In case anyone needs reminding, the government had been running a CCS competition since 2012 and was due to make a final decision on the two preferred bidders (White Rose and Peterhead) in Q1 2016. However, on 25 November, it announced the £1 billion ring-fenced budget for the CCS competition was no longer available, meaning the competition could not continue on its current basis.
To say this came as a complete shock to the CCS industry would be a gross understatement, particularly as it was so close to completion, but also because the government had committed to the £1 billion in its manifesto with several affirmations in the months following.
The immediate and probably most significant impact has been loss of industry confidence. This was felt extremely quickly – in terms of job losses, loss of supply chain and companies moving away from CCS and the UK. Unless concrete action is taken to rebuild this confidence, there is a real danger CCS could be delayed in the UK by a decade or more.
This would have profound implications for the ability of the UK to meet its statutory climate change target at least cost. The Energy Technologies Institute calculated that including CCS in the mix of low-carbon technologies could reduce the cost of tackling climate change by £32 billion a year in 2050. So while cutting the £1 billion could be seen as a short-term saving, this must be weighed against the risk of much greater costs that if CCS is not developed.
The case for CCS remains as strong as ever. At COP21 in Paris, a historical agreement was reached to “pursue efforts to limit the temperature increase to 1.5C above pre-industrial levels”. It is hard to see how this goal can be met without CCS – both in the UK and globally. As the IPCC concluded in its fifth assessment report, the costs of meeting global climate change targets without CCS could increase by 138 per cent.
So while other countries are pushing ahead with CCS projects, the UK must now decide whether or not it wishes to do the same. If it does want CCS, it will need to work with CCS developers to once again create mutual trust between industry and government and implement the policies that will deliver operational projects.
First and foremost, we must ensure key lessons are learnt from the competition projects and that these lessons are shared with other potential CCS projects. It is vital the government keeps the dialogue open with these other projects to understand the appropriate funding mechanisms and route to market.
Finally, a key challenge is the business model for transport and storage infrastructure. Large-scale development of common infrastructure that can seed the creation of CCS clusters is required. Creative thinking is needed to ensure such infrastructure is developed.
Interesting times are ahead of CCS. We must pick ourselves up and move forward. There is an overwhelming body of evidence on the importance of CCS and it is therefore crucial CCS has a future in the UK.
Judith Shapiro, policy and communications manager, CCSA