Action urged before CCS network code consultation closes

Stacey Collins of Pinsent Masons, who advises businesses on carbon capture and storage (CCS) projects, issued the call for action ahead of the end of an ongoing UK government consultation on the CCS Network Code.

The government is currently in the process of establishing contractual arrangements with multiple would-be transport and storage (T&S) networks operators, who would be tasked with operating different sections of the pipeline and storage infrastructure across country. Those T&S network operators will be placed under a licensing condition to offer access to their network in accordance with the terms of the CCS Network Code when it is finalised.

The draft code, which the government opened consultation on last month, is an extensive document. Among other things, it sets out the process by which users of a T&S network – such as industrial manufacturers that capture the carbon emitted from their production site – will be able to connect to that network. It also deals with matters such as the allocation of capacity from the T&S networks to users, as well as the charging, invoicing and payment regime that will apply.

In its consultation paper, the government highlighted that the proposed CCS Network Code makes provision for the fact that not all users of the new infrastructure will make use of the onshore transportation system. Some users, known as ‘non-pipeline transport’ (NPT) users, are expected to seek connection directly with the offshore pipeline and storage network only. The draft code provides for two different types of T&S charges to account for this.

The potential for liabilities to arise between users and operators of the T&S networks would be limited under the proposed code, both in scope and in financial terms. For example, liability would be excluded in respect of several kinds of indirect and consequential losses, such as loss of revenue and business interruption, while claims pertaining to liabilities in respect of physical damage to property would be capped at £20 million for users and £100 million for operators.

The government’s consultation on the draft code closes on 16 February 2024.

The CCS Network Code is only one part of a wider suite of measures the government is deploying to support the development of the CCS industry in the UK.

The government pledged £20 billion of public funds for carbon capture use and storage (CCUS) projects in the 2023 Budget, and it has been engaging with industry on the development of CCUS-related business models that will offer financial support to businesses that invest in the technology and, in doing so, help the government meet its climate targets. A new Energy Act passed into law in October 2023 provides the legal basis for those business models to be developed.

The government has also updated planning policy to make it clearer how planning policy relevant to ‘nationally significant’ energy infrastructure projects applies to CCS projects that are brought within the scope of that consenting regime.

In addition, the government is seeking to develop four carbon capture use and storage (CCUS) clusters around the UK, via two separate processes. Under the ‘track-1’ initiative, two clusters – East Coast and HyNet – are expected to be operational by the mid-2020s. Last month, the government outlined plans to expand the HyNet cluster to a wider number of projects.

The ‘track-2’ initiative envisages two further CCUS clusters – Viking and Acorn – being operational by 2030, with the government indicating last month that it would be looking for those potential clusters to submit plans for assessment of an ‘anchor phase’ of initial capture projects in “early 2024”.

Stacey Collins said: “The government has set out ambitious plans to develop a thriving CCS and CCUS market in the UK, with the vision it outlined late last month crystallising not just the environmental issues at stake, but the economic ones too – the government envisages that CCUS can provide a £5 billion boost to the UK economy each year by 2050.”

“While the government is laying the groundwork for the market to develop, its vision provides helpful insight into how it sees the industry growing beyond the scope of the clusters and ultimately becoming self-sustaining. Industry itself has a key role to play in shaping how the market develops and it is in this context that businesses seeking to become T&S network operators or users should take the chance to engage with the government’s ongoing consultation on the CCS Network Code. Once the code is in force there will be limited opportunity to materially change it, so now is the time to have your say,” he said.