WBD: UK CCUS - building the framework
The Association for Decentralised Energy
Read the article on the WBD website here.
In our article, 'Energy Act 2023: The countdown to net zero', we flagged that the Energy Act 2023 (the Act) has put in place more building blocks for the carbon capture, utilisation and storage (CCUS) regime in the UK. After a number of false starts, the UK government is now well-advanced in developing a statutory framework for CCUS and the first four industrial clusters have been identified for hosting transportation and storage networks. Much needs to be done though if the UK government is going to reach its target of capturing and storing 20–30 MtCO2 (including removals) per year by 2030.
Which are the principal CCUS provisions in the Act?
Licensing regime for transport and storage
Those familiar with the UK's licensing regimes for gas and electricity will note that the Act sets out a framework for CCUS transportation and storage activities which is not dissimilar. Details will be fleshed out in secondary legislation but it will be an offence to conduct these activities without a licence (unless an exemption has been granted). The licence will govern how those activities are to be conducted. Ofgem will be the economic regulator although the North Sea Transition Authority retains a role in the licensing of geological storage of CO2.
Special administration regime
Should a CO2 transportation and storage company enter into insolvency then the Act provides for the implementation of a Special Administration Regime (SAR). As in other utility sectors, a SAR will permit the appointment of a special administrator to step in and run the company in the interim.
Transfer schemes
The Act allows for the use of a transfer scheme where a licence terminates or expires and the UK government needs to secure the ongoing operation, or security, of all or part of the licensed network.
CCUS business model support
Also put on a statutory footing are the revenue support contracts for CCUS transportation and storage. This is an important milestone in the development of the UK government's CCUS business model which has been in the pipeline for several months now.
Decommissioning of carbon transportation and storage facilities
Provisions are made in the Act for the decommissioning of CCUS transportation and storage facilities. Secondary legislation will cover issues such as the estimating of decommissioning costs, the administration of funds to meet those decommissioning costs and the security to be provided for these costs. The Act makes specific reference to change of use relief such that, for instance, a company converting oil and gas infrastructure to eligible CCUS transportation and storage facilities may qualify for relief on decommissioning costs for which it might otherwise have been liable.
Reporting and information
The Act gives the regulatory authorities the power to request from licensees a range of information.
Next steps
The implementing regulations will contain many of the detailed mechanics for operation of the CCUS regime in the UK and the industry will be keeping a close eye not only on those details but also on the pace with which that secondary legislation is produced.