Scottish Cluster: letter from First Minister to Prime Minister

From: First Minister Nicola Sturgeon
To: The Prime Minister

During COP26, when both our governments are rightly focusing on the acute issue of delivering on our net zero commitments, I am writing to note my concern at the UK Government’s recent decision not to support the deployment of carbon capture, utilisation and storage (CCUS) to its full potential and to call on you to enhance the recent cluster sequencing process by moving the Scottish Cluster onto full Track-1 status without delay.  

As you will know, when I set out Scotland’s priorities for COP26, I noted the Scottish Government’s strong support for the Scottish Cluster of proposed CCUS projects, which includes the Acorn project at St Fergus in Aberdeenshire, which has been scored by the UK Government’s evaluation process as the most deliverable planned CCS project anywhere in the UK.

Despite this, and the Scottish Cluster demonstrating full suitability for Track-1 status based on the competition criteria, this project has been designated as a ‘reserve’ cluster. This is a damaging decision for projects that are primed to develop, with significant private sector investment and funding in place, and which have the potential to deliver a significant proportion of the UK’s ambitions for carbon storage.

It is my understanding that the evaluation process has undervalued some of the key factors that make the Scottish Cluster bid unique and valuable to the UK-wide effort to reduce emissions. In March this year, Scottish Ministers responded to your consultation on the proposed cluster sequencing process, calling for weight to be given to the establishment of shipping connections, which would link and unlock additional capture sites in the UK and beyond, thus allowing projects without direct access to a storage location to decarbonise early and in turn delivering economic benefit to the whole of the UK.

The response from UK Ministers does not acknowledge the significance of CO2 shipping or to adequately value emissions associated from the potential of direct air capture. Equally, the process did not address resilience, should any of the Track-1 storage projects slow or require temporary closure. On this basis, the process failed to recognise the important role that the Scottish Cluster can play as a CCS Cluster with a UK-wide reach. 

The designation of ‘reserve’ status has come with no clarity and no guarantees of future support for the projects. In short, there appear to be no benefits for the Scottish Cluster in being considered a reserve cluster. Instead the resulting uncertainty, at the very moment when clarity is most required, risks delaying the delivery of crucial and strategically important projects including the decarbonisation of Scotland’s largest point industrial emitter at Grangemouth, and the Peterhead CCGT electricity project, which is so important for our security of supply.

We have been told by your officials that ‘reserve’ status does not permit projects to negotiate revenue mechanisms with HM Treasury. Given this is an area of energy policy which is reserved to the UK Government, this ruling has the effect of leaving the emitters who are part of the Scottish Cluster stranded. We also are led to believe that the UK Government will not act as lender of last resort in bearing the long-term liabilities in relation to the risks associated with the operation of the Acorn storage site, when designated as a 'reserve’ cluster. Locking the Scottish Cluster out of a UK-wide infrastructure funding scheme, denying access to revenue models, and the refusal to hold storage liability, means your Government has either by accident or design created an un-level playing field for the establishment of the CCUS industry in the UK.

Furthermore, I understand ‘reserve’ status does not guarantee the Scottish Cluster designation as a Track-2 cluster, instead having to reapply for a competition at an uncertain future point, which may or may not have different assessment criteria.  As a minimum, given the state of readiness demonstrated by the Scottish Cluster in their performance against the Track-1 selection criteria, the Scottish Cluster deserves a guarantee that it would not be required to re-enter a bidding process for Track-2 status and is supported to develop with minimum delays to its current deployment timeline.

I believe that the UK Government should act now to give clarity, certainty and confidence on the status and support available to the Scottish Cluster to allow them to continue to move forward.

Your recently launched Net Zero Strategy trebles the UK ambition for CO2 storage by 2030 from the target in your 2020 10 Point Plan. Achieving this will clearly require as much carbon storage as possible, as quickly as possible.  In tandem, this requires the establishment of as many carbon storage locations as possible to ensure a resilient storage solution across the UK. 

The UK Government’s failure to support the Scottish Cluster is a blow to the people of Scotland, and particularly those communities in the North-East of Scotland so dependent on energy transition. That is why we have announced a £500 million just transition fund for the north-east and Moray and asked the UK Government to match that ambition.  As in the North of England, the livelihoods of significant numbers of industry and oil and gas workers in Scotland are at stake. The Scottish Cluster could support an average of 15,100 jobs between 2022 and 2050, with a peak of 20,600 jobs in 2031. 

We remain convinced that the Scottish Cluster can play a vital role in our just transition, and in reaching our respective net zero goals by 2045 and 2050. We have offered to collaborate with the UK Government in supporting the Cluster on several occasions, including offering the Treasury the option to deploy funding from our Emerging Energy Technologies Fund (EETF). We stand ready to deliver on this commitment despite no response to this offer having been received to date.

This is a pivotal moment for CCUS on our decarbonisation pathway and it requires a clear and coherent strategy to support UK-wide action on emissions reductions.  To deliver on your climate change targets and ambitions, the UK Government should be funding all clusters capable of operating by the mid-2020s, including the Scottish Cluster. Now is the time to speed up, rather than slow down, activity in this area. This is a view shared with major industrial partnerships, and one I know Sir Ian Wood shared with you recently, when stating this decision makes no sense.  I am therefore calling on you to enhance the decision on cluster sequencing by accelerating the Scottish Cluster to full Track-1 status.