Longannet cancellation a ‘pound foolish’ approach
DECC’s “penny-wise and pound foolish” approach to supporting low carbon technologies will mean the UK will miss the opportunity to lead the world in carbon capture and storage (CCS) technology. Negotiations between the developer ScottishPower and the Government collapsed on Wednesday, leaving the UK with no CCS demonstration project.
Not only does this result in the loss of vital employment in Fife and the surrounding areas, but the Longannet design would have provided a model that could have been retro-fitted to coal and gas power stations around the world.
What went wrong? In short, we may never get the full facts, although £1bn of public money was involved in the negotiations. Contract confidentiality has meant a troubling lack of transparency as to why the negotiations broke down.
We hear that the total cost of the project was £1.05bn, meaning that DECC was unwilling to top up the final £50K. That the Government was insisting on the company committing to a 15% contingency fund on top of the project costs, and even a further £300m to cover cost overruns. And finally, we hear that the decision not to go ahead was made in by the Iberdrola board in Spain, not Scotland. Iberdrola bought the Scottish company in 2007. Are any of these rumours based in fact?
The Environment Secretary claimed that “A billion pounds is enough to demonstrate this vital new technology in the UK.” Perhaps not. Such end-of-negotiations difficulties as ScottishPower has encountered could easily resurface for any of the remaining four CCS projects the Coalition is committed to.
The global challenges presented by fossil fuel stations, particularly within developing countries – with a coal-fired station opening every week in China – will be with us for some time. But DECC’s penny-wise and pound foolish approach could prevent the UK from leading the world in this vital CCS technology.
“It seems inconceivable that the plug has been pulled purely because the government is unwilling to plug the relatively small gap between the funding earmarked for the project and what we now know are the actual build costs – a small price for the benefits of securing the electricity supply of the future.”
ScottishPower’s coal-fired plant at Longannet was the only remaining site in the UK government competition for funding worth up to £1bn to develop CCS technology.