications.
While these technologies may not be new (the first commercial CO2 storage project has been operating since the mid-1990s), the real challenge is to implement them at the scale needed to achieve Net Zero. There is talk about the potential for the UK to become a global leader in the sector, but that requires sustained Government support and the development of self-supporting business models.
Regulatory framework
The Energy Act 2023 establishes the basis for the economic regulation of carbon transport and storage and is the primary legislation framework for Industrial Carbon Capture, Greenhouse Gas Removals and Low Carbon Hydrogen Production business models. Ofgem is expected to grant the economic licences for onshore/offshore transport and storage to carbon network operators, though the secondary legislation is awaited.
Regulations passed earlier in 2024 set out the Secretary of State’s role in directing carbon capture and carbon transport and storage counterparties in offering contracts to eligible entities. Other relevant legislation includes the Great British Energy Bill (establishing GB Energy to co-invest in clean energy projects) and the Planning and Infrastructure Bill (intended to reform the planning system and accelerate the delivery of infrastructure).
Wider opportunity
Scaling up CCUS has the potential for unlocking green growth and helping the UK to manage the Net Zero transition. According to the recent Offshore Energies UK (OEUK) publication, the sector has the potential for creating 50,000 jobs and protecting a further 100,000 jobs across the UK. Delivering CCUS will help the UK retain domestic energy-intensive industries (such as steel, cement and glass production), avoiding offshoring significant parts of our economy.
CCUS also has an important role to play in providing flexibility for a decarbonised electricity grid. The UK Government has set a challenging target to decarbonise the grid by 2030. Investing in more solar and wind generation is only half the picture. The intermittent nature of renewable energy requires investment in storage and flexible power generation. The Teeside cluster gives a good example of how new gas-fired power stations with CCUS may help plug that gap. CCUS can also enable upscaling the production of low-carbon hydrogen, which provides more options for energy storage and can help decarbonise heavy industry.
The combination of low-carbon electricity, CCUS and clean hydrogen production has the potential to attract carbon-intensive businesses to co-locate in these new low-carbon clusters. The much-hyped Green Industrial Revolution just got real.
This article appeared in the Jan/Feb 2025 issue of Energy Manager magazine. Subscribe here.
