The National Audit Office has warned that the government’s decision to scrap a carbon capture and storage plan in the name of saving money could actually add billions to consumers energy bills in the coming decade.
The government has, for the second time now, cancelled a £1 billion competition for the development of technology to capture and store polluting carbon emissions, citing the “significant impact on consumer bills in the 202s” that would follow from the associated subsidies, estimated to cost around£170 per megawatt hour produced by the plants involved.
Both bidders involved in the competition, Shells ‘Peterhead’ and Drax’s ‘White Rose’, “announced that without government support they would be unable to continue their projects” the NAO report explains.
The report, released this week, warns that the cancellation of the project is likely to delay, and increase the cost of the UK’s progress towards meeting the 2050 climate targets – a sentiment echoed by the UN and by the Committee on Climate Change.
The head of the CCS Association, Luke Warren, said that the NAO’s report should be taken seriously as a call to action. He said: “The NAO report unequivocally shows that the full costs and impact of delaying CCS were not adequately considered in the run-up to the cancellation. The Energy Technologies Institute has shown that a 10-year delay to CCS could add £1 billion to £2 billion to consumers’ bills every year throughout the 2020s.”
Mary Creagh, the chair of the committee that commissioned the report, also reiterated the importance of CCS. she said: “CCS is essential to meet our 2050 climate change targets. It is critical that government establish a new strategy for supporting large-scale deployment.”
The government has assured that the cancellation of the CCS competition does not mean a full stop to CCS, merely a delay. It was thought, according to the government, that CCS is, at this stage, both too costly and not yet necessary.
“We are committed to meeting our climate change targets in a way that is affordable and provides secure energy to our families and businesses. We haven’t closed the door to CCS in the UK, but we are clear that it needs to come down in cost and are considering the role that it could play in long-term decarbonisation.”
However, based on calculations made by the now disbanded Department for Energy and Climate Change, this very delay could cost the country billions.
The NAO explains: “[the] DECC’s bid for power sector CCS showed a return of £4.50 per pound invested, with most benefits arising after 2030. It estimated net social benefits of £3.7 billion to 2050.
“DECC calculated the benefits on the basis that without CCS it would cost an additional £30 billion to meet the 2050 carbon targets.
This is because a more expensive mix of low-carbon technologies would be required to decarbonise the power sector. DECC calculated that the two projects would bring the cost of CCS down by 23% and so attributed that percentage of the total forecast CCS benefits to the competition.”
The idea that CCS is too costly because of the basic subsidy costs is fundamentally misguided and short-sighted, argues Professor Stuart Haszeldine, for similar reasons to those cited by the DECC.
The CCS competition, before it was cancelled, had already cost around £180 million, £100 million of which was paid for by taxpayers. Had the competition gone ahead, the total cost would have been £1 billion, although according to DECC calculations, it would have brought return of £4.5 billion.
As well as commenting on the CCS competition, the NAO also looked at the government’s current budget as it relates to environmental issues and the fight against climate change.
Creagh warned, based in part on the fact that the Department of Environment, Food and Rural Affairs’ spending budget will, by 2020, be half the size it was in 2010, that “there is a gap between our stated ambitions on climate change and the policies and spending the government is bringing forward to get us there.”
