The British government has ‘not delivered value’ for money for taxpayers
after spending £168 million on fees and associated costs for its abandoned
carbon-capture and storage projects at Peterhead power stations and the
White Rose project in Yorkshire.
Carbon capture storage is a process to avoid the release of carbon dioxide
(CO2) into the atmosphere.
It has the potential to help the UK achieve its ambitious targets to reduce
CO2 emissions, if it is used in the power and industrial sectors.
However, the Department for Business, Energy & Industrial Strategy has not
achieved value for money for its £100 million spend on the second
competition for government financial support for carbon capture storage,
according to the National Audit Office.
The NAO found the Department began the competition ‘without agreeing the
Treasury’ on the amount of financial support available over the lifetime of
the projects.
This is a curious explanation because the Prime Minister (then David
Cameron) – who as First Lord of the Treasury out-ranks the Chancellor (as
Second Lord of the Treasury) – must have known what he was doing when he
witnessed the Peterhead CCS agreement being signed between Shell oil and
Perth-based utility SSE.
The NAO said this ultimately contributed to the Treasury’s decision to
withdraw £1 billion of funding from the competition, leading to its
cancellation, as it was ‘concerned about future costs to consumers.’
The Department funded two developers to undertake work that would reduce
the commercial and technical risks surrounding the construction of the
first CCS plant. One of the two shortlisted projects, backed by a
consortium, was not able to present a proposal compliant with the
Department’s risk allocation as it was struggling to allocate risks between
the parties involved. The other competition was more commercially viable
but would have had fewer benefits for reducing the costs of subsequent CCS
projects.
An NAO spokesman said: “Many stakeholders think the government should bear
more risks, particularly over stored CO2. Government taking a greater share
of the risk could reduce delivery costs but would expose taxpayers to
losses in the event of risks materialising.
“The NAO also found that flaws in the design and implementation of the UK
government’s Levy Control Framework, which caps the costs of certain
consumer-funded policies, also impacted on investors confidence in the
carbon-capture projects.”
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