Longannet carbon capture project cancelled

Last remaining project in government competition for CCS funding scrapped as partners fall out over funding

A pioneering £1bn state-funded carbon capture and storage (CCS) project at the Longannet power station in Fife has been cancelled, as the government announced that "a decision has been made not to proceed with Longannet but to pursue other projects with the £1bn funding made available by the government."

Earlier this month, the Guardian revealed that Longannet, the only remaining project in the government's competition for CCS funding was on the brink of collapse because Scottish Power and its partners, Shell and the National Grid, were concerned about its commercial viability without more public backing.

David Cameron cast doubt on the future on the project during prime minister's questions, when he said the scheme "isn't working". Tom Greatrex asked : "Given the importance of CCS both as a way of reducing emissions and as an exportable technology, can the PM confirm the Longannet scheme is going ahead?"

Cameron replied: "What I can say is that the funding we set aside for carbon capture and storage is still there, is still available. Clearly the Longannet scheme isn't working in the way they intended. But the money from the government, the support from the government for this vital technology is there."

Chris Huhne, the energy secretary, later clarified that "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." He added: "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."

Government and industry have been fighting over the financing of the Longannet project for weeks. The Department of Energy and Climate Change (Decc) pledged £1bn, but the developers believed £1.5bn from the state was required. At 2,400MW, Longannet is the third largest coal-fired power station in Europe and was once highlighted as Scotland's biggest single polluter.

Just a few hours before the decision was officially explained Adam Dawson, who heads the CCS Office at Decc, listed the Longannet project as going ahead. In a speech to industry leaders, academics and policymakers at the What's the Future for Carbon Capture and Storage? conference, organised by the Institution of Mechanical Engineers, he said he believed that the new technology could create thousands of new jobs.

"It's disappointing that the CCS project at Longannet won't go ahead, but by retaining the £1bn government promised for CCS it can now get our programme back on track. The UK has an opportunity to be a market leader in CCS, with excellent alternative projects that can be delivered quickly," said Matthew Spencer, director of the Green Alliance environmental thinktank.

In May, Decc submitted seven UK-based CCS projects for European funding, including the Peterhead gas-fired power station in Aberdeenshire in Scotland, although it will apparently take longer to get the CCS technology up and running there than in Longannet.

The Longannet project would have brought the UK to the forefront on tackling greenhouse gas emissions from coal combustion plants, said Keith Allott, head of climate change at WWF-UK. "Because Longannet is an existing station, it was a good choice to get CCS fitted quickly and to avoid the emission risks involved in building a new coal power plant," he added.

He went on: "Given the troubles facing the nuclear industry, and the delays to the CCS programme, the only rational response is for the government to redouble efforts on energy efficiency and clean renewable energy. This is the sure-fire way of keeping the lights on, avoiding costly gas dependency and meeting our carbon reduction targets."

On Thursday, the government is expected to announce details of its review of the renewables obligation, the subsidy mechanism for green power. The review will decide the level of support for key renewable technologies including offshore and onshore wind energy, biomass generation and wave and tidal power. Carbon capture and storage is not included.

The review is likely to result in a settlement less generous than companies had hoped for – the government has been concerned by headlines complaining of high energy prices. Renewables subsidies do not come from central taxation but as an addition to consumer energy bills.

Subsidies for offshore wind are likely to remain at their current levels at least until 2015 under the changes to be announced on Thursday, but after that date they will be gradually reduced. Subsidies for onshore wind will be cut sooner, because the price of onshore turbines has come down in recent years, and rising fossil fuel prices have made wind power more competitive.

Companies generating energy from biomass - such as wood and waste products - will receive clarification on the level of subsidy they are likely to receive, which a Whitehall source said would be enough to ensure that they are economically viable.

However, the review of the feed-in-tarrif - a mechanism for subsidising small solar installations - will be at least a year later than ministers had promised. Late last year, the energy minister Charles Hendry said it would be complete by the end of this year, but even if the three-month consultation period begins now, it cannot be complete before parliament rises for its year-end recess.


Hanna Gersmann and Fiona Harvey

The GuardianTramp

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