Despite spending £168 million, the Department for Business, Energy and Industrial Strategy has failed to support the construction of the UK’s first large-scale carbon capture and storage (CCS) projects. After its first competition for support ended in 2011, the Department launched its second competition without being clear with HM Treasury on the support that would be available to successful CCS projects through bill payer-funded contracts for difference once they were up and running, or ensuring that its proposed risk allocation was viable for developers. These design weaknesses contributed to the Treasury’s decision, as part of the 2015 Spending Review, to bring the competition to an early end by withdrawing the £1 billion capital grant it had previously made available to contribute to the projects’ construction costs. This was the latest in a series of decisions that indicate the Treasury is having undue influence on the government’s energy policy. Halting CCS’s deployment means that the UK will have to pay billions of pounds more to meet its decarbonisation targets, has missed opportunities to be at the forefront of a growing global industry, and has damaged investors’ confidence in working with the government on CCS in the future. There is now a major gap in the government’s decarbonisation plans, and we urge the Department to set out as soon as possible how this gap will be filled.
25 April 2017