The UK Department for Business, Energy & Industrial Strategy (BEIS) did not achieve value for money with the £100m it spent on the second competition to support carbon capture storage (CCS), according to the National Audit Office (NAO).
In a new report – ‘Carbon Capture and Storage: the second competition for government support’ – NAO said BEIS’s plan to use a second competition to develop and deploy CCS was “ambitious, but ultimately, unsuccessful”.
It said the department had started the competition without agreeing with HM Treasury on the amount of financial support available over the lifetime of the projects.
“This ultimately contributed to HM Treasury’s decision to withdraw £1bn of funding from the competition, leading to its cancellation, as it was concerned about future costs to consumers,” the audit office added.
The terms of the competition also contributed to one of the two shortlisted projects being unlikely to reach the construction phase, NAO said.
“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,” it noted.
Flaws in the design and implementation of the levy control framework, which caps the costs of certain consumer-funded policies, also impacted on CCS investors’ confidence, the report added.
For future policy on technology, NAO said many stakeholders believe the government needs to carry more of the risk “if it is to enable CCS to be deployed affordably to consumers”.
But, while this could reduce delivery costs, it would “expose taxpayers to losses in the event of risks materialising”, the audit office added.
NAO head Amyas Morse said: “The department must learn lessons from this experience if it is to stand any chance of ensuring the first CCS plants are built in the near future.”
The government announced in November 2015 that £1bn ring-fenced for the CCS competition was no longer available.
A further £68m was spent on the first CCS competition, which was cancelled in 2011.
Image: BEIS (Steph Gray)
