Hunt urged to heed CfD lessons for carbon capture and storage

Jeremy Hunt has been urged to heed the “failure” of last year’s Contracts for Difference offshore wind auction and ensure government support for carbon capture and storage (CCS) projects contains sufficient leeway to absorb inflation costs.

In a letter to the chancellor of the exchequer, published ahead of Wednesday’s Budget, a trio of industry bodies have called for the government to accelerate the issuing of final investment decisions for the projects and clusters identified in Track 1 of the government’s CCS programme.

The chief executives of the CCS Association, Global Infrastructure Investor Association and Make UK have written to express joint concern about September’s planned timeline for the FIDs.

A “swifter conclusion” to the process is important to bolster market confidence the three bodies write, expressing concern that “investors are wary of messaging coming from government, particularly following the cancellation of HS2, that public funds for CCUS are tight”.

They add that public support for CCUS will largely be in the form of revenue support, which will be paid out after the current fiscal period ends, but will unlock billions of private sector funds.

And pointing to the near tripling in costs for the Netherlands Porthos CCS cluster between the announcement of the project’s initial funding envelope and FID, they write: “We would ask the UK government to learn from recent failures to procure new offshore wind capacity under Allocation Round 5-the importance of flexibility In light of cost inflation and escalation in the raw materials and construction sectors, which are global trends.”

The three signatories also call on Hunt to clarify how future commitments will be funded, without which it is ‘very likely’ that there will not be sufficient deployment of Co2 storage by 2030.