Is this the end of the road for CCS in the UK?

Successive governments lauded the potential of CCS, then this government pulled the cash. Mathew Beech reports.

It’s April 2012 and energy secretary Ed Davey has proudly proclaimed that the government’s latest carbon capture and storage (CCS) competition will ensure the UK develops a “new world-leading CCS industry in the 2020s”.

Fast forward to 25 November 2015, and that dream finally died when the Department of Energy and Climate Change (Decc) scrapped its £1 billion competition to help develop the technology.

What changed in the 43 intervening months? What led the government to abandon a technology once deemed “crucial” to meeting the UK’s climate change goals?

The answer is simple: money.

The money required to develop the technology into a full-scale demonstration plant, and then to lead it down a path to commercial competitiveness, was deemed to be too much. In a world where the Conservatives are aiming to close the £69 billion annual deficit, ring-fencing £1 billion for the technology seemed too big a luxury.

In a statement to the London Stock Exchange, Decc said: “Following the chancellor’s autumn statement, the government confirms that the £1 billion ring-fenced capital budget for the CCS competition is no longer available.

“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.”

Following up this statement at prime minister’s questions on 16 December, David Cameron said: “In government you have to make tough choices. You have to make decisions about technology that works and technology that is not working.” He added that the government was putting money into innovation, small nuclear reactors and heat networks, projects that “will make a difference”.

This appeared to have put the CCS agenda to bed. Three different governments – Labour in 2007, the coalition government, and now the Conservative administration – have all tried to back CCS with two £1 billion competitions. All have seen the money earmarked to support it taken away before the Holy Grail of a fully functioning demonstration plant has been developed.

Even before the news that the government was withdrawing the funding, Drax, a major partner in the White Rose CCS project, announced it was pulling out of the scheme.

In September last year, the generating giant said it would not continue with plans to develop the project beyond the initial development phase, blaming the government’s shift in energy policy.

Drax operations director Pete Emery said at the time: “The decision is based purely on a drastically different financial and regulatory environment. We must put the interests of the business and our shareholders first.”

Leigh Hackett, chief executive of Capture Power – a company formed by GE, Drax and BOC to be responsible for the development, implementation and operation of the proposed White Rose CCS Project – said: “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.”

Nonetheless, there is still hope for the technology and its development in the UK.

Responding to a question from SNP energy spokesperson Callum McCaig, energy secretary Amber Rudd said the government does not rule our CCS in the future and added: “We recognise that CCS will still have an important future in the low carbon economy.”

Shell and SSE, the two companies behind the Peterhead project, have also said they remain committed to it and will honour the contract entered into with the government as part of the competition. This includes the sharing of all key knowledge gathered during this phase.

The government, as recently as October, was still awarding cash grants to CCS projects. In this instance it was £1.7 million to three companies as part of the energy entrepreneurs fund, which supports the development and demonstration of CCS technologies with the aim of reducing costs.

The need for CCS, which was the original reason why the UK government set aside the £1 billion to help its development, still stands. The need is to decarbonise an economy and a generation fleet that is still heavily reliant on fossil fuels. Without it, the costs of halving carbon emissions by 2050 are predicted to be 70 per cent higher.

The need to decarbonise, especially with the UK’s legally binding commitment contained in the 2008 Climate change Act, could once again drive interest in CCS. As could the potential to claim a stake in the still embryonic CCS market, one that Decc predicts could be worth between £3 billion and £6.5 billion a year to UK firms by the late 2020s. With these big incentives still in play, the final nail is not yet in the CCS coffin.