The UK is world famous for its wet, windy weather. Flanked by the Atlantic Ocean and the blustery North Sea, with its long coastline and small landmass, fast-moving jet streams and low-pressure systems can quickly engulf much of the country.
And while this does often mean that in the winter you’re far more likely to see the yellow of a weather warning than the sun, it is also precisely these conditions that are responsible for one of Britain’s biggest economic and technological successes of the 21st century.
For much of the past two decades, Britain led the world in offshore wind. It was overtaken in 2021 by China but it is still firmly placed at second and accounts for 20 percent of global offshore wind capacity.
For better or for worse, these conditions could also be part of the answer to the UK’s next best economic and technological bet: carbon capture and greenhouse gas removals.
A developing field of technology, if successfully commercialised, carbon capture could generate more value than rechargeable batteries and hydrogen, creating a market worth between £500 billion and £1,000 billion by 2050. Investment in it also reflects less than 10% of what other climate technologies, such as solar, were receiving at the same stage in their development, meaning there is an enormous opportunity to invest early.
There is also an enormous opportunity for the UK. It is the best-positioned country in the world to take advantage of carbon capture’s potential and is already home to a number of promising carbon capture companies. If successful, these companies could be pivotal in propelling the UK into leading a multi-hundred-billion pound industry and shaping the future of world industry.
Lessons from offshore wind
The UK’s leadership in offshore wind serves as a strong precedent for carbon capture. Following the first offshore wind installations in the late 1990s, it quickly built high-capacity wind farms and set the benchmark for the rest of the world in terms of regulations and standards.
This was achieved through policy, market incentives, and, of course, its ideal weather.
From the carbon budgets in the Climate Change Act, the formation of the Green Investment Bank, and the incentives of Contracts for Difference (CfD), the UK turned offshore wind from a risky investment into an attractive, stable asset for developers and institutional investors alike. As confidence grew, costs fell, driving better collaboration and, in turn, faster innovation.
The same features that made it possible to install large offshore wind farms with relatively low construction costs and high energy production potential also make it well-suited for carbon sequestration. With easily accessible underwater sites near existing infrastructure in the North Sea and off the East and West coasts, there is a geological storage potential of over 70 billion tonnes under the UK seabed.
The carbon removal business
Carbon capture falls into two primary approaches: point-source capture, which targets industrial emissions before they reach the atmosphere, and carbon dioxide removal (CDR), which extracts CO2 directly from ambient air.
Both will be important for achieving net-zero emissions, and the UK has already begun developing these technologies. Crucially, it is setting out strategic investments and policies that mirror exactly what proved so successful with offshore wind.
Last December saw the first large-scale carbon capture project in the UK receive a Final Investment Decision (FID) as part of the UK government’s pledge of establishing two carbon capture clusters over the next 25 years. Some of the world’s largest energy companies, BP, Equinor, and Total, are involved in the project, which will have an offshore pipeline network of 145km and the capacity of transporting and injecting up to four million tonnes of CO2 per year once operational in 2028.
Projects like this will set the UK well on its way to its ambitious targets. It aims to capture 5 million tonnes of CO2 by 2030, 23 million tonnes by 2035, and up to 81 million tonnes by 2050 and is backing these targets up with significant funding, with £22 billion of support reaffirmed at the end of last year.
It is also looking to make these projects as attractive and as low-risk to private investment as it did with wind with similar incentives to CfDs being considered to finance projects.
It is exploring the inclusion of carbon capture in the UK Emissions Trading Scheme (ETS) and potential intervention in voluntary carbon markets (VCM) to issue credits supported by the CfD business model.
Including carbon capture in the latter two schemes could be pivotal. Because direct air capture allows the precise quantification of removed carbon, carbon capture projects could sell the carbon they capture and store as a high-quality carbon credit. If the UK can develop high-quality carbon credits at a feasible price, it will set itself up to lead the way in global carbon markets.
A global business
Carbon credits are set to play a crucial and necessary role in the global effort to reach net zero. In hard-to-abate sectors like heavy duty transportation and construction and for developing countries still reliant on fossil fuels, such credits would enable companies to capture carbon dioxide emissions from industrial processes and store them underground.
This would essentially create ‘negative emissions’ that can be traded as carbon credits, incentivising the development and deployment of carbon capture technologies within a market-based system to reduce greenhouse gas emissions. The early signals from the government to set a precedent for how carbon capture can be involved in such schemes mirror how they set global standards for wind.
The UK government has established its ambition to become a leader in climate change and technology. But, to do this, the UK must leverage its existing strengths. Its success in offshore wind offers a clear roadmap for becoming a leader in carbon capture.
If the UK can exploit its natural advantages and recreate the right regulatory frameworks and investment climate, it would create jobs, drive economic growth, and position the UK at the forefront of carbon capture and global carbon markets.
David Delfassy is Investment Director at TDK Ventures
The post Why carbon capture is the UK’s next best technological and economic bet appeared first on UKTN.
