Business Green – By Jessica Shankleman – CCSA accuses government of moving goalposts after reneging on funding commitment made six months ago
As the Chancellor this afternoon delivered his Spending Review, the Department of Energy and Climate Change issued a stock market announcement confirming it has cut the long-running CCS Commercialisation Competition, which was offering up to £1bn of capital to support the design, construction and operation of the UK’s first commercial-scale CCS projects.
“Today, 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,” the statement read.
“This decision means that the CCS Competition cannot proceed on its current basis. We will engage closely with the bidders on the implications of this decision for them.”
The news was not mentioned in the Chancellor’s speech or Treasury’s Spending Review document. However, a spokesman for DECC told BusinessGreen that the move formed part of the decision to cut spending at the department by 22 per cent over the parliament.
The news has come as a huge blow to the CCS industry, which had been hoping to use the funding to develop two CCS clusters in Yorkshire and Peterhead, which advocates of the technology had claimed would be crucial to reducing the carbon emissions from industrial and power plants.
Rumours had been circulating ahead of the spending review that the project may be scaled back, but industry insiders said they were “shocked” the entire funding competition had been shelved.
Dr Luke Warren, chief executive of the Carbon Capture and Storage Association said the news was “devastating”.
“Only six months ago the government’s manifesto committed £1bn of funding for CCS,” he said in a statement. “Moving the goalposts just at the time when a four year competition is about to conclude is an appalling way to do business.”
The Conservative manifesto praised the last government for “committing £1bn for carbon capture and storage”.
“This announcement is a real blow to confidence for companies investing in CCS,” added Warren. “We call on the Government to come forward – as a matter of urgency – with their plans for CCS as this technology is critical for the UK’s economic, industrial and climate policies. Without concrete government support for CCS the UK will lose the opportunity for cost-effective decarbonisation.”
He added that the entire industry has now lost trust in the government’s commitment to the technology, predicting it would be “incredibly hard” for any project to move forward.
“These projects were a matter of weeks from submitting their bids. Three and a half years into a process and it’s changed overnight,” he told BusinessGreen.
“We’ve been in a 10-year process to develop CCS in the UK and we’re approaching the final furlong and right at the last minute government has pulled the funding.”
Separately, one industry source slammed the timing of the announcement. “How can they close the competition five weeks from the deadline for bids, after five years of work and millions invested by private sector?” they asked. How can they make such a move on eve of the Paris Climate Summit, and not even make it clear in Treasury Spending Review documents?”
The move will also been seen as a blow to the UK’s wider decarbonisation efforts. Prime Minister David Cameron has in the past used the potential development of CCS to justify the government’s plans to step up investment in gas infrastructure while rejecting calls for a decarbonisation target for the power sector.
Meanwhile, a number of industries including iron and steel, had identified CCS as a key technology in helping to meet their decarbonisation efforts through the government’s 2050 industrial roadmaps.
Claire Jakobsson, Head of climate & environment policy at EEF, the manufacturers’ organisation, said the cuts were “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,” she said in a statement.
She added that 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.”
Experts have also argued CCS will prove crucial to reducing emissions from baseload power plants and industrial facilities that rely on thermal energy generation.
The move comes just weeks after the government revealed new plans to support CCS on gas powered plants through the same system of subsidy support contracts offered to renewable energy and nuclear generators. However, it remains to be seen if developers will be willing to move forward with CCS plans without additional demonstration funding.
Ministers may be hoping that the potential for support contracts coupled with the recent commitment to force coal plants to close by 2025 if they fail to fit CCS systems could allow the fledgling sector to continue to operate in the UK.
The news brings to an end a lengthy and at times tortuous history for the CCS demonstration funding competition, which has been running for five years and had to be reset once after the government was left with just one bidder.
In the interim, a number of other countries have moved forward with commercial scale CCS projects, with an industry-backed report earlier this month detailing how there were now 15 projects in operation globally capable of capturing up to 28 million tonnes of CO2 emissions a year. A further seven projects are due to come online in the next year and a half, increasing the amount of emissions captured by the industry to 40 million tonnes a year – equivalent to taking eight million cars off the road.