Recommendation 24

HM Government · verbatim extract Deferred

49. The Government is committed to deploying CCUS to transition to net zero while bolstering economic growth and energy security. Power CCUS is a key part of the government strategy to decarbonise the electricity system by 2035, subject to security of supply. 50. In March 2023, the Government announced £20bn investment in CCUS, and the eight projects selected to progress to negotiations to form the first two CCUS clusters. This £20bn will be funded by a combination of levy funding and exchequer funding and includes the revenue support for power CCUS that will be levied on electricity consumers. 51. However, this is not the extent of the Government’s ambitions. The Powering Up Britain publications set out the steps the government is taking to ensure the UK is more energy independent, secure, and resilient. In these publications, the Government announced Track-2 of the CCUS Cluster Sequencing Process and confirmed that the Government will develop the Track-1 clusters to increase the benefits they can deliver. The Government has now conducted an Expression of Interest process on Track-2 and is developing plans to launch a process later this year to enable further expansion of the Track-1 clusters. 52. The Powering Up Britain publications also highlighted the importance of bringing forward power CCUS and other low-carbon technologies that can provide the flexibility to complement renewable generation. To support power CCUS, the Government is developing the Dispatchable Power Agreement (DPA) and the Dual Contract for Difference (Dual CfD) for power Bioenergy with Carbon Capture and Storage (BECCS). 10 Decarbonisation of the power sector: Government Response 53. DPA contracts will only be awarded, and payments started, to facilities that satisfy all delivery criteria that are needed to operate as a power CCUS project. This includes demonstrating a minimum CO2 capture rate, plant net dependable generation capacity, as well as commissioning the facility in adherence with performance testing standards. The DPA will incentivise a power CCUS facility to provide non-weather dependant low carbon electricity to balance the system and meet demand, and to dispatch this after renewable generation sources but ahead of unabated thermal generation plant. The amount a generator will be paid will in part depend on the capture rate of the plant. This ensures developers are incentivised to maximise decarbonisation and in turn drive innovation. 54. The Dual CfD is still in development but intends to follow CCUS precedents and include contractual mechanisms which ensure that projects deliver a high standard of carbon capture. As a result of these contractual mechanisms, a project would not receive payments if it never demonstrates a high standard of CO2 capture and may face termination if it fails to maintain a high standard of capture rates.