When Drax (DRX) withdrew from the White Rose carbon capture project in September, operations director Peter Emery told the Financial Times: “We’ve also got concerns about the government’s future support for the low carbon agenda and that’s left us in a position where we are no longer confident we can persuade our shareholders that this is an attractive investment, given the obvious risks.” The energy group’s concerns about a potential government u-turn in policy proved well-founded. Just two hours after George Osborne had finished announcing his Autumn Statement to the Commons, the Department for Energy and Climate Change (DECC) announced the £1bn fund for the carbon capture and storage project had been scrapped.
The government stated: "Today, following the Chancellor's Autumn Statement, HM Government confirms that the £1 billion ring-fenced capital budget for the Carbon Capture and Storage (CCS) Competition is no longer available."
"This decision means that the CCS Competition cannot proceed on its current basis. We will engage closely with the bidders on the implications of this decision for them."
The White Rose consortium – previously made up of Alstom (ALO: PAR), Drax and the BOC industrial gas group – was bidding for a piece of the government’s £1bn fund, set aside to support the development of carbon capture and storage technology. Carbon capture works by funnelling carbon dioxide to a storage site, rather than letting it be emitted into the atmosphere. One way to do this would be by taking the CO2 away by pipeline to an offshore platform, where it would be injected into the space left by depleted oil and gas fields. .
Chief executive of Capture Power Capture Power - which was responsible for the power plant and carbon capture component of the White Rose project - Leigh Hackett said in a statement: “We are surprised and very disappointed by the Government’s decision to cancel the £1bn CCS Commercialisation Programme more than three years into the competition.
“It is too early to make any definitive decisions about the future of the White Rose CCS Project, however, it is difficult to imagine its continuation in the absence of crucial Government support.”
Making a u-turn
The decision was especially surprising given Secretary for Energy and Climate Change Amber Rudd’s speech a week earlier on the future direction of energy policy. Ms Rudd outlined plans to close all coal-fired power plants by 2025, unless carbon capture and storage technology could be developed alongside. There was no hint that government funding would be pulled.
