Government reneges on £1bn for carbon capture and storage

Government funding to support the development of carbon capture and storage and storage technology has been withdrawn, a move that could lock industries into paying higher carbon taxes.

In a regulatory note to the London Stock Exchange, the government said: “Following the chancellor’s Autumn Statement, HM Government confirms that the £1bn ring-fenced capital budget for the Carbon Capture and Storage (CCS) Competition is no longer available.

“This decision means that the CCS Competition cannot proceed on its current basis.” 

Peterhad CCGT plant, Aberdeenshire

Today’s announcement coincides with a pledge by chancellor George Osborne to double spending on energy research, including a major commitment to small modular nuclear reactors.

The UK government originally planned to use the £1bn competition to fast track the development of CCS technology, which could allow the safe removal and storage of harmful carbon emissions from coal and gas plants.

In 2012 four projects were shortlisted for the next phase of the competition, with Shell and SSE’s CCS scheme at Peterhead and Capture Power Ltd’s White Rose project at Drax Power station emerging as front-runners.

White Rose CCS suffered a set back in September 2015 when project partner Drax withdrew from the project, a decision reportedly driven by the government’s reductions in renewables subsidies.

Commenting on today’s announcement, Claire Jakobsson, head of Climate & Environment Policy at EEF said: “The cuts to the UK’s Carbon Capture and Storage (CCS) funding are extremely disappointing, whilst we understand that government has had to make some extremely tough decisions, this one is not in the long term interests of the UK economy or energy consumers.

“CCS has the potential to halve the costs of decarbonising the UK economy by 2050, which amounts to £32bn a year by 2050. In choosing to save a relatively small sum of tax payer money in 2015, government is unnecessarily committing vast amount of future energy consumers’ money.

“Only last week the energy secretary’s ‘reset’ speech pledged to do away with writing of ‘blank cheques from the consumer, it is difficult to see today’s decision as not running counter to this principle.

“For many sectors, such as steel and cement, there are simply no other options available for cutting emissions. No CCS locks many industrial sectors into a carbon intensive future paying increasing amounts in carbon taxes.”

CCS plant

Osborne today delivered his combined Spending Review and Autumn Statement, pledging to more than double support for low-carbon electricity and renewables, and increase support for climate finance by over 50% over the next five years.

Stuart Haszeldine, SCCS (Scottish Carbon Capture & Storage) said: “It has now become clear that announcements made by Chancellor George Osborne regarding energy innovation and support for low-carbon electricity were economical with the facts about support for Carbon Capture and Storage (CCS) in the UK.

“A focus on CCS research and development is not enough to deploy this essential climate change technology – project developers and others in the CCS community are united in their stance that large-scale projects are needed on the ground.  Multiple analyses have demonstrated that this is a feasible and cost-effective method to decarbonise not just UK electricity, but also heat and industry, whilst driving improved efficiency.

“The UK government’s reliance on nuclear power to deliver our future electricity needs depends entirely on whether projects such as Hinckley Point can actually be delivered on time. All of the current three versions of this power plant under construction globally are taking double the anticipated timescales at treble the anticipated price.  Small modular nuclear power, although promising, remains entirely unproven in a commercial supply setting. If new nuclear cannot be delivered at scale and on time, the UK runs the future risk, as of today, of becoming a distressed buyer of rapidly built gas power plant, which locks in UK carbon emissions for the next 40 years. To me, this does not look like prudent management.

“The new electricity supply landscape proposed by the Government, but a long way from being delivered, means all low-carbon electricity providers should be bidding into the supply market under equal terms. This means that low-carbon renewable providers must provide reliable ‘ firm’ power delivery and that CCS projects should receive the multiple underwriting and favourable contract benefits gifted to Hinkley and its successors. CCS can deliver this and it would be perverse to prevent it from doing so.”

“The cancellation also leads to questions about the compatibility of recent energy policy announcements with the UK’s legislated climate change targets. Without CCS available, the government’s plans to use gas as a ‘bridge’ to a low carbon future will have much more limited mileage in the medium term,” added Prof Jim Watson, director of the UK Energy Research Centre.

We will feature full coverage of relevant aspects of the Autumn Statement and Spending Review on the website tomorrow.