Capturing Carbon At Drax: Delivering Jobs, Clean Growth .

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Capturing Carbon at Drax: DeliveringJobs, Clean growth and Levelling upthe HumberReport prepared for DraxNovember 2020

Capturing Carbon at Drax: Delivering Jobs, Clean growth and Levelling up the HumberExecutive SummaryBackground In November 2019, Drax Group plc (Drax) announced its ambition to become the world’s first carbonnegative energy company by 2030. To achieve this, it is looking to convert its four existing biomass operations at Drax Power Station tocarbon capture and storage (CCS). This technology, also known as BECCS, would generate up to 16million tonnes of ‘negative emissions’ per year – equivalent to the total industrial emissions from theHumber region today. Vivid Economics was commissioned by Drax to quantify the social and economic benefit of deployingBECCS at Drax Power Station. It was also commissioned to provide an estimate for Drax of the socioeconomic benefits of deploying CCS and hydrogen technologies at scale across the wider Humberindustrial cluster. Harnessing hydrogen and CCS technology represents a unique opportunity to build back better as partof the Covid-19 recovery and transform the UK’s most carbon intensive industrial cluster into theworld’s first carbon neutral industrial cluster by 2040. The Zero Carbon Humber Partnership, comprised of 12 leading companies and organisations acrossthe Humber including Drax, have recently submitted a joint public-private sector funded bid wortharound 75m to support the deployment of CCS and hydrogen technologies in the region1. This bidillustrates the significant potential CCS and hydrogen projects present to safeguarding existing jobsand creating new, highly skilled jobs in the region. Vivid Economics’s analysis of the socio-economic benefits of deploying CCS and hydrogen technologiesin the Humber seeks to further develop industry and government’s understanding of the economicopportunity in the region. It complements the Hy-Deploy analysis undertaken by Element Energy forEquinor (Element Energy, 2019) and the forthcoming analysis the Humber LEP and CATCH willundertake as part of their joint Humber Cluster Plan (Humber LEP, 2019b).Building back better at Drax and the Humber industrial cluster As many as 49,700 direct, indirect and induced jobs will be created as a result of deploying CCS andhydrogen technologies in the Humber region. Working in partnership with the UK Government, thesenew jobs could begin to be realised in as little as four years’ time (2024), peaking at 49,700 jobs in2027. These jobs include up to 25,200 high quality jobs in construction, such as welders, pipe fitters, machineinstallers and technicians; with a further 24,500 supported across the supply chain and widereconomy. Developing BECCS at Drax itself would support on average 10,500 direct, indirect and induced jobs peryear during construction between 2024 to 2031, peaking at 16,800 jobs in 2028.1The Zero Carbon Humber Partnership currently comprises of Associated British Ports, British Steel, Centrica Storage Ltd, Drax Group, Equinor,Mitsubishi Power, National Grid Ventures, px Group, SSE Thermal, Saltend Cogeneration Company Limited, Uniper, and the University of Sheffield’sAdvanced Manufacturing Research Centre (AMRC). Further information can be found at https://www.zerocarbonhumber.co.uk.2

Capturing Carbon at Drax: Delivering Jobs, Clean growth and Levelling up the Humber BECCS at Drax would also generate an additional 370 million on average in direct GVA each yearduring the construction period (2024 to 2031) – and an additional 170 million per year and 210million per year in indirect and induced GVA respectively. Total GVA peaks at 1.1bn in 2028. Deploying CCS and hydrogen technologies in the Humber would also deliver a peak of over 3.2 billionper year in direct, indirect and induced GVA in 2027 for the Humber economy.Realising the joint opportunity of Humber and Teesside As part of its commission, Vivid Economics also considered the benefits of rolling out CCS andhydrogen technologies in the Humber and Teesside industrial clusters, utilising shared CO2 transportand storage infrastructure in the Southern North Sea. Developing the Humber and Teesside industrial clusters in parallel would on average support 19,000direct jobs per year during the period 2024 to 2031 (peaking at 30,200 in 2027).Levelling up through CCS and hydrogen At its peak, the Humber and wider UK deployment of CCS and hydrogen technologies could supportover 205,000 direct, indirect and induced jobs and almost 15 billion in direct, indirect and inducedGVA. Developing CCS and hydrogen technologies at Drax and across the wider Humber industrial clustercan help reverse a growing skills and investment gap in the region. CCS and hydrogen technologies have the opportunity to create high quality jobs in the low carboneconomy, during both the construction of projects and their subsequent operation and maintenance.These jobs include welders, pipe fitters and machine installers.Defining jobs1. Direct jobs are jobs supported from direct project expenditure, such as jobs supported when acompressor is purchased for installation on site.2. Indirect jobs are those which are supported from spending in the wider supply chain, such as thosesupported when the manufacturer of the compressor pays for instrumentation to install on thecompressor before it is sent to site for installation.3. Induced jobs are those which are supported from spending in the local economy by employees, suchas when the technician commissioning the compressor on site purchases a coffee at the localsandwich shop.3

Capturing Carbon at Drax: Delivering Jobs, Clean growth and Levelling up the HumberContents1234567Acronyms. 6Introduction. 7The role of BECCS in reaching net zero and regional regeneration . 8Deployment Pathways . 11Direct Impact . 18Wider economic benefits . 24Labour and skills availability . 29Conclusions. 41Summary of Findings . 42Appendix. 44List of tablesTable 1Table 2Table 3UK content by market. 17Jobs Summary. 42GVA Summary. 43List of figuresFigure 1Figure 2Figure 3Figure 4Figure 5Figure 6Figure 7Figure 8Figure 9Figure 10Figure 11Figure 12Figure 13Figure 14Figure 15Figure 16Figure 17Comparison of Drax BECCS deployment scenarios . 12Deployment pathway for Zero Carbon Humber . 13Deployment pathway for Zero Carbon Humber and Net Zero Teesside . 14Deployment pathway at the UK level . 15Direct economic benefits at the Drax level. 20Direct economic benefits of ZCH at the Humber level . 21Direct economic benefits of ZCH at the Humber and Teesside level. 22Direct economic benefits of UK-wide deployment of CCUS and Hydrogen. 23Indirect and induced impact of Drax deployment in the Humber . 26Indirect and induced impact of ZCH deployment in the Humber . 27Indirect and induced impact of ZCH deployment . 28Issues and proposed solutions detailed and discussed in this chapter. 30Skills shortage vacancies in the Humber compared to the Tees Valley and England . 31Sectors hardest hit by the coronavirus in the Yorkshire and Humber region . 34Zero Carbon Humber assessed against Green Stimulus Index job creation criteria . 36R&D investment in Yorkshire and the Humber in 2017 compared to the rest of the UK . 37Unemployment and economic inactivity in the Humber compared to the UK . 38List of boxesBox 1Box 2Acorn cluster . 15HyNET North West cluster. 154

Capturing Carbon at Drax: Delivering Jobs, Clean growth and Levelling up the HumberBox 3Box 4Net Zero Teesside . 16South Wales Industrial Cluster (SWIC) . 165

Capturing Carbon at Drax: Delivering Jobs, Clean growth and Levelling up the HumberAcronymsBECCSBioenergy with carbon capture and storageCAPEXCapital expenditureCCCClimate Change CommitteeCCGTCombined-cycle gas turbineCCSCarbon capture and storageCCUSCarbon capture utilisation and storageDEVEXDevelopment expenditureEPCmEngineering, Procurement, Construction managementETPEnergy Technology PerspectivesEUEuropean UnionFOAKFirst-of-a-kindGVAGross value addedIEAInternational Energy AgencyIIMInvestment Impact ModelM&RMitigation and remediationMMVMeasuring, monitoring and verificationMtpaMillion tonnes per annumNACENomenclature of Economic ActivitiesNOAKNth-of-a-kindNZTNet Zero TeessideO&MOperations and maintenanceOPEXOperating expenditureRD&DResearch, design, and developmentRoWRest of the worldSAMSocial Accounting MatrixSSVSkills shortage vacancyZCHZero Carbon Humber6

Capturing Carbon at Drax: Delivering Jobs, Clean growth and Levelling up the Humber1IntroductionIn December 2019, Drax Group announced its ambition to become the world’s first carbon negative energycompany by 2030 (Drax, 2019). Drax has already invested substantially to convert four of its units from coal tobiomass and began piloting bioenergy with carbon capture and storage (BECCS) in October 2018 at Drax PowerStation inside the Humber industrial cluster (Drax, 2018). Since Drax has the largest biomass power generationunits in the UK, retrofitting its four biomass units with CCS can help accelerate the switch to BECCS-basedcarbon negative power in the UK. Additionally, Drax provides the opportunity for four units of refurbishedbiomass generation at low cost, enabling innovation to spill over to future projects. Achievability of itscompany-wide target is dependent on an effective negative emissions policy and investment framework.Formulating the socio-economic implications of the use of CCS specifically at Drax Power Station thereforeforms a key objective of this study.Several independent experts including the Climate Change Committee, National Infrastructure Commissionand the Electricity System Operator have identified a critical role for BECCS in achieving Net Zero. This isbecause BECCS is the most scalable of all technology options that can deliver ‘negative emissions’ to offsethard-to-decarbonise sectors such as agriculture and aviation (CCC, 2019),(National Grid, 2020),(NationalInfrastructure Commission, 2020).BECCS is also important to the decarbonisation and stability of the power system. This is because of a largerequirement for “zero carbon firm capacity”, to provide the necessary system needs (inertia, adequacy,frequency and reserve), and constraints on the roll out of alternative technologies such as nuclear (siteconstrained), hydro (site constrained), storage/renewables (constrained by intermittency) and gas(constrained by emissions limits).BECCS can play an important role in supporting the development of industrial clusters. By generating a large,stable source of biogenic CO2, BECCS projects can help de-risk CO2 transport and storage networks by creatingeconomies of scale and reliable volumes of CO2 for the network operators.This report sets out the direct and wider economic benefits of the project, along with an analysis of skills andlabour required to achieve the vision of the project. The remainder of the report is structured as follows: Section 4 discusses the direct jobs and Gross Value Added (GVA) benefits of the project at the level ofDrax, the Humber, the East Coast (combination of Humber and Teesside) and UK-wide deployment ofCCS and hydrogen technologies.Section 5 discusses the indirect and induced jobs and GVA benefits of the project at the Drax, Humberand UK-wide levels. These are jobs and GVA created as a result of spending in the wider supply chainand in the local economy.Section 6 discusses the labour, skills and investment gaps in the Humber and ways to fill these gaps inorder to support CCS and hydrogen deployment in the Humber industrial cluster, including on thequality of the jobs and their ability to help achieve a post-COVID recovery.7

Capturing Carbon at Drax: Delivering Jobs, Clean growth and Levelling up the Humber2The role of BECCS in reaching net zero andregional regenerationThe UK needs to decarbonise rapidly if it is to meet its legally binding net zero target. This was legislated inJune 2019, as an amendment to the Climate Change Act 2008 by introducing a target for at least a 100%reduction of greenhouse gas emissions (compared to 1990 levels) in the UK by 2050 (HM Government, 2019).A common finding across scenarios for UK decarbonisation is the requirement for at-scale negative emissions(Vivid Economics, 2019a)(Vivid Economics, 2019c)(CCC, 2019). Recent estimates put the scale of thesenegative emissions at around 90-110 MtCO2-e per annum (CCC, 2018). The ability to achieve this amount ofnegative emissions by growing trees that absorb CO2 still leaves a large gap2 which will need to be met throughbiomass with carbon capture and storage (BECCS) as well as other technologies such as direct air capture withcarbon capture and storage (DACCS). The CCC therefore has recognised the need for BECCS and DACCS,stating that ‘all scenarios require some active removal of GHG from the atmosphere. This enables netemissions to fall faster than gross emissions can be reduced and compensates for residual sources ofemissions’ (CCC, 2019).Using sustainably sourced biomass, BECCS has the potential to deliver a significant volume of negativeemissions needed by the UK to offset emission in hard-to-decarbonise sectors like agriculture and aviation.The CCC in its 2018 bioenergy review state that biomass can be produced and used in ways that are both lowcarbon and sustainable, subject to robust monitoring and governance. (CCC, 2018).BECCS can also provide zero carbon firm power, for which there is large demand in the run up to 2050. TheCCC forecasts that around 150 TWh of firm power will be required by 2050. Firm power is production whichcan be scheduled with confidence well in advance and may continue to play an important role in the UK'spower sector. Alternative sources of firm power are likely to be limited: renewables: land and sea area and feasible deployment rates constrain deploymentnuclear and hydro: limited by site availabilityunabated gas: limited by emissions constraintsdemand side flexibility: limited by the feasibility of demand side participation.An at-scale BECCs plant is therefore a cost-effective choice for the late 2020s on the path to delivering 2050climate targets. BECCS goes beyond the power sector with negative emissions. Negative emissions are likelyto be important in decarbonising Aviation and Agriculture, bridging the gap between these sectors and thepower sector. Without deployment of BECCS at scale, the decarbonisation of industry, buildings and transport(via CCS and Hydrogen), is likely to face higher costs and more constraints in rollout, ultimately potentiallydelaying the achievement of the net zero target.Innovation spillovers for CCSAchieving the UK’s net zero emissions target will involve a major role for industrial clusters. The Government’sIndustrial Clusters Mission aims to create the world’s first net-zero industrial cluster by 2040 (BEIS, 2019).Having set the 2050 net zero emissions target, BEIS are now redesigning decarbonisation and industrial policyto support industrial decarbonisation. Key pillars relevant to the Humber are:2The CCC has indicated that 30,000 hectares of trees will need to be planted every year in order to achieve negative emissions consistent with thenet zero target by 2050 and UK Prime Minister Boris Johnson has committed to planting 75,000 acres (31,000 hectares) per annum as part of theCOVID-19 ‘new deal’ (BBC News, 2020). However, even with 30,000 hectares being planted, there will be a large gap in negative emissions which willneed to be filled by negative emissions technologies.8

Capturing Carbon at Drax: Delivering Jobs, Clean growth and Levelling up the Humber The development of CCS policy support across both power and industrial sectors. Specific CCS policycould raise investment in BECCS Industrial decarbonisation policy, including design of a UK ETS (or similar) and funding for innovativedecarbonisation technologies through, for example, the Industrial Strategy Challenge Fund (HMGovernment, 2017). The broader industrial strategy – which considers decarbonisation but is heavily focused onimproving UK industrial competitiveness and ‘levelling up’ the UK’s regions. Leveraging the UK Government’s climate leadership ambitions for COP 26 through exporting CCSskills, expertise, and technology globallyBECCS projects can play a critical role in supporting CCS and hydrogen clusters around the UK. In the case ofthe Humber industrial cluster, the scale of the Drax BECCS plant would create a significantly larger CCStransmission and distribution network in the region. In conjunction with other projects in the region that canserve as ‘anchor’ loads, they can help de-risk the development of these networks. The development of the CCSinfrastructure can in turn facilitate the use of hydrogen in industry, for those plants where electrification is notpossible and fuel-switching to hydrogen is the preferred and most economically viable option. Additionally,development of the CCS infrastructure can facilitate DACCS, another important negative emissions technologywhich the CCC believes could play a role in meeting 2050 climate targets. Finally, taken together, the Humberan

These jobs include welders, pipe fitters and machine installers. Defining jobs 1. Direct jobs are jobs supported from direct project expenditure, such as jobs supported when a compressor is purchased for installation on site. 2. Indirect jobs are those which are supported from spending in the wider supply chain, such as those