Britain drops CCS levy, Longannet set to secure GBP1bn funding

Britain has dropped plans to impose a levy on consumer bills to fund a GBP3bn ($4.9bn) scheme to develop three carbon capture and storage (CCS) projects.
 
Last year the British government announced it had set aside GBP1bn for at least one CCS pilot scheme, saying it would use either a levy on bills or public money to fund at least three further projects in the future – at the cost of another GBP3bn.
 
A levy has now been ruled out, according to the Financial Times, as the coalition shies away from imposing fresh costs on the British public at a time of severe austerity. That decision is likely to raise fresh questions over how the three further projects will be built given the large upfront costs and the fact that CCS is still an untested science.
 
According to industry and government sources the levy idea has been superceded by the electricity market review at the end of last year which will impose a new “carbon floor price” to subsidize all forms of renewable energy – including nuclear power.
 
This measure, which is also expected to be announced in Wednesday’s Budget, will provide a large revenue stream to the exchequer – much of which could be used for operating CCS schemes.
 
The new revenue from the carbon floor price should provide sufficient money to subsidize new CCS projects, according to the Financial Times, although there are still concerns over how the capital cost of the projects would be subsidized. The EU has promised to part-subsidize the programme.
 
A consortium led by Scottish Power, the utility owned by Spain’s Iberdrola, is on course to build one of the world’s first commercial-scale CCS demonstration plants at Longannet. It was the only bidder for the trial after E.ON pulled out last October, saying it could not meet the project timetable to build a scheme at its Kingsnorth coal fired power station.
 
The Scottish Power group will complete its detailed design work this year but is not guaranteed to receive the GBP1bn state funding for a 300 MW CCS pilot scheme in Fife.
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