CCS funding removal lacked evidence

10th February 2016


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IEMA

The unexpected government decision to scrap funding for carbon capture and storage (CCS) technology has damaged industry and investor confidence, a group of MPs said today.

A funding pot to support the commercialisation of the technology was cancelled on the day of the autumn statement, and came just weeks before industry was due to submit final bids for the money and after repeated statements in support of CCS by the government.

The cross-party energy and climate change select committee has scrutinised the decision and today published a report on its findings.

The committee specifically requested clarification from the energy and climate department (Decc) on the evidence behind the decision, particularly because CCS was not specifically mentioned in the autumn statement or in chancellor George Osborne’s speech.

However, Decc did not provide a specific answer on this, nor on whether an assessment of the impacts of the decision had been carried out, the committee said.

The decision to axe the £1 billion programme was so sudden that even companies involved in the funding competition only found out about it just before it happened, according to industry figures giving evidence to the committee.

Luke Warren, chief executive of the Carbon Capture and Storage Association, told MPs that his first warning was a sudden lack of engagement from Decc officials earlier in the week of the decision.

‘It was really around the Monday, Tuesday of the spending review that we suddenly started getting a bit nervous.

‘It was very hard to get in contact with people [at Decc], so we sensed that something might have been going on at that point,’ he told the committee.

Richard Simon-Lewis, finance director at Capture Power, which was developing the White Rose CCS project in Yorkshire, one of two projects shortlisted for the funding, said that Decc told the company’s chief executive less than one hour before the announcement was made public.

In the wake of the announcement, Warren complained of ‘radio silence’ from Decc and from the government in general about next steps, though he added that energy minister Andrea Leadsom had attended an emergency meeting of an industry forum.

This evidence raised ‘serious questions’ about the manner in which the government handled the decision, the committee concluded.

‘It is disappointing that companies that had committed years to a government-led competition were only informed of its cancellation on the day of the announcement, when there had been consistent statements by government that it was committed to the commercialisation programme as late as a few weeks prior to the decision,’ the committee said.

It recommends that Decc urgently seeks to build bridges and engage with the industry to discuss next steps for the development of CCS in the UK.

The committee also highlighted concerns by the Committee on Climate Change that CCS is ‘crucial’ to meeting the UK’s carbon budgets at least cost. Decc must promptly devise a new CCS strategy in conjunction with a new gas strategy, it MPs said.

‘Given initial costs and lead-time for projects, if we do not commit to CCS now, we may have to accept that it will not be part of the future of UK energy policy,’ the committee concluded.

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