Budget cut ‘hammer blow’ to Peterhead

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The future of an innovative green energy project in the Blue Toon lay in tatters as the UK Government cut funding by £1 billion.

The carbon capture and storage scheme (CCS) was set to be the first of its kind, with Peterhead Power Station a frontrunner to win a competition to secure capital to support the design, construction and operation of the UK’s first commercial-scale CCS site.

The Conservative government has seemingly backed out of a manifesto pledge.

Their 2015 general election manifesto said: “We have been the greenest government ever... committing £1bn for carbon capture storage.”

The cut was not announced in Chancellor George Osborne’s autumn statement, but instead was detailed in a two-paragraph statement to the London Stock Exchange.

Oil and gas company Shell confirmed that without government money, the programme is dead.

A Shell spokesperson said: “Shell is disappointed at the withdrawal of funding for the CCS Commercialisation Competition, in which our Peterhead CCS project was one of the final contenders. We have worked tirelessly over the last two years to progress our plans for this.

“It has the potential to bring huge value to the UK, both in terms of immediate emissions reductions and developing knowledge for the benefit of a wider industry.

“Government funding to support this world-first demonstration project, through the competition, was important to achieving the aim of making the technology commercially viable in the shortest possible time.

“While we acknowledge that this decision has been made in the context of a difficult spending review, without that funding, we longer see a future for the Peterhead project in the near term.”

Bill Spence, Shell’s business opportunity manager on the Peterhead CCS project, thanked the community for its support: “From a local perspective, we recognise that this is deeply disappointing. One of the most heartening things for us as we progressed the project was the incredible support we recieved from the local communities of Boddam and Peterhead, for which we are grateful.”

Shell had previously stated the project could have brought 400 jobs to the area; rising to a peak of 600 during construction.

Banff & Buchan MP Eilidh Whiteford said the government’s action was ‘disgraceful’.

She added: “They have marched us up to the top of the hill and have now cut the project at the last minute.

“This is bad for Peterhead, bad for the economy, and at odds with the Tories’ commitment to invest in gas powered stations.”

The local MP asked at a House of Commons debate on Thursday, November 26 why the U-turn occurred. Leader of the House of Commons MP Chris Grayling replied, saying ‘we did of course have to make some difficult decisions in the spending review; however, we have made great progress on renewables’.

Commenting afterwards, Dr. Whiteford said: “Peterhead was always the front-runner in this competition. Just last week the Secretary of State was extolling the benefits of CCS, but now they have pulled the plug without warning.

“It’s a massive disappointment, which demonstrates that the Tories have no real commitment to the future of the energy sector and no real plans for tackling climate change.”

MSP for Banfshire & Buchan Coast highlighted that the timing of the cut was worrying.

“It is deeply concerning that the UK Government has backtracked on this, especially given the upcoming Paris climate talks.

“The Tories have missed a huge opportunity to champion new technologies that will cut emissions in Scotland and across the UK - and all because they are blinkered by their obsession with austerity.”

Scottish Liberal Democrat energy spokesperson Liam McArthur MSP said: “The UK Government’s decision to axe funding ring-fenced for the CCS competition is a catastrophe, not just for Peterhead and the north-east, but for the whole of the UK.

“The three sentences the government uses to explain its decision just shows how far down the list of priorities protecting our environment really is.

“Far from being the greenest government ever, this is now the greyest.”

Fellow Lib Dem, for the North East Scotland constituency. MSP Alison McInnes, added: “This is an attack on science and will have a huge impact on innovation in Scotland.

“The scheme would have put this country at the forefront of pioneering methods to reduce the effect of carbon emissions.

“There was no mention of this in the Chancellor’s autumn statement. Did the government think it could just quietly scrap £1bn of funding and hope no-one would notice?”

The Scottish Government’s minister for Business, Energy and Tourism, SNP MSP Fergus Ewing labelled the decision a ‘disgrace’.

“It shows complete disregard for tackling climate change, utter indifference to developing the crucial new technologies that will cut emissions and is another UK Government hammer blow to energy generation in Scotland,” he said.

“Had the competition been allowed to run its course, the world’s first commercial scale gas powered CCS plant could have been built in Peterhead creating new jobs, blazing a trial for innovation and potentially attracting significant investment to the UK.”

The research & policy director at Aberdeen & Grampian Chamber of Commerce, James Bream, described it as a ‘huge blow’ to confidence for the business community.

“As well as being bad news for Peterhead and its local community, this is also bad news for the UK-wide supply chain which has been engaged for several years with the project,” he said.

“Removing a ring-fenced funding stream is symptomatic of the UK’s approach to energy strategy and will further undermine investor confidence,” he added.

However, the UK Government’s Department of Energy & Climate Change (DECC) has claimed CCS can still play a part in Britain’s energy future.

A DECC spokesperson said: “The government has confirmed that the expected capital grant funding for the CCS competition is no longer available.

“CCS has a potential role in the long-term decarbonisation of the UK and the government will engage closely with bidders on the implication of this decision for them.”

The spokesperson also added that the government made it clear the capital was ‘subject to affordability’.

They said: “The government has not taken this decision lightly. This was a tight financial settlement and difficult decisions have had to be made.

“Our annual support for renewables will more than double in the next five years, reaching over £10bn in 2020/21”.