Notice

Net Zero North Sea Storage Limited: Notice of proposal to grant a carbon dioxide transport and storage licence

Published 6 September 2024

The Secretary of State for Energy Security and Net Zero gave notice on 6 September 2024, of the proposal to grant a carbon dioxide transport and storage licence to Net Zero North Sea Storage Limited.

1. The Secretary of State gives notice pursuant to section 9(4) ^{[footnote 1]} of the Energy Act 2023 (“the Act”), of the proposal to grant a carbon dioxide transport and storage licence (“the Licence”) under section 7 of the Act to Net Zero North Sea Storage Limited, company number 12473084, whose registered office is situated at Chertsey Road, Sunbury On Thames, Middlesex, United Kingdom, TW16 7BP (“the Company”).

2. The Licence, if granted, will authorise the Company to operate sites for the disposal of carbon dioxide by way of geological storage and provide a service of transporting carbon dioxide through pipes to such sites (“the Transport and Storage Network”), pursuant to its obligations under the Licence. A Company operating a site for the disposal of carbon dioxide by way of geological storage requires both a licence under section 7 of the Energy Act 2023 and a carbon storage licence under section 18 of the Energy Act 2008. The granting of a carbon storage licence is subject to a separate process. For the avoidance of doubt, this notice of intent relates only to the licence under section 7 of the Energy Act 2023.

3. If granted, the Licence will provide the framework for the Company to receive an “Allowed Revenue” ^{[footnote 2]} that the Company will be able to recover through use of system charges paid by Users of the Transport and Storage Network. The Licence will also establish the standard of service to be provided by the Company and other requirements which the Company must comply with. The Licence would be regulated by the Gas and Electricity Markets Authority (“GEMA”) in accordance with Part 1 of the Act.

4. The reason why the Secretary of State proposes to grant the Licence is to facilitate the deployment of carbon dioxide transport and storage infrastructure. This will enable the contribution of carbon capture, usage and storage (“CCUS”) to accelerating our journey to net zero and assisting in meeting the Secretary of State’s duties under sections 1 and 4(1)(b) of the Climate Change Act 2008 in relation to carbon targets and budgets. The deployment of CCUS is expected to contribute to economic growth in the United Kingdom’s industrial heartlands, including a just transition for the industries operating on the United Kingdom Continental Shelf.

5. The proposal to grant the Licence follows the decision, announced in October 2021 ^{[footnote 3]} that the HyNet NW cluster and the East Coast Cluster (ECC) had been confirmed as “Track-1” CCUS clusters through the Department for Energy Security and Net Zero’s CCUS Cluster Sequencing process. The Track-1 clusters were identified as the best suited for deployment in the 2020s against the published eligibility and evaluation criteria and were selected to be taken forward into negotiations to receive financial support under the CCUS Programme, subject to matters including subsidy control requirements and value for money assessments. If the Licence is granted, the Company will construct, commission and operate the Transport and Storage Network that forms part of the East Coast Cluster, and decommission the infrastructure at the end of its operational life.

6. The CCUS Cluster Sequencing process was developed following a public consultation in 2019 on commercial models for CCUS deployment ^{[footnote 4]}. The approach to Cluster Sequencing followed a market engagement exercise in early 2021 ^{[footnote 5]}.

7. Since the decision on Track-1 clusters was announced in October 2021, negotiations on support for the Company, and the drafting of the Licence terms and conditions have progressed. The Department published indicative Heads of Terms for the Licence in December 2023, alongside updates on the commercial model for carbon dioxide transport and storage. ^{[footnote 6]} The Licence terms and conditions are now sufficiently developed that the Secretary of State hereby gives notice under section 9(4) of the Act of the proposal to grant the Licence.

8. The draft “template” Licence at Appendix 1 sets out the draft terms and standard and special conditions for the Licence proposed to be granted by the Secretary of State to the Company. The draft conditions have been categorised as “standard” and “special” conditions, although these “standard” conditions are not at this stage being determined as standard conditions pursuant to section 12 of the Act. Updates to this draft may be required as a result of ongoing engagement, to reflect the development and Parliamentary approval of applicable legislation, or to take account of representations received following issuing this notice.

9. The final decision to grant the Licence to the Company remains subject to approval by the Secretary of State, sufficient funding arrangements, subsidy control compliance and value for money assessments, as well as satisfaction of various conditions precedent, including the necessary permits and consents being in place.

10. The Licence aims to provide the Company and its investors with long-term revenue certainty to establish and to potentially scale up carbon dioxide transport and storage infrastructure, while regulation of the Allowed Revenue by GEMA through Periodic Reviews will prevent monopolistic pricing of transport and storage services and provide important protections to Users of the Transport and Storage Network.

11. Any representations or objections with respect to the proposal to grant the Licence must be made on or before 4 October 2024 and should be addressed to ts.engagement@energysecurity.gov.uk.

12. This Notice, and the form of the draft template Licence attached to it, does not constitute the determination of standard licence conditions under section 12 of the Act, and this Notice is made without prejudice to the Secretary of State’s discretion to determine at a future date the conditions that are to be the standard conditions of licences.

Appendices to the notice

• Appendix 1: Draft template Licence
• Appendix 2: Updates to date to the Licence since the heads of terms published in December 2023

1. References in this notice to sections 7-12 (inclusive) of the Energy Act 2023 are to those sections as modified in accordance with section 16 of, and Schedule 1 to, the Act. ↩

2. The amount of money that the Company can earn on its regulated business and recover from Users of the Transport and Storage Network. ↩

3. UK Parliament written statement made on 19 October 2021: Climate Change Update ↩

4. GOV.UK consultation: Carbon capture, usage and storage (CCUS): business models  ↩

5. GOV.UK consultation: Carbon capture, usage and storage: market engagement on cluster sequencing ↩

6. Carbon Capture, Usage and Storage: An update on the business model for Transport and Storage - explanatory note and indicative heads of terms ↩