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Government pulls plug on £1bn CCS competition

26 November 2015

The government has withdrawn funding for its carbon capture and storage (CCS) technology competition just six months before it was to be awarded.

Two projects were to be considered for the CCS commercialisation competition funding. One was backed by Shell and SSE at Peterhead. The other, called White Rose, was backed by Drax but fell through earlier in the year following claims by the UK's largest power plant that changes in financial and regulatory environments had made the project "financially unattractive".

The news came in a government announcement to the London Stock Exchange, which said: “HM government confirms that the £1bn ring-fenced capital budget for the Carbon Capture and Storage Competition is no longer available. This decision means that the CCS Competition cannot proceed on its current basis. We will engage closely with the bidders on the implications of this decision for them.”

A Shell spokesman expressed "disappointment" at the withdrawal of funding for the CCS Commercialisation Competition, in which the company's Peterhead CCS project was one of the final contenders. "We have worked tirelessly over the last two years to progress our plans for this project," the spokesman said. "It has the potential to bring huge value to the UK, both in terms of immediate emissions reductions and developing knowledge for the benefit of a wider industry.

“Government funding to support this world-first demonstration project, through the competition, was important to achieving the aim of making the technology commercially viable in the shortest possible time. While we acknowledge that this decision has been made in the context of a difficult spending review, without that funding, we no longer see a future for the Peterhead project in the near term.

“Shell remains committed to CCS – as our involvement in demonstration projects in other parts of the world shows – and view it as an important part of a low-carbon energy future.”

Shell's other global CCS projects include the largest CO2 capture demonstration facility in the world, the European CO2Technology Centre Mongstad, Norway. Shell is also developing the Quest project in Canada, which is at an advanced stage of construction, and is a partner in Australia’s Gorgon natural gas liquefaction project.

Responding to the cancellation of the competition, Dr Jenifer Baxter, head of Energy and Environment at the Institution of Mechanical Engineers, also expressed disappointment. "There have been concerns about the initial costs of this technology, but we will only be able to properly assess the viability of UK Carbon Capture and Storage upon the successful delivery of a demonstration project," she said.

"Demonstration projects are a recognised requirement for full commercialisation of all large technologies, without such, new energy management technologies will remain in the shadows.

“If we are serious about building a clean and secure energy sector we need a diverse energy system, and CCS is central to this. In addition to the potential this technology has in making coal-fired generation low carbon, there is great promise for this technology to be used to retrofit gas-fired power stations in the future as well.


“The Government has outlined plans for the winding-down of coal-fired generation. With just one nuclear reactor currently being planned, the UK looks set to experience a new dash for gas. Without CCS technology this will mean we are locking ourselves into relying on unabated fossil fuel power for generations to come.”


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