Carbon Capture and Storage: the second competition for government support – NAO Summary Report

Summary

The Department for Business, Energy & Industrial Strategy (the department) did not achieve value for money for its £100 million spend on the second competition for government financial support for carbon capture and storage, according to the National Audit Office Summary Report of January 2017.

The report found that the Department’s plan to use a second competition to develop and deploy carbon capture and storage was ambitious, but ultimately, unsuccessful. Achieving this goal was challenging because the untried nature of the technology meant the costs and benefits of the proposed projects were inherently uncertain. Given the level of challenge, it was an achievement for the Department to sustain negotiations with the preferred bidders to the point where it gained valuable technical and commercial knowledge about how to deploy the competition projects. But any value that could be gained is contingent on the Department applying the lessons it and the sector has learnt as a result of the competition.

The NAO found the Department began 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 £1 billion of funding from the competition, leading to its cancellation, as it was concerned about future costs to consumers. The Department had, however, designed the competition so it could withdraw from supporting its preferred bidders without incurring cancellation costs.

The NAO found that flaws in the Department’s design and implementation of its Levy Control Framework, which caps the costs of certain consumer-funded policies, also impacted on CCS investors’ confidence.

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