The UK Government has been accused of wasting an opportunity to secure an alternative future for the North Sea by axing £1billion of funding for carbon capture and storage.
A damning report by the Commons energy and climate change committee published today concludes that maximising the use of the existing oil and gas infrastructure would have allowed second-phase CCS project costs to reduce quickly.
It also warns the last-minute plug-pulling will delay CCS development in the UK, making it “challenging” to meet the climate change commitments agreed at last year’s Paris summit.
And it urges the Department for Energy and Climate Change (Decc) to “mend bridges” with the industry in an effort to repair investor confidence.
Plans to build a ground-breaking CCS plant at Peterhead came to a halt following the 11th hour news that the £1billion competition had been pulled.
It was announced on the Stock Exchange the same day as the chancellor’s spending review in November.
The report, based on industry representatives’ evidence, highlights the importance of transport and storage infrastructure to any future CCS development.
It argues: “Having this infrastructure in place and maximising the use of the UK’s existing North Sea assets would have allowed second phase project costs to fall rapidly.
“With both the White Rose (in Yorkshire) and Peterhead projects cancelled, the opportunity to develop this infrastructure in the first half of the 2020s is likely to have been missed.
“By pulling the plug on the competition, the UK Government may have lost an opportunity to exploit its North Sea capital, which could have generated additional revenues.”
Committee chairman Angus MacNeil said it could be much more expensive to meet climate change targets in the future without investment in infrastructure now.
The Western Isles MP added: “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 CCS technology in the 2020s.”
Energy Secretary Amber Rudd announced last year that gas would replace polluting coal plants by 2025.
Today’s report calls on Decc to devise a new strategy for CCS in conjunction with one for gas and assess the “financial and other benefits of using our existing North Sea infrastructure”.
It also points to the possible loss of EU funding and potential financial penalties through cost recovery claims.
And it criticises the “disappointing” way companies that had committed years to a government-led competition were only informed it had been cancelled on the day of the announcement after
“consistent” statements suggesting the Tories remained on board.
The report goes on: “Decc must now work to mend bridges and proactively engage with industry in a consultative way to discuss the next steps for businesses involved with the development of CCS in the UK.”
Scottish Energy Minister Fergus Ewing urged the UK Government to continue to review options to keep the Peterhead project alive.
He described CCS as necessary to a successful, low-cost global response to climate change.
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