SUMMARY
Despite spending £168 million, the Department for Business,
Energy and Industrial Strategy has failed to support the
construction of the UK’s first large-scale carbon capture and
storage (CCS) projects.
After its first competition for support ended in 2011, the
Department launched its second competition without being clear
with HM Treasury on the support that would be available to
successful CCS projects through bill payer-funded contracts for
difference once they were up and running, or ensuring that its
proposed risk allocation was viable for developers.
These design weaknesses contributed to the Treasury’s decision,
as part of the 2015 Spending Review, to bring the competition to
an early end by withdrawing the £1 billion capital grant it had
previously made available to contribute to the projects’
construction costs.
This was the latest in a series of decisions that indicate the
Treasury is having undue influence on the government’s energy
policy.
Halting CCS’s deployment means that the UK will have to pay
billions of pounds more to meet its decarbonisation targets, has
missed opportunities to be at the forefront of a growing global
industry, and has damaged investors’ confidence in working with
the government on CCS in the future.
There is now a major gap in the government’s decarbonisation
plans, and we urge the Department to set out as soon as possible
how this gap will be filled.
