Just hours after Prime Minister David Cameron told MPs that government cash was ready to support carbon capture and storage projects, the energy department has pulled the plug on the Longannet CCS scheme.
In a short statement issued by the Department for Energy and Climate Change (DECC) this afternoon, the decision to finish with the Longannet project was confirmed.
It came less than three hours after David Cameron told the House of Commons in response to a question over the future of Longannet: “The funding we set aside for carbon capture and storage is still there and will be made available.
“Clearly the Longannet scheme isn't working as they intended but the money from the government and support from the government for this vital technology is still there.”
However, the DECC statement issued shortly later, said: “A decision has been made not to proceed with Longannet but to pursue other projects with the £1 billion pounds funding made available by the Government.
“The decision balances the UK’s low carbon ambition with the need to ensure taxpayer’s money is invested in the most effective way. £1bn will be available for a new process and we are expecting a number of promising bids from both Scotland and England.”
Chris Huhne, Secretary of State for Energy and Climate Change added: “CCS is a key technology for the UK’s long term energy strategy.
“A billion pounds is enough to demonstrate this vital new technology in the UK, but it’s got to be spent in the most effective way.
“Despite everyone working extremely hard, we’ve not been able to reach a satisfactory deal for a project at Longannet at this time, so we’ve taken the decision to pursue alternative projects.”
The CCS Consortium at Longannet, which comprised of ScottishPower, National Grid and Shell, said it was “immensely proud” of the work it had done but it was the decision of the Department of Energy and Climate Change not to proceed with the construction phase of its Carbon Capture and Storage competition.
It said that although Competition One, as it is known, will not now progress, the consortium, in close consultation with DECC, has completed extensive design work on CCS technology.
These designs were the result of 12 months of study into a potential commercial scale CCS project at Longannet Power Station. The submission of the designs to DECC will allow the UK Government to take valuable research from the process directly to Competitions Two, Three and Four.
The consortium said it had submitted the most detailed and comprehensive design of a commercial-scale end-to-end CCS project ever conducted in the UK or Europe. In the process it invested more than £20 million to complete the investigation into the potential of the technology and had over 400 experts from various disciplines – engineering, pipeline, offshore, planning, commercial and legal - working on CCS for four years and had completed the research on time and on budget.
Speaking on behalf of the consortium, ScottishPower’s Generation Director, Hugh Finlay, said: “The Consortium is immensely proud of the work we have completed in the last 4 years. Our combined efforts have seen this potentially world-changing technology develop from being a concept in a laboratory to a definitive blueprint that could be implemented.
“As a result of the study we now understand how the CCS process works from power station to storage site. This gives us great insight into the physical infrastructure that we need to support it, the regulatory framework it fits within and the organisational model of a CCS business.
“All of this information will be made available through DECC’s Knowledge Transfer programme and will be of enormous benefit to other CCS developers and stakeholders”.
However, environment campaigners say the future development of CCS technology in the UK has been left up in the air today following today's announcement.
Dr Richard Dixon, Director of WWF Scotland said: "This news is massively disappointing and threatens Scotland's, and the rest of the UK's, ambition to be at the forefront of developing this new technology.
“If technical and economic hurdles can be overcome CCS has the potential to help reduce emissions at thousands of coal power stations around the world. However, almost four years after launching its funding competition, plans for CCS in the UK have descended into farce. Four years have effectively been wasted in the battle to tackle climate change.
"The UK Government’s decisions to roll forward the £1bn competition fund to fund other CCS projects is welcome but the process for identifying these must be urgently accelerated. Lots of valuable research and planning has been done around the Longannet proposal, which could put Scotland in pole postion to have a CCS scheme at the existing gas-fired power station at Peterhead or the recently consented gas-fired power station at Cockenzie.
The environmental group said today's announcement had big ramifications for plans to build new coal-fired power stations.
Dr Dixon added: "Even a £1bn sweetener was not enough to make the economics of running a coal-fired power station in the coming decades stack up. This must surely be the final nail in the coffin for the proposal at Hunterston which has never made economic or environmental sense."
A report by WWF previously found Longannet power station to the best value option for UK Government trials to capture carbon emissions. The environmental group warned that some of the other sites being considered would result in vastly higher carbon emissions, actually increasing emissions instead of reducing them.
Scotland's First Minister Alex Salmond, said: "This is a deeply disappointing announcement by the UK Government, and an enormous lost opportunity. While responsibility lies with DECC, the Scottish Government co-operated extremely closely with Chris Huhne and his colleagues, and did everything we possibly could over a long period of time to help make this project happen.
"It is just as bad a decision as when the previous UK Government abandoned the Peterhead pre-combustion gas carbon capture project four years ago - which the current coalition parties rightly criticised in 2007.
"The fact is that the UK Government's Electricity Market Reform process is undermining industry confidence and investment planning - with higher costs due to the Carbon Floor Price, and uncertainty over long-term support for carbon capture and storage.
"Between public and private investment, Longannet would have been a 2 billion pound investment - exactly what is needed in the present economic climate. It underlines the need for a Scottish energy strategy so that we have proper planning, and apply our energy wealth of today to ensure that we are equipped for the technologies of tomorrow.
"At the end of the day, this technology requires the courage and the vision to make the investment happen, and that is what has been lacking in successive Westminster administrations. At a time when North Sea revenues are coming in at record levels, it was surely not too much to expect that the Treasury would make the necessary funding commitment for Longannet to go forward. The cost would have been less a tenth of this year's alone estimated North Sea revenues of £13.4 billion.
"We are led to believe that Peterhead is a contender for a future gas carbon capture project, but that was supposed to be the case four years ago. From Scotland's perspective, history has already repeated itself with the failure to proceed with Longannet, and what guarantees are there that we will not be disappointed yet again? As we now know to our cost twice over, warm words are not enough.
"The Longannet announcement also has serious implications for the long-term future of coal production in Scotland, as the renewal and upgrading of the site was to be part and parcel of the CCS investment.
"With our unrivalled resources, decades of experience in the North Sea and an excellent base in science and engineering, Scotland is the natural home for developing, deploying and exporting CCS technology. The failure of UK Ministers to go ahead with Longannet is deeply disappointing, and the Scottish Government will continue to do everything we can to turn Scotland's great CCS potential into reality."
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