Engineering news
The government decision to cancel the £1 billion carbon capture and storage competition in its 2015 spending review will make meeting the UK’s 2050 carbon target more difficult and expensive, according to a report by the National Audit Office.
The DECC’s competition offered £1 billion to support construction of up to two commercial scale Carbon Capture and Storage (CCS) plants in a bid to enable CCS to be cost competitive with other low carbon technologies in the 2020s.
However, the government decided to cancel the competition in December 2015, which came as a shock to industry and those involved in the competition bids.
The National Audit Office (NAO) report, Sustainability in the spending review, said that while HM Treasury raised concerns about the merits of the CCS competition given fiscal constraints in the 2015 spending review, neither DECC nor HM Treasury quantified the cost of delaying large-scale deployment of the technology.
The report said the decision to cancel the competition has seen the loss of up to £100 million of taxpayers’ money that was spent on the competition so far. DECC estimates that the private sector lost a further £80 million that it invested into the competition.
Some of this investment could be useful for future CCS projects, particularly in passing on lessons learned about the technical and project management aspects of the two bids. However, the NAO said that there is a significant risk that the skills and knowledge gained by people working on CCS could be lost as they move on to other projects.
One of the competition projects planned to reuse an oil well for its storage site, however the report has said cancelling the competition means this well could be decommissioned rather than being reused. This would mean any future CCS projects could be more expensive if they need to build new transport and injection sites, rather than using existing wells.
However, the government aims to mitigate this risk by giving the newly-created Oil and Gas Authority the power to manage legacy and decommissioning sites, including considering their potential to be used to store CO2.
Cancelling the competition was also said to have shaken private investor confidence and could mean that government will have to take on more cost for any future CCS policy, said the report. A major impact has also been in the UK’s ability to meet is decarbonisation targets. The report said that as a result there is “no viable way to achieve deep emissions reductions from the industrial sector in the near future”. This means industry will need to buy more carbon permits in the European trading scheme market, increasing its exposure to variations in permit prices.
The report added: “There is now less time to build the CCS infrastructure required for it to contribute to the UK’s decarbonisation target. This could increase the burden on the supply chain, which, according to government advisers such as the Energy Technology Institute, has a high chance of significantly increasing the cost of meeting the 2050 target.”
Dr Luke Warren, Chief Executive of the CCSA, said: “Despite the cancellation of the CCS competition, industry in the UK stands ready to deliver and the Government must now move forward and urgently develop a new and improved approach to CCS that delivers this essential low-carbon infrastructure for the UK economy - recognising the wider benefits of CCS to decarbonise energy intensive industries, power, heat and hydrogen.
“The new Department for Business, Energy and Industrial Strategy will be well-placed to deliver a more holistic and strategic approach to CCS and we look forward to building a constructive relationship with the Department".
Dr Jenifer Baxter, head of energy and environment at the Institution of Mechanical Engineers, said: “While the initial costs of CCS technology are high, we need research and demonstration projects before large technologies can be rolled out commercially. These types of demonstration projects, developed collaboratively with business and universities, will begin to develop skills and expertise in the area as well as trust in the technology. The inertia in moving such technologies forward has the potential to lead to greater engineering skills gaps in the UK a long with higher costs. If we want to meet the UK’s stretching carbon targets, at the same time as having a secure electricity system, we need a diversified energy system and CCS is crucial to this.”