£168m wasted on failed carbon capture and storage competitions
Image credit: Arnold Paul
Two failed competitions to develop carbon capture and storage (CCS) technology in the UK over the past six years cost the taxpayers approximately £168m due to the government’s inability to agree on terms.
According to a report by the National Audit Office (NAO), the two competitions, the second of which was cancelled in 2015 days before the kick-off of the UN climate summit in Paris, produced zero value for money.
CCS makes it possible for emissions from power plants and heavy industry to be captured and stored permanently underground. Though challenging and expensive to develop, the technology is considered vital by experts for the UK to meet its emissions targets.
The UK has a legally binding target to cut emissions by 80 per cent from 1990 levels by 2050. The UK Department for Energy and Climate Change (DECC), now part of the new Department for Business, Energy and Industrial Strategy (BEIS), estimated in 2015 it would cost the country £30bn more to meet the goals without the deployment of CCS in the power sector.
“Taxpayers will be alarmed that disagreement between departments means the taxpayers have little to show for the £100m the government spent,” Meg Hillier, Chair of the Committee of Public Accounts, said in a statement referring to the second competition.
The NAO said that the DECC launched the second CCS competition in 2012 without having previously agreed on costs with the Treasury.
The DECC originally estimated the government support needed to deploy CCS technology would cost taxpayers between £2bn and £6bn over 15 years. However, the number grew to £8.9bn by 2015, prompting the Treasury to pull out.
“There are undoubtedly challenges in getting CCS established, but the department faced an uphill battle as a result of the way it ran the latest competition,” said Amyas Morse, head of the NAO.
“Not being clear with HM Treasury about what the budget is from the start would hamper any project and caused particular problems in this case where the upfront costs are likely to be high.”
Two projects were applying for funding through the competition – the White Rose consortium in North Yorkshire, which planned to build a new coal plant with the technology, and Shell, aiming to retrofit an existing SSE-owned gas plant in Peterhead, Aberdeenshire, with CCS technology.
The Treasury reasoned there were other better uses for the £1bn needed to continue with the project and concluded it was perhaps too early for CCS to be deployed cost-efficiently.
An earlier attempt by the DECC to develop CCS collapsed in 2011 after a consortium including National Grid and Iberdrola’s Scottish Power pulled out. The DECC spent some £68m on the project.
“The department has now tried twice to kick-start CCS in the UK, but there are still no examples of the technology working,” Morse said adding that all the two competitions produced was some limited improvement in the understanding of the risks and challenges related to the deployment of CCS.
The fate of the two competitions, the NAO stated, will have a detrimental effect on the willingness of investors to support the development of CCS in the UK in future.
“The Department (BEIS) must learn lessons from this experience if it is to stand any chance of ensuring the first CCS plants are built in the near future,” Morse added.
The NAO believes it is ‘currently inconceivable’ to develop CCS without Government support.
“We haven’t closed the door to carbon capture and storage technology in the UK, but decisions had to be taken to control Government spending and protect consumer bills,” said a Beis spokesman.
“This is why the Government ended the funding for the CCS competition, and ensured taxpayers were protected from significant costs when the competition closed.”