Energy and Climate Change Select Committee slams "snap" decision to pull CCS funding and calls on ministers to deliver alternative strategy
MPs will today accuse the government of jeopardising the UK's climate targets and pushing up the cost of decarbonisation as a result of its controversial "snap decision" to pull £1bn of funding for a carbon capture and storage (CCS) demonstration project.
The Energy and Climate Change Select Committee of MPs is to join the chorus of criticism that followed the government's decision last autumn to halt the CCS funding competition, with the publication of a report on the future of CCS in the UK.
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Angus MacNeil MP, Energy and Climate Change Committee Chair, said the decision to halt the funding competition, which was poised to provide financial support to the proposed White Rose or Peterhead carbon capture projects, could have far-reaching repercussions for the UK's wider decarbonisation efforts.
"If we don't invest in the infrastructure needed for carbon capture and storage technology now, it could be much more expensive to meet our climate change targets in the future," he said in a statement, adding that failure to deliver CCS technology could undermine the government's plans to build a new fleet of gas power plants.
"Gas-fired power stations pump out less carbon dioxide than ones burning coal, but they are still too polluting," he said. "If the government is committed to the climate change pledges made in Paris, it cannot afford to sit back and simply wait and see if CCS will be deployed when it is needed. Getting the infrastructure in place takes time and the government needs to ensure that we can start fitting gas fired power stations with carbon capture and storage technology in the 2020s."
MacNeil also criticised the surprise nature of the decision to halt the competition, arguing it could impact wider energy investor confidence. "The manner in which the government pulled the plug on the CCS commercialisation competition was hugely disappointing," he said. "UK companies had been working towards this for years and were only weeks away from final proposals. The first hint one company had about the decision was when they read a news report the night before. This is the latest in a series of snap decisions that have damaged confidence in the government's energy policy."
The report sets out a series of recommendations designed to ensure new CCS projects can be delivered in the UK in the 2020s.
Specifically, it calls on the government to deliver a new CCS strategy alongside its gas strategy; plan for the transport and storage infrastructure that will be needed alongside CCS projects; engage with the National Infrastructure Commission to explore CO2 transport and storage options; and request that the Commission consults on whether developing CCS infrastructure should be one if its priority areas.
It also argues Ministers should recognise the economic opportunity North Sea oil fields could provide as carbon storage sites and undertake an formal assessment of "the financial and other benefits of using our existing North Sea oil and gas infrastructure to facilitate carbon capture and storage on a commercial scale".
"The department must devise a strategy to ensure carbon capture and storage technology can start delivering carbon savings by the 2020s," said MacNeil. "Only last week Ministers rejected the need for such a strategy, but the industry and investors are crying out for this certainty. Ministers must set out exactly how much of their planned new gas capacity is to be retrofitted with CCS and by when. And the government must let investors know when CCS projects will be able to apply for guaranteed-price contracts alongside other low-carbon energy schemes."
The report was welcomed by trade body the CCS Association (CCSA), which has been fiercely critical of the government's shock decision to pull support for the proposed demonstration projects.
"The Spending Review decision to withdraw funding for CCS has had an extremely negative impact on the industry," said Dr Luke Warren, Chief Executive of the CCSA, in a statement. "What may have seemed like a good short-term saving risks loading significant costs onto the UK economy in the longer-term as the cost of meeting decarbonisation goals will increase substantially if CCS is not available.
"We very much welcome the Energy and Climate Change Committee's call for the UK Government to urgently come forward with a clear strategy for CCS. As today's report has emphasised, such a strategy needs to clearly set out the Government's ambitions for CCS in the near-term and address the challenge of providing transport and storage infrastructure."
Industry insiders said they were particularly pleased with the report's focus on CCS as an infrastructure technology, arguing suggestions the UK could simply purchase carbon capture technologies from other countries in the future underplayed the need for investment in supporting carbon transport and storage capacity. "You simply can't buy CCS infrastructure off the shelf," said one industry source.
The government has maintained the cuts to the CCS competition were necessary as part of a tough spending settlement. However, Energy and Climate Change Minister Lord Bourne indicated late last year that the government was looking at ways to mobilise CCS investment in the future. BusinessGreen understands the CCS industry has been told Ministers are keen to deliver a new approach for supporting the sector "within months, not years".
A DECC spokeswoman confirmed the government was looking at how CCS could still be developed in the UK. "The UK is leading both the EU and the world in setting and meeting the most ambitious carbon reduction targets and we're committed to doing that in a way that is affordable and provides secure energy to our families and businesses," she said. "We haven't closed the door to CCS technology in the UK. However, CCS needs to come down in cost and we are considering the role that it could play in the long-term decarbonisation of the UK."
However, some green groups remain concerned the delay to CCS development will increase the cost of meeting the UK's carbon targets.
"Every credible assessment of actions needed to phase out greenhouse gas emissions highlights an important role for carbon capture and storage; it makes decarbonising the power sector cheaper, and at present it's the the only viable option for some industries," said Richard Black, director of the Energy and Climate Intelligence Unit (ECIU) think tank. "So the Treasury's decision to renege on its promised CCS support is damaging for investor confidence and undermines the government's promise to tackle climate change as cheaply as possible.
"Although it may look a bit pricey up-front, CCS can play a very significant role in solving the energy 'trilemma' - decarbonising, allowing flexible gas-fired power stations to keep running for years which aids energy security, and doing so cost-effectively. Cancelling it shows the folly of basing energy policy on short-term concerns about affordability - especially at a time when energy bills are falling."
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