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UTILITY WEEK | 9TH - 15TH JUNE 2017 | 19 Policy & Regulation How do you solve a problem like carbon capture and storage? Opinion Guy Winter I magine if, in the run-up to the FA Cup final, the famous trophy itself had been replaced with an IKEA vase, the match relocated to an industrial estate off the North Circular and the action only broadcast on Ceefax. You might have seen a similar reaction to the dismay within the energy industry when the government can- celled its £1 billion carbon capture and storage (CCS) competition in the 2015 spending review, just six months before the prize was due to be awarded, and a matter of days before the COP21 UN climate change summit in Paris. From poster initiative to pariah In the words of CCS association chief executive Luke Warren: "This is devastating". And he was right, because CCS in the UK – up to then the subject of feverish work and investment by industry heavyweights including SSE, Shell, National Grid and Drax – has yet to recover its impetus. My own firm was advising SSE on the Peterhead project, and I still remember the shock in the team when the news hit. Overnight, CCS become a dirty word in energy company boardrooms. The tragedy is that the environmental and economic rationale for CCS has never gone away. By the depart- ment of Business, Energy and Industrial Strategy's own estimate, it would cost the UK £30 billion more to meet the 2050 carbon emissions target without CCS in the power sector, because a more expensive mix of low-car- bon technologies would be required. That presents a stark version of the energy trilemma for government: watch the lights (and heating) go out; break the bank and commit political suicide; or renege on the 2050 target and face international humiliation. The future of gas In the build-up to launching our Future of Gas report on 16 May, we asked gas industry experts from right across the value chain whether there was a "fourth way" that would allow natural gas to resolve the UK's energy tri- lemma. The overwhelming consensus was that we need to find a cost-effective strategy to develop the necessary CCS infrastructure to decarbonise the gas grid. Drilling down as to how we could achieve that, the most innova- tive idea that came back was both simple and logical. The UK has eight gas distribution networks (GDNs), owned and managed by four collaborative and well-cap- italised companies: Cadent Gas (formerly National Grid Gas Distribution); Northern Gas Networks; Wales & West Utilities; and SGN. As the recent divestment by National Grid of its Gas Distribution business to a Macquarie-led consortium demonstrated, the regulated returns gener- ated by the s are highly prized by international pension and infrastructure funds, and allow them to benefit from a low cost of capital. Rather than the game theory of competitions, the solution would be to develop regional CCS networks as a new part of the regulatory asset base of the GDNs. That would simultaneously help socialise the cost of CCS and lower the capital cost, allowing Ofgem to support it through the RIIO price control framework. And that support is still very much needed, because of an ongoing political failure to internalise the true cost of carbon, and the formidable regulatory and risk transfer issues faced by the first carbon storage projects. Perhaps the most ambitious of the routes to decar- bonisation of heat is hydrogen gas grid conversion, as pioneered by Northern Gas Networks through its H21 Leeds City Gate project. Cadent Gas is also actively exploring a ground-breaking project to integrate low- carbon hydrogen with its gas network in Merseyside and the surrounding area. Dave Parkin, network director at Cadent Gas, says: "CCS, storing the captured carbon dioxide in gas fields in the East Irish Sea, is an integral part of the project. This approach offers a lower cost way of decarbonising heat than alternatives." Best of all, once we have the know-how, we can sell it to a world hungry for climate change solutions. Leading CCS expert Chris Manson-Whitton of Progressive Energy explains: "The industrial revolution started in Britain, driven by the confluence of our geological resources and innovative mindset. In the same way, our geology has given us excellent carbon storage solutions. Combined with our world-class gas infrastructure and innovative drive, we have the conditions for a hydrogen-based energy revolution to start here." Act now to decarbonise later As Nicola Pitts, head of gas market change at National Grid Transmission, says: "To reach the 2050 decarboni- sation target, we need technology to be deployed in the 2030s and 2040s. The next decade should be about trial- ling this technology and there is a price control window- and that window will close in the autumn of 2018." Absolutely. It's time to give our gas networks the mandate, regulatory and price control support to deliver a decarbonised gas future, or the UK faces a horrendous carbon cop-out when that 2050 cup final comes round. Guy Winter, partner, Addleshaw Goddard LLP