The UK government rocked the industrial sector this week with the news that it had scrapped its £1 billion capital budget for the Carbon Capture and Storage (CCS) Competition.
The competition was announced three years ago in a bid to boost the Carbon Capture and Storage industry to help reduce carbon emissions and create thousands of jobs.
“The £1bn ring-fenced capital budget for the Carbon Capture and Storage (CCS) Competition is no longer available,” the government said in a two-line announcement issued alongside this week’s Autumn Statement.
Several studies show that CCS is the cheapest route to decarbonising our base load electricity system in the short term. However, the cost goes up rapidly the longer we delay and cutting funding to CCS commercialisation is false economy. This decision jeopardises the economic potential of an industry that could be worth over £30 billion by 2030.
Geoff Maitland, vice chair of IchemE’s Energy Centre
“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 government said.
CCS technology has the potential to provide safe removal and storage of harmful carbon emissions from coal and gas fired power stations and heavy industry, and is considered crucial to meeting carbon reduction targets. Established in 2012, there were two remaining bidders in the competition, which was close to being finalised.
One of these is the 426MW White Rose CCS project, which is being developed to demonstrate the commercial viability of carbon capture technology.
In September, energy firm Drax pulled its investment in the project citing a “drastically different” financial and regulatory environment.
The remaining consortium involved in the project, Capture Power, expressed disappointment in this week’s announcement.
“We are surprised and very disappointed by the Government’s decision to cancel the £1bn CCS Commercialisation Programme more than three years into the competition,” said Leigh Hackett, chief executive of Capture Power.
“It is too early to make any definitive decisions about the future of the White Rose CCS Project, however, it is difficult to imagine its continuation in the absence of crucial Government support.”
The other contender in the CCS competition was Shell and Scottish and Southern Energy’s (SSE) Peterhead CCS in Aberdeenshire, however Shell said this week that without government funding, it did not see a future for the Peterhead project.
Luke Warren, chief executive of the Carbon Capture Storage Association described the government’s announcement as the darkest day for CCS in UK history.
“The same words keep repeating themselves; devastated, sad, bewildered. The question; Why? And why now? Amazingly, a day later and the silence from Government is deafening,” he said.
The decision was also greeted with disappointment from professional bodies across a range of industries.
The Institution of Chemical Engineer’s (IChemE) Energy Centre described the move as “extremely bad news for the UK and its ability to decarbonise its energy system”.
The centre acknowledged that while developing CCS was a high-risk venture with large, upfront costs, it said that the decision to cut the funding for a competition to establish CCS technology represented “a false economy”.
“Despite moving as quickly as possible to renewable energy and nuclear, we will continue to use fossil fuels to meet base load demand and keep the lights on for decades to come,” said IChemE past president and vice-chair of the Energy Centre Board, Geoff Maitland.
“Without CCS for both coal and gas-fired power stations, we will fail to meet UK carbon emissions targets.
“Several studies show that CCS is the cheapest route to decarbonising our base load electricity system in the short term. However, the cost goes up rapidly the longer we delay and cutting funding to CCS commercialisation is false economy. This decision jeopardises the economic potential of an industry that could be worth over £30 billion by 2030.”
Jenifer Baxter, head of energy and environment at the Institution of Mechanical Engineers, said: “This is very disappointing news. There have been concerns about the initial costs of this technology, but we will only be able to properly assess the viability of UK Carbon Capture and Storage upon the successful delivery of a demonstration project. Demonstration projects are a recognised requirement for full commercialisation of all large technologies, without such, new energy management technologies will remain in the shadows.
“The Government has outlined plans for the winding-down of coal-fired generation. With just one nuclear reactor currently being planned, the UK looks set to experience a new dash for gas. Without CCS technology this will mean we are locking ourselves in to relying on unabated fossil fuel power for generations to come,” she added.