Teesside Collective has been developing a financial support mechanism to kickstart an Industrial Carbon Capture and Storage (CCS) network in the UK. This project would transform the Teesside economy, which could act as a pilot area in the UK as part of the Government’s Industrial Strategy. The final report– produced by Pöyry Management Consulting in partnership with Teesside Collective – outlines how near-term investment in CCS can be a cost-effective, attractive proposition for both Government and energy-intensive industry. The report was published on Teesside Collective’s website on 7 February. You will be able to view copies of the report in advance of the webinar. We were delighted to welcome Sarah Tennison from Tees Valley Combined Authority back onto the webinar programme. Sarah was joined by Phil Hare and Stuart Murray from Pöyry Management Consulting, to take us through the detail of the model and business case for Industrial CCS. This webinar offered a rare opportunity to speak directly with these project developers and understand more about their proposed financial support mechanism.

1. Webinar Series: Public engagement, education and outreach for carbon
capture and storage
Part 4: Is there a cost-effective way of making Industrial CCS a reality?
Tuesday 14th February 2017

2. Sarah Tennison
 Responsible for the transition to a Low Carbon
Economy in one of the most industrialised and
energy intensive locations in the UK.
 Manages Teesside Collective, a consortium of
leading industries with a shared vision: to
establish Teesside as the go-to location for
future clean industrial development by creating
the UK’s first Carbon Capture and Storage
equipped industrial zone
Technology and Innovation Manager, Tees Valley Combined Authority

3.  10 years at Pöyry consulting on CCS, advising on a range of
CCS development projects in Europe, North America and
Central Asia.
 Specialist in the economics of CCS
 Managed Pöyry’s work with the UK CCS Cost Reduction
Task Force in 2012/13, and more recently with The Crown
Estate examining the barriers to CCS deployment, as well
as modelling of CCS development pathways for the Energy
Technologies Institute and Committee on Climate Change.
 Background in energy market economics, and power market
modelling for asset valuations – advising a range of clients
including major international utilities, Multilateral
Development Banks, government departments and the
Prime Minister’s Office in the UK.
Principal, London office, Pöyry Management Consulting
Stuart Murray

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5. www.teessidecollective.co.uk
@TeesCollective

6. What is Teesside Collective?
Teesside Collective is a cluster of leading energy intensive companies working together to build one of Europe’s first CCS
equipped industrial zones, helping to retain the UK’s industrial base, attract new investment and jobs, and meet the UK’s
climate change targets.
The group is made up of five large industrial companies:
– BOC – UK’s largest hydrogen plant
– CF Fertilisers – UK’s largest ammonia plant – 35% of UK fertilisers
– Lotte Chemical UK – PET for 15bn plastic bottles
– SABIC – UK’s largest cracker – upgrading to run on US shale gas
– Sembcorp – industrial utilities – in planning for 850MW CCGT
Teesside Collective is coordinated by Tees Valley Combined Authority and backed by the North East Process Industry Cluster
“CCS on industrial plants is going to be a
critical part of the global effort to prevent
serious climate change. Teesside is in the
right place, at the right time, to get ahead of
the curve.”
Sir David King, UK’s Special Representative
for Climate Change
“The sustainability of the PET we buy is of
paramount importance to us. Suppliers who
account for their emissions in a credible way
will present a fundamentally more attractive
proposition in relation to their rivals.”
Alison Rothnie, Britvic Plc

8. Background
ICCS is the only technology to remove CO2 from some industrial
processes
Strategic infrastructure that can lead to competitive advantage
Key blocker is commercial – this report presents a solution
No direct follow on from Lord Oxburgh report but agree on need for
separate state backed transport and storage
Uses cost figures published in 2015 – Teesside Collective Blueprint –
recent work shows these could be reduced even further
Focus on developing hubs of power and industry and that industry
could move first

9. Industrial CCS is very cost
competitive
Industrial CCS would cost government £58/t including an £18/t fee
for transport and storage
Potential for government to receive up to £41/t income from carbon
saving
Pilot CCS network in Teesside would cost £110million to build and
£29million year to operate including a Transport and Storage fee
Pilot would capture 11million tonnes over 15 years, the network
would then expand to over 7million tonnes CO2 per year
Pilot could be operational in 6 years
Start small and start cheap in an area that can expand to link power
and industry into a network
“CCS in industry represents some of the
cheapest available carbon abatement in the UK
economy.”
“CCS hubs: a national infrastructure priority”
Lord Oxburgh report
0.5
3
8 11
11
17 40
18 47 58
41
0
10
20
30
40
50
60
Pre-FEED FEED to FID CAPEX grant Subtotal:
capital
payments
CAPEX
repayment
OPEX
passthrough
Subtotal:
cost excl
T&S
T&S
passthrough
Subtotal:
operating
payments
Total lifetime
payments
Carbon
abated ETS
value
Costtogovernment(£/tCO2,real2015)
Costs per tonne to capture, transport, and store
2.4million tonnes CO2 per year from 6 plants on
Teesside

10. INDUSTRIAL CCS BUSINESS MODELS
BUSINESS MODEL CONCEPT DISCUSSION
GCCSI Webinar
14 February 2017

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CONTENTS
1. Overview
2. Industrial Contract Structure
3. Timing and allocation mechanism
4. Cost and expense estimates
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INDUSTRIAL CCS BUSINESS MODELS

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REPORT HEADLINES
 Carbon Capture and Storage (CCS) is a technically proven
technology for application to industrial emissions currently
operating at sites worldwide, and the only option for deep
emissions cuts for many UK industries.
 Total lifetime cost for capture, transport and storage for an
industrial CCS hub is ~£60/tCO2 – appears good value in
comparison to cost of carbon used for UK policy
development which stands at £78/tCO2 by 2030, and other
contracts aimed at decarbonising the energy system.
 Building on Lord Oxburgh report recommendations, a
commercially feasible industrial CCS business model has
been identified and tested through broad stakeholder input
that potentially meets needs of both industry and
Government.
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Three headline points
 Still appears to be the
number one question from
many parties in the UK –
need to keep pushing!
Notes for GCCSI Members
 Engineering study basis is
2015 Teesside Collective
blueprint study from RHI
 Assumes that industry pays
a fee for the proportional use
of large shared T&S
 Reiterate need to separate
business model of capture
from T&S
 Business model tested
through meetings with EIIs,
BEIS, treasury

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ALIGNING PERSPECTIVES
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Report and model targeting a solution to meet intersection of three view points

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CONTENTS
1. Overview
2. Industrial Contract Structure
3. Timing and allocation mechanism
4. Cost and expense estimates
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Separate T&S development
PROPOSED INDUSTRIAL CCS BUSINESS MODEL: OVERVIEW
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EIIs transfer part of CO2 benefit from fitting CCS to Government. Government
provide upfront capital (in two tranches) and also cover on-going opex for [15 yrs].
EII
Government
Invest part capex upfront, receive a fixed return on investment and some EU ETS
downside protection and, after the support period, gain a CCS system long-term
Provide capex and opex support to drive domestic carbon reduction, receive value of
saved CO2 permits, and jobs/industry retention from upgrading industrial infrastructure
Rationale for
[15yr] Contract for CO2 capture
Storage
CCSDC/Gov’t
T&SCo
[100%] Opex
Incl. any fees for
T&S
T&S Fees
In return for transporting
and storing CO2
Transport
[50%]
Capex
EIIEII
EIIs Capture
Plant
Capture
Plant
Capture
Plants[50%] Capex
Returns part of
CO2 savings to
Gov’t Return on
investment
Shaped repayment
of invested capital

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CAPITAL SUPPORT ARRANGEMENTS
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INDUSTRIAL CCS BUSINESS MODELS
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Combination of grant + EII upfront investment repaid over time (as long as capture
plant operates over life of contract). EII incentivised to minimise capex overrun.
Key discussion points Recommended solutions
1 % funding split – EII & Gov’t appetite? 50:50 partnership good starting point for all? Potentially advantageous to
define boundaries on split but flexibility helpful to reflect difference in EIIs
2 Repayment term – EII requires <5yrs,
Government contracts usually longer>?
Shaped payments may help resolve potential issue: Font-loaded capex so
EII recovers capex quickly [e.g. 3yrs] but longer term [e.g. 12yrs] contract tail
3 What return to offer on EII funded portion? Return depends on specific industry; so negotiate or set in pre-FEED –
negotiation could be led centrally or by regions

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“OPEX” PAYMENTS (PASS THROUGH EII)
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All capture related opex expenditure (and any T&SCo fees) passed through to Gov –
propose that FEED study defines categories with open book recovery process
Key discussion points Recommended solutions
1 Does EII pay for use of T&S system? Could have EIIs pay, but with the cost passed through as part of opex
costs to Government (money-go-round)
2 Residual risk (e.g. calculation basis) Simple starting point is to pay reasonable actual costs (open book
process). Alternative elements (e.g. split of actual vs. forecast costs)
may improve incentives.

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LINK TO EU ETS – WHAT IS AN EQUITABLE CO2 RISK SHARE?
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Carbon value shared – CO2 value to Government at least partially offsets ongoing
support costs and value to EII helps to create compelling business case for boards
CO2
emissions
captured
CO2
emitted
With CCS
Free
allowances
Permit
value
returned to
government
CO2
exposure
reduction
CO2
emitted
Free
allowances
Permits
bought to
match CO2
production
Without CCS
CO2
balance for
EII – as free
allowance
% falls
 Clear CO2 emissions reduction from installing CCS – ‘status quo’ would be for this benefit to accrue to
the EII who fitted capture
– As per current ETS rules, industry assumed to receive free allowances even after CCS installed
 We therefore proposed that for early adopters:
– 100% of the value of ‘spare’ free allowances resulting from CCS installation are passed to
Government (value nets off on-going operational support requirements to government); and
– all subsequent carbon value remains with the EIIs, sheltering them from carbon cost risks as long
as capture plant running, so providing incentive to keep the capture unit operational
 Propose that support levels drop for later projects developing after hubs have been committed to

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CONTENTS
1. Overview
2. Industrial Contract Structure
3. Timing and allocation mechanism
4. Cost and expense estimates
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INDUSTRIAL CCS BUSINESS MODELS

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EII CONTRACT ALLOCATION
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Commit to store locations early (but not commit full funding) to minimise pre-feed
requirements, then run parallel processes to deliver industrial + power CCS hub

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CONTENTS
1. Industrial Contract Structure
2. Timing and allocation mechanism
3. Cost and expense estimates
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INDUSTRIAL CCS BUSINESS MODELS

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CCS CAPTURE HUB AT TEESSIDE – FUNDING COST OVERVIEW
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*Average over 15 year support life commissioning in 2025, assumes DECC 2015 elec and CO2 forecasts rising to £47/tCO2 by 2030
**Assumes a T&S network in place and charged at £18/tCO2 [based on latest ETI estimates of levelised T&S cost allowing for ramp up]
CO2 reduction (kt
CO2 /yr)
3 Teesside
blueprint
EIIs
730 £2.2M £15M £110M
£16mpa OPEX
£13mpa T&S Fee**
-£31mpa CO2 saving*
3 follow on
EIIs
1700 £8M £40M £340M
£26mpa OPEX
£31mpa T&S Fee**
-£71mpa CO2 saving*
Industrial
inward
investment
1400
850MW
Teesside
CCGT
2000
H2 for
domestic
heating
1440
Total 7270
Pre-FEED FEED Construction Operation

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COSTS BREAKDOWN: 3 TEESSIDE BLUEPRINT EIIS ONLY
 Costs in £/tCO2 stored over
a 15 year scheme lifetime
– Discount rate of 3.5%
 Total cost compares
favourably to social cost of
carbon from treasury green
book (£78/tCO2 by 2030)
– Carbon permit value clearly
sensitive to carbon market
value used
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Chart shows breakdown of costs by type – ‘net’ cost heavily dependent on CO2 price
*Assumes DECC 2015 reference scenario electricity and carbon price forecasts rising to £47/tCO2 by 2030, and commissioning in 2025
7
9
22
18
41
58
17
0
5
10
15
20
25
30
35
40
45
50
55
60
Abatementcost(£/tCO2)
‘Net’
cost
Carbon
permit
value*
TotalT&S
Fee
OPEXCAPEX
Support
GrantFEED
2
Pre-
FEED
0.4
Numbers for 3 original EIIs
only and don’t include any
cost reduction opportunities
(e.g. opex reduction from
aggregation)

25. WHAT'S NEEDED
1. Focus on regions and clusters – Teesside pursued as a
pilot with agreement to fund FEED (£15million)
2. Agreement to put in place an ICCS funding mechanism
and timeline for implementation
3. Agreement to establish a transportation and storage
company with timeline for implementation
4. Focus on the two stores in the North Sea which have
received large amounts of public funding

27. Please submit questions in English directly through
the GoToWebinar control panel…
• Desperate to read the report now?
• The full report and an executive
summary are both available from the
Teesside Collective website:
• http://www.teessidecollective.co.uk/teessi
de-collective-report-a-business-case-for-a-
uk-industrial-ccs-support-mechanism/
• Be sure to check out Teesside Collective’s
proposition document as well:

28. Further reading…
Reports/ Publications Links
Blueprint for Industrial CCS in the UK
(Teesside Collective, 2015)
This is a collection of reports that the new study
has built on and refined. The reports include:
• Investment mechanism report (Societe Generale)
• Business case (Pale Blue Dot)
• Engineering estimates (Amec Foster Wheeler/ RHI)
• Economic impact report (Cambridge Econometrics).
www.teessidecollective.co.uk/teesside
-collective-blueprint-for-industrial-ccs-
in-the-uk/
A Need Unsatisfied. A blueprint for enabling
investment in CO2
(The Crown Estate and Deloitte, 2016)
A collaborative study investigating the risks of offshore
CO2 storage development and identified potential
commercial models for public and private investment in
CO2 transport and offshore storage infrastructure.
www.thecrownestate.co.uk/media/50
2093/ei-a-need-unsatisfied-blueprint-
for-enabling-investment-in-co2-
deloitte.pdf

29. Further reading…
Reports/ Publications Links
Future of carbon capture and storage in the
UK inquiry - publications
(House of Commons Energy and Climate
Change Committee, 2016)
The UK Government’s Energy and Climate Change
Committee held an inquiry into the near- and long-term
future of carbon capture and storage in the UK following the
cancellation of the UK CCS Commercialisation Competition.
After hearing all the evidence the ECCC left a strong set of
recommendations for the UK Government.
All Evidence:
www.parliament.uk/business/committee
s/committees-a-z/commons-
select/energy-and-climate-change-
committee/inquiries/parliament-
2015/ccs-15-16/publications/nquiry -
publications
Final Report:
www.publications.parliament.uk/pa/cm2
01516/cmselect/cmenergy/542/542.pdf
A strategic approach to carbon capture and
storage
(The UK Committee on Climate Change, 2016)
The CCC’s formal response and recommendations to the
(then) UK Secretary for State for Energy and Climate on the
critical importance of CCS in the UK.
www.theccc.org.uk/wp-
content/uploads/2016/07/Letter-to-Rt-
Hon-Amber-Rudd-CCS.pdf

30. Further reading…
Reports/ Publications Links
Strategic UK CCS Storage Appraisal
(Energy Technologies Institute, 2016)
This project confirmed there are no major technical hurdles
to storing industrial scale CO2 offshore in the UK with sites
able to service mainland Europe as well as the UK.
The 12 month project was delivered by the ETI and funded
with up to £2.5m from the UK Department of Energy and
Climate Change (DECC). It progressed the appraisal of five
selected storage sites towards readiness for Final
Investment Decisions, de-risking these stores for potential
future storage developers.
The detailed reports from the project and the sub-surface
geological models are all publically available – links can be
found on the ETI page linked to here…
www.eti.co.uk/programmes/carbon
-capture-storage/strategic-uk-ccs-
storage-appraisal
The project built on data from CO2Stored - the
UK’s CO2 storage atlas - a database which was
created from the ETI’s UK Storage Appraisal
Project.
This is now publically available and being further
developed by The Crown Estate and the British
Geological Survey.
Information on CO2Stored is available at
www.co2stored.com

31. Further reading…
Reports/ Publications Links
Lessons Learned – Lessons and evidence derived
from UK CCS programmes, 2008-2015
(CCSA, 2016)
Patrick Dixon, former Expert Chair of the Office for CCS
partnered with the CCSA and interviewed the most recent
UK CCS project developers and a number of other
companies with an interest in CCS deployment, in order to
capture important insights into the delivery challenges of
large–scale CCS projects. These are presented in ‘36-lessons
learned’.
Report:
www.ccsassociation.org/press-centre/reports-
and-publications/lessons-learned/
Webinar:
www.globalccsinstitute.com/events/webinar/20
16-09-06-080000/thirty-six-key-lessons-2008-
%E2%80%93-2015-uk-carbon-capture-and-
storage-programmes
‘The Lord Oxburgh Report’ - Lowest Cost
Decarbonisation for the UK: The Critical Role of CCS.
(Report of the Parliamentary Advisory Group on CCS,
2016)
This was the Parliamentary Advisory Group report commissioned by
the UK Government to examine the role of CCS. It found that CCS is an
essential component in delivering lowest cost decarbonisation across
the whole UK economy.
www.sccs.org.uk/images/expertise/reports/oxfo
rd/oxburgh_report_the_critical_role_of_CCS.pdf

32. Please submit any feedback to: webinar@globalccsinstitute.com