Episode 7: Pathways to Net Zero - New Nuclear and Carbon Capture Utilisation and Storage (CCUS)

Steve Jennings

Hello and welcome to the seventh episode of our innovation in energy podcast series. My name is Steve Jennings and I lead PwC’s Energy and Utilities Practice in the UK. In 2019, the UK government was the first advanced economy to set a net zero decarbonisation target, to be reached by 2050, and many countries have followed suit. Almost 200 global businesses have set similar ambitions and many in the energy industry, including the likes of National Grid in the UK, Repsol in Spain, and Equinor in Norway.

The challenge now is how to deliver this net zero target, and what is clear is there is no single silver bullet to address this, instead there will be a number of pathways, from renewables, nuclear, carbon capture usage and storage, to reforestation and behavioural change, all of these complementing each other to achieve this ambitious goal.

Now with that in mind, and as we eagerly await the government to set out it’s stall in an energy whitepaper, we shall, over coming episodes, look at these different technologies and solutions.

Today, we are discussing nuclear and carbon capture usage and storage. I am delighted to be joined by Julia Pyke, Nuclear development director at EDF; and Helen Liddell, president of the Carbon Capture and Storage Association.

So Julia, perhaps we may start with you. What is the outlook for nuclear energy in the UK?

Julia Pyke

Hi Steve. The outlook for nuclear in the UK is really positive. If we look at how we are going to achieve net zero, we need to look at how have other countries actually got net zero compatible energy systems. There is a fantastic app, which is free, which I’d encourage anybody interested in the power sector to download, which is called electricity map. If you look at electricity map, you can see that some countries are always green, and some countries are occasionally green, quite often yellow, sometimes brown. What the green countries have in common, is either that they have a lot of natural geography like GSM or hydro, or the replicable systems, where you are a country which doesn’t have a lot of GSM or lower hydro potential, have a mixture of renewables and nuclear.

What we say is, when we are looking at what can we do, let’s look at what actually works, and what actually works is a mixture of nuclear and renewables. If we look at France, we look at Sweden in particular, they have decarbonised hugely and very quickly using that mix. In the UK, the power sector represents only about 15% of total greenhouse emissions, but what we are looking at is a huge increase in the use of electricity as we look to decarbonise other sectors.

Whether or not we are going to do that by making hydrogen and heating homes with hydrogen, or whether or not we are looking at how to decarbonise transport, we are probably looking at an increase in the use of electricity as well as of course decarbonising gas through CCUS, which we are going to talk about in a few minutes.

The power sector has been quite successful in decarbonising, it has got a long way to go. At the moment, nuclear produces round about 20% of the UK’s electricity, and that’s more than half generally speaking, is around half of the low carbon electricity in the UK. The challenge we have is, over the next 10 years, the UK’s nuclear power stations are actually turning off. They were built in the 1970s and 1980s, therefore reached the end of their lives, and we really need to replace them, and to replace them, we really need to get moving with some decision making.

We are building Hinkley Point C in the south west of England, and that will produce about 7% of current electricity demand. I should also mention that while nuclear power stations are famously quite expensive to build, that’s because they are massive, it is because they are producing awful lot of electricity. It is very expensive to make 7% of the nation’s electricity from any form, it is just that with nuclear you build that all in one place, all at one time.

They are in fact extremely cost effective, and not only are they extremely cost effective for consumers in the long term, they are also extremely low carbon. You can offset all the carbon dioxide emissions from constructing nuclear power station in the first few months of operation. Then we have one of the lowest carbon footprints of any way of making electricity.

The last thing I would just like to mention is that, we are looking at innovation. In the UK we’ve traditionally used nuclear only to make electricity for the grid what we are actually is a massive heat source. We are looking at ways that we can also use that heat to help decarbonise heating alongside, for example, carbon capture and storage, and how we can use it for storage, and how we can work really closely with renewables industry, to have like combined centres for making hydrogen, like from excess electricity or we are looking at cryobattery.

Generally, we are looking at how we can use them most creatively for the greatest benefit to consumers.

Steve Jennings

Thanks Julia, and whilst our listeners are in the middle of downloading that app, I would encourage them also to download another app, which shows the source of different generation technologies and the source of our power on a daily basis, another excellent app.

But I want to return, if I may, Julia to your words, I think you’ve said famously expensive to build, and obviously a lot of people talk about the cost of nuclear.

How do you see the funding the nuclear stations evolving in the future, and specifically in the UK?

Julia Pyke

It’s a really good question. Following the Hinkley Point C built, the national auditor office suggested that the government looked at different ways of financing nuclear. The recent nuclear, particularly interesting issue to finance, is because it has a very long construction period. For Hinkley Point C, we rolled up interest on the money for the better part of 10 or 12 years, before any money is paid out, that’s an expensive thing to do. If anybody thinks about rolling up the interest on their own personal credit card for a long period of time, that’s expensive, so, we are looking at how we can do it more cost effectively.

There are really two different ways of doing it. One is, to look at a mechanism called the regulated asset-based model. The government consulted on using the regulated asset-based model in the summer and we are awaiting for a response from the government to that consultation. That’s how we’ve thought about financing Sizewell, which is the power station we would like to build on the east coast of England, next to Sizewell B.

Sizewell will be an exact copy of Hinkley, and because we’d start off with a mature design, that really brings down construction risk. If you start off with a design that you know, then you know your quantities of steel aggregate cable equipment, that’s about half the cost. That means that the cost overrun risk is hugely reduced, and that’s why we think it’s possible for the government to look at the regulated asset-based model for Sizewell. Equally, we are ourselves agnostic to the funding model if the government chooses to fund this directly out of tax payer funding, then that’s also great.

What I would mostly say about the funding model is that we should all remember that last year global carbon emissions were the highest they have ever been. Whether or not it is funded by the private sector through the regulated asset-based model, or it’s funded by the public sector directly, what we really need to do is to get on with building some low carbon electricity.

Steve Jennings

Thanks Julia that was very helpful. I may return to you at the end with another question if that’s okay, around nuclear.

Julia Pyke

That’s fine.

Steve Jennings

But before that, I’d like to bring Helen into the debate, welcome Helen.

We’ve used the acronym CCS and CCUS, carbon capture storage and utilisations, it has been around for some time, hasn’t it?

Helen Liddell

Carbon capture and storage has been around for almost all of my working life, but has really come into its own with the net zero commitment, because with net zero, carbon capture storage and use becomes essential, not an added extra, we can’t do it otherwise. Also, this year is going to see COP 26 in Glasgow. The focus is going to be on the United Kingdom, and what we are doing about our carbon emissions. Now, there are about 18 large scale projects globally, capturing about 33 megatons of CO2 annually, and it’s not just power, it is the energy intensive industries as well. If you think about it, we need our iron and steel, we need our heavy industries in a developed country like our own, but there are also developing countries, who want to have those kind of technologies. If they are going to have those technologies, we need to link them in with carbon capture storage and use.

One of the exciting things at the moment is, what has been done in the steel industry, the whole of idea of clean steel, but you are right, and that has been around for a long time. It has had some problems couple of years ago, we were all very concerned that the sector may not do particularly well, but net zero really did change that, and now we see that the government is very committed. We’ve seen a big change in the focus on carbon capture and storage, and also it is very useful to see that in the Conservative party’s manifesto in the recent election, 800 million has been set aside for carbon programs, that’s great news.

For those who think it is tomorrow and tomorrow, it is not, this is happening now. There are greater opportunities in the supply chain right now, because by the middle of this year, the prospect of projects up and running in clusters, in places like Teesside, Fergus, Grangemouth, South Wales, Middlesbrough, these are the great opportunities there for carbon capture to flourish.

Steve Jennings

Helen you are so right, it has been around for a number of years, but I agree, I think we are at the tipping point. As I understand it, we already got demonstration technologies actually in action, some of which are actually blending hydrogen. How is that progressing?

Helen Liddell

The clean steel model has potential to blend hydrogen as well, but you also have great developments like Drax. Drax have had a really clever program, where they are incorporating CCUS into power generation. Did a pilot in 2018 and they got about 7 million pounds in funding from the government, and they are now at a stage where they are bringing bioenergy alongside carbon capture and storage, and they went live in 2019. Now the evaluation of that is going on.

I awakened up just after New Year to hear in the radio that Microsoft have now started out with a carbon negative program, which is absolutely fascinating. With my obsession, I went through everything they’ve produced and they actually talk about carbon capture as part of that, because otherwise it wouldn’t work frankly. They have acclaimed an innovation fund of 1 billion dollars US. Suddenly, carbon capture is the place to be, which is terrific in terms of economic growth, it’s terrific in terms of regional economic development, but it is particularly good in relation to cutting out carbon emissions too.

Short term target is by 2024 to have projects that are capturing about 10 million megatons of carbon, and nobody would have dreamt of that sometime ago.

Steve Jennings

Things are moving so fast isn’t it, almost every day goes by, there is another announcement from a company committing to net zero.
As we are enter the new decade, as you said Helen, we approach COP 26, which is being hosted in the UK in Glasgow in 2020.

If I may ask a supplementary question, we’ve talked a lot about the two technologies, but I am interested also in the business models that are going to support these technologies, and how we are going to bring the technologies to life through different business and commercial models, Helen thoughts on CCUS.

Helen Liddell

You are absolutely spot on, that’s absolutely critical, because people now need to see reality, and the reality is that this is going to happen, the business models are critical. Once we get the business model sorted out, then everybody can move. I am sure Julia is in pretty much the same boat with the nuclear industry.

Julia Pyke

Yeah, I totally agree, Helen. We are basically agnostic about the business model. We need to get cost out of the consumers. We are happy with the regulated asset-based model that the government is consulted on. We are happy if government wants to fund it out of taxation. Either is great, provided it brings down cost of consumers. Most importantly that we get on with actually building some low carbon generating capacity and addressing our carbon emissions.

Steve Jennings

One final question for you both, if that’s okay. What do you think is the most critical factor to accelerate successful deployment of these two technologies, and Julia if I could start with nuclear first of all?

Julia Pyke

Well what we need is a decision from government, which is going to enable us to make a copy of Hinkley and Sizewell. It is a really fantastic opportunity to show that nuclear can reduce costs through copying, but is an opportunity which obviously has an optimal time, because as the experienced team from Hinkley starts to finish Hinkley and move on to other things, we need them to be moving into Sizewell, so we have a mature design, and an experienced team.

Nuclear is actually a fantastic boost for the regional economy. We offer fantastic skills training. We have 25,000 job roles across each project, which actually, when you take into account the wider supply chain, is around 40,000 jobs. The jobs are all over the UK, they are in the region, so in the south west for Hinkley, they are in the east of England, so jobs in places like Lowestoft, Great Yarmouth in Suffolk, but they are also in the north, we’ve got some of our really high skilled manufacturing taking place in some great factories around Sedgefield in Humberside.

Again, we have to remember that last year global carbon emissions went up, and so we need to make decisions, which enable us to get going, nuclear and CCUS, on bringing carbon emissions down while producing secure electricity supplies for consumers.

Steve Jennings

Helen what do you think is the most critical element for CCUS.

Helen Liddell

One of the most vital thing is certainty. If we have certainty that this is going ahead, companies have the opportunity then to invest, not just directly, but also in the supply chain, and there are huge opportunities that are around in this sector. Julia is saying, we can’t mock about much longer on what we are going to do about carbon, as David Attenborough has pointed out, the crisis is now, it’s happening now. We have the technologies that can deal with this, and there are huge opportunities, particularly with the government’s action plan on carbon capture and storage to create new job opportunities. We are not alone in this game, we could be world leaders, but we have to look and see what’s happening in Norway, and what’s happening in the United States. There are opportunities there, the issue is, are we going to seize them, I think the climate has never been better to seize these opportunities, both with nuclear and with carbon capture storage and utilisation.

Steve Jennings

Great summaries, and as you said, I think the opportunities there is with significant challenges, but significant opportunities for the UK. Julia and Helen thank you so much for participating in this podcast, and for sharing your valuable perspectives on nuclear energy and carbon capture usage, and storage. It is a really exciting time for the UK as we seek to maintain a leading role in the green energy revolution.

I hope you enjoyed listening to this podcast. If you would like further details in what PwC is doing in this area, or around net zero, please do get in touch.

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Steve Jennings

Steve Jennings

Leader of Industry - Energy, Utilities & Resources, PwC United Kingdom

Tel: +44 (0)7704 564513

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