Two major carbon capture and storage (CCS) schemes look likely to be scrapped after the government withdrew a £1bn funding stream.
Developers behind the projects in Scotland and Yorkshire said it was hard to see a future for their schemes. In 2013 they were chosen as preferred bidders for support through the government’s CCS commercialisation programme.
The Department of Energy and Climate Change (Decc) announced in the wake of last week’s Spending Review that the competition had been terminated.
Thousands of construction jobs were expected to be created on Capture Power’s White Rose scheme in Yorkshire and Shell’s Peterhead project in Aberdeenshire.
Capture Power chief executive Leigh Hackett said: “We are surprised and very disappointed by the government’s decision to cancel the £1bn CCS commercialisation programme more than three years into the competition.
“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.”
A Shell spokesman said: “Shell is disappointed at the withdrawal of funding for the CCS commercialisation competition. We have worked tirelessly over the last two years to progress our plans for this project. It has the potential to bring huge value to the UK, both in terms of immediate emissions reductions and developing knowledge for the benefit of a wider industry.
“Government funding to support this world-first demonstration project, through the competition, was important to achieving the aim of making the technology commercially viable in the shortest possible time.
“While we acknowledge that this decision has been made in the context of a difficult spending review, without that funding, we no longer see a future for the Peterhead project in the near term.”
The White Rose scheme would have involved construction of a stand alone power plant next to the existing Drax Power Station site near Selby. It would have captured about 2M.t of CO2 per year, to be transported through a pipeline for storage under the North Sea.
Shell’s projectwould have seen CO2 captured from a gas turbine at the Peterhead power station and transported to the Goldeneye Reservoir beneath the North Sea.
Carbon Capture & Storage Association chief executive Luke Warren said scrapping the government funding was “devastating”.
“Only six months ago the government’s manifesto committed £1bn of funding for CCS,” he said.
“Moving the goalposts just at the time when a four-year competition is about to conclude is an appalling way to do business.
“This announcement is a real blow to confidence for companies investing in CCS. We call on the government to come forward - as a matter of urgency - with their plans for CCS as this technology is critical for the UK’s economic, industrial and climate policies. Without concrete government support for CCS, the UK will lose the opportunity for cost-effective decarbonisation”.
Decc said in a statement: “Following the chancellor’s Autumn Statement, HM Government confirms that the £1bn 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.”
Announcing the preferred bidders back in 2013, the then energy secretary Ed Davey said the CCS industry would “help reduce carbon emissions and create thousands of jobs”.
“These two are major infrastructure projects potentially worth several billion pounds and could support thousands of construction jobs over the next few years,” he said at the time.
A decision about whether to support one or both of the projects was expected in early 2016.