UK government sets out preferred power Beccs model

The UK government is proposing a "minded-to" business model to support bioenergy with carbon capture and storage for power (power Beccs) which consists of a contract for difference for electricity generation (CfDe) combined with a CfD for carbon (CfDc).

The department for business, energy and industrial strategy (BEIS) set out its minded-to model (CfDe+CfDc) along with three other short-listed alternatives on 11 August as it launched a consultation on power Beccs. The other three models that Beis analysed internally were a CfDc alone, a CfDe with a negative emissions payment (NEP), and a CfDe combined with an NEP and the emissions trading scheme (ETS).

The models were assessed based on five main criteria — affordability, benefit maximisation, cost minimisation, investment potential, and timeline.

BEIS selected the CfDe+CfDc model as its preferred one as it offers a combination of a CfD for electricity generation and carbon. It differs from the other options mostly as it "allows for flexibility to include negative emissions in any appropriate carbon markets in the future", meets the 'polluter pays' principle and could reduce the proportion of support payments.

Under this model, the CfDe strike price would be set "equivalent to the cost of generating power from biomass on an unabated basis and the CfDc strike price would need to cover the incremental costs associated with adding carbon capture and storage capability and operating the plant on an abated basis". A 10 to 15-year contract length has been proposed for the minded-to business model.

BEIS is asking stakeholders whether they agree with the minded-to CfD framework, and if they think the power Beccs projects should be incentivised to run as base-load or flexibly. It is also looking into whether there are alternatives to the business model and support framework. It is also seeking views on whether a consumer price indexed (CPI) strike price option similar to the existing CfD scheme for biomass generation that would require the project to bear the risk of biomass costs was an appropriate allocation of risk. It will accept feedback until 8 October.

BEIS is also considering options on how to support generators with transport and storage (T&S) network related risks. One alternative is allowing T&S charges to pass-through cost to generators as a separate third-stream payment; another option is to allow such charges to be an integrated part of the payment mechanism.

The government is also undertaking work with the chief scientific adviser to scientifically prove the net-negativity of power Beccs and the sustainability of biomass used as fuel. It will publish the outcomes of this study.

It launched a consultation for development of a greenhouse gases removal (GGR) business model in July, but such a model was not deemed suitable for power Beccs, which requires a specific framework "to ensure correct behaviours are incentivised, both in relation to the grid, and to the wider societal benefit of negative emissions". It is therefore developing a bespoke business model for power Beccs, "reflective of the advanced technological readiness of this specific technology and the significant co-benefits of both power generation and negative emissions".

Market barriers

A credit for carbon removal for utilities was not proposed under previous frameworks. But there are a number of market barriers preventing scaling-up and investment in Beccs, despite the high level of technological readiness, and the consultation will consider actions the government could take to help companies overcome such barriers, Beis said.

BEIS said it recognises there are no viable investment frameworks that would enable power Beccs to deploy at scale in Great Britain, and that private market-based investment was hindered by risks attached to a variety of operational and economic challenges common to bioenergy and carbon capture and storage technology. Such risks include wholesale power price volatility, biomass fuel price risk, cross-chain risk with a T&S network, current lack of predictable, long-term demand and stable revenue streams to produce negative emissions, immaturity of carbon removal markets and uncertainty around future scales and prices, regulatory and policy uncertainty over GGRs long term, and new technology development risks.

Power Beccs is expected to "deliver a steady increase of engineered removals of greenhouse gases (GHG) between the late 2020s and 2035", which will help the UK to achieve its net-zero targets through delivery of negative emissions, and to reach the 5mn t/yr of GHG removals by 2030, BEIS said. Power Beccs also helps boost system resilience, with sustainable biomass having "proven to be a reliable source of base-load generation", it added.

The government has been working on such a business model since it published the biomass policy statement in November last year, in which it stated it would support future biomass-fired generation only for large-scale plants with CCS.

"The government is paving the way for the UK to lead the world in deploying vital carbon removal technologies like Beccs. This could kickstart a whole new sector of the economy, creating green growth on an even greater scale than we have seen in the UK previously with renewables like wind and solar," utility Drax chief executive Will Gardiner said today. In April, Drax put a cost of about £150 to generate 1MWh of power and remove 1t of carbon dioxide from the atmosphere. It aims to commission Beccs at one of its 645MW pellet-fired units by 2027 and at a second unit by 2030. It aims to deliver 8mn t/yr of negative emissions in the UK by 2030.

The 420MW dedicated biomass-fired Lynemouth power plant has also completed a feasibility study on Beccs and is exploring further investment opportunities in the technology.

The UK aims to have a fully decarbonised, reliable and low-cost power system by 2050, predominantly composed of wind and solar in 2035 and in 2050 — its medium and long-term timelines, respectively.

By Erisa Senerdem