Advocates for the UK's fledgling carbon capture and storage (CCS) industry have this morning launched a blistering attack on the government's decision to axe a high profile £1bn funding programme, accusing it of "shabby" behaviour and short-sighted policymaking.
Giving evidence to the energy and climate change select committee, industry experts united in condemning the government's shock decision last autumn to axe the long-running £1bn funding competition.
Ministers later justified the move on cost grounds, with Prime Minister David Cameron telling the Liaison Committee of MPs earlier this month that the government had decided CCS was not cost effective at this stage. He said the low carbon power provided by the two projects in the running for the CCS funding would cost around £170/MWh, far in excess of the subsidies on offer for nuclear or offshore wind energy projects.
However, a raft of industry experts told MPs the cost of meeting climate targets would increase overall without CCS, with some warning it would prove all but impossible to deliver on long term climate goals without carbon capture capabilities for industrial firms.
The evidence session came as it emerged that the Energy Technologies Institute (ETI) has written to the Committee warning a 10 year delay to the deployment of CCS in the UK would add between £1bn and £2bn a year to the cost of meeting carbon targets. "Delaying the development of CCS in the UK by 10 years has a high chance of significantly increasing the cost of carbon abatement to the UK economy," the letter states. "Delay adds an estimated £1-2bn per year throughout the 2020s to the otherwise best achievable cost for reducing carbon emissions (an increase of 15-25 per cent above the baseline)."
Industry players also criticised the government's handling of the announcement the £1bn of funding was to be scrapped, warning it would undermine confidence among infrastructure investors.
Richard Simon-Lewis, financing director for Capture Power, one of the consortia in the running for the CCS funding, said the news it was to be scrapped was only confirmed to the developer an hour before the public stock exchange announcement.
Chris Littlecott, programme leader for fossil fuel transitions and CCS technology at think tank E3G, offered a blunt assessment of the government's management of the announcement.
"The treatment of the projects was shabby, it reflects very badly on the UK government's relationship with business and their ability to drive long term investment," he said. "This was a fundamental change in government policy masquerading as a spending decision."
He added that the move suggested the "government appears now not to believe in its own energy policy", given the centrality of CCS to meeting long term carbon targets set out in the Climate Change Act and its planned role in the government's electricity market reform programme.
Luke Warren of the CCS Association said the technology was likely to be crucial to the UK's carbon targets given it could help decarbonise industrial plants while also offering baseload power generation. He added it was critical the government come forward with a new strategy for delivering CCS in the UK as soon as possible.
DECC was considering a response at the time of going to press.
The hearing came as there was some better news for heavy industry, as the government yesterday launched its compensation scheme for energy intensive industries, inviting them to apply for exemptions from green levy costs.
However, Claire Jakobsson, head of energy and environment at manufacturers' association EEF, said further steps were still needed to help ensure UK energy prices remain competitive.
"The opening of the application process for energy intensive companies to receive compensation in relation to the costs of the Renewables Obligation and Feed-in-Tariff schemes is another step towards establishing a level playing field for industry here in the UK," she said. "It has been a long and complex journey to reach this stage with compensation first promised two years ago and industry having been raising concerns for significantly longer. Industry will be relieved that it can finally start receiving compensation payments reducing the burden of policy costs that it has been saddled with for too long.
"However this is not 'job done'. There remains an outstanding EU state aid application for which approval is required to complete the package and provide compensation to the full range of companies that need it. We urge government to bring about a satisfactory conclusion to this as soon as possible."
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