Scotland is facing a potential double blow to the nation’s energy sector after rumours that the UK coalition could be about the sabotage plans for a Carbon Capture project at Longannet power station.
The possible blow to Scotland’s energy sector was compounded when, on the same day, it emerged that Westminster’s ‘carbon tax’ could force Grangemouth-based Ineos to relocate to another country.
The news that the Longannet project is under threat broke yesterday afternoon when reports suggested that the UK government was not prepared to commit the necessary funds, estimated to be in the region of £1 billion, to ensure the project goes ahead. Scottish Power are thought to be concerned about the initial commercial viability of the project and are seeking a guarantee of financial backing from Westminster.
Carbon capture allows carbon emissions from the coal power stations to be buried underground, in Scotland this would include areas of the North Sea.
Longannet became the last remaining entrant in a Westminster contest for a £1 billion carbon storage project grant after the last remaining rival, Kingsnorth power station in Kent, dropped out. The previous Labour government has faced criticisms after repeatedly refusing to commit to Longannet despite its clear advantages and superior infrastructure.
Should Longannet be allowed to fail it would be the second time in four years that a UK government had declined to fund a carbon storage project in Scotland. In June 2007, shortly after the SNP won the Holyrood election by one seat, the then Labour chancellor Alistair Darling confirmed that the UK government would not be committing to a carbon storage project at Peterhead.
The project at Peterhead would have been the first industrial scale project in the world to combine three separate technologies – hydrogen production, power generation and carbon capture and storage – to generate electricity using hydrogen from natural gas.
A spokesman for the Department of Energy and Climate Change has suggested that Longannet would not mean the end for carbon capture in the UK and said that the UK coalition has plans to choose three other projects that would be eligible for European funding.
It is estimated that carbon storage could provide 5000 jobs in Scotland and generate around £3 billion for the Scottish economy.
Commenting on the situation a Scottish Government spokesman said: “With our unrivalled natural resources, decades of experience in the North Sea and an excellent base in science and engineering, Scotland can be Europe’s carbon storage hub. Longannet remains a contender in the CCS competition and ScottishPower are continuing to discuss its role with the UK Government.”
Meanwhile on the same day as concerns for Longannet emerged, Grangemouth based oil firm Ineos claimed that the UK government’s carbon tax plans may force it to move from Scotland.
In a statement yesterday the company said that extra costs of up to £61 million over the next decade could see the company having to relocate. Even if it decided to remain in Grangemouth, said the spokesman, investment would be targeted at the firms Laverie plant in France.
The company is facing extra costs as a result of the UK Government’s plans to set the carbon price floor – a regulatory tax firms have to pay for the right to continue to pollute – at £16 a ton from April 1, 2013, rising each year to £30 pounds a ton in 2020.
Local Labour MP Michael Connarty believes Ineos will stay put, despite the added financial pressures. Mr Connarty said that the firm “will have to bear a burden … it will just be a burden they will have to carry”.
However Mr Connarty also claimed that the tax would not work and added: “It will damage UK business – especially high energy users like the refining industry.”