The National Audit Office (NAO) has chided the government over its handling of the failed £1 billion carbon capture and storage (CCS) demonstration project competition.
The competition was launched in 2007 by the then Department for Business, Enterprise and Regulatory Reform and cancelled last year by the Department of Energy and Climate Change (DECC) when it failed to agree terms with the remaining contender.
Talks broke down when developers Scottish Power, Shell and National Grid asked for a further £0.5 billion to develop the Longannet site at Fife in Scotland.
The NAO says DECC, and its predecessor, failed to engage with the commercial risks involved in the scheme and did not fully consider in advance the contract terms with the competition winner.
A lack of clarity over financing delayed the early stages of the competition as well, says the report.
“Taking calculated risks is perfectly acceptable if those risks are managed effectively; but in this case DECC, and its predecessor, took too long to get to grips with the significant technical, commercial and regulatory risks involved,” says head of the NAO, Amyas Morse.
Following the cancellation of the scheme, CCS technology has yet to be developed on a commercial scale in the UK four years on, although a demonstration project has opened at Ferrybridge in Yorkshire.
The main failure of the project, says the NAO, is the time lost. In fact, the report finds that relatively little was spent in the intervening years and the £40 million that did go on engineering and design studies will be of use to future projects.
“The Department must learn the lessons of the failure of this project if further time is not to be lost, and value for money achieved on future projects,” says Morse.
The government has now launched a new £20 million CCS competition to develop better and cheaper components and systems for pilot-scale demonstration schemes.
For further information:
UK government launches £20 million CCS competition (13-Mar)
UK government pledges commitment to carbon capture and storage (29-Feb)
UK Energy Secretary opens Yorkshire carbon capture plant (1-Dec 2011)
Longannet carbon capture and storage projects falls through (20-Oct 2011)
20 March 2012