Source · Select Committees · Public Accounts Committee
Recommendation 2
2
Accepted
Introduce mechanisms for taxpayers and consumers to benefit financially from future CCUS project success
Conclusion
While the Department is taking steps to incentivise efficient delivery of the CCUS projects, it has not established mechanisms to make sure that taxpayers and consumers will benefit financially should the programme be successful. The Department has developed a range of business models for applying CCUS to a range of sectors. The models form the basis of negotiations between the Department and the private sector 4 and outline how risks will be allocated between the different parties and set the payment mechanism. While the projects will receive the bulk of taxpayer and consumer support only when they are operational, the sums involved are substantial. Should the programme be successful, projects might eventually earn significant profits that are partly a result of early public support. Neither of the two contracts that the Department has already signed include any provision for the government to share profits or take an equity stake, or for consumers to benefit from lower energy bills should things go well. Nor does the Department seem to have considered any such ‘gainshare’ mechanisms when negotiating with the Track 1 projects. recommendation For all future CCUS projects, the Department should introduce mechanisms to make sure taxpayers and consumers benefit financially from the success of the projects they have supported financially.
Government Response Summary
The government agrees, stating that existing business models already include mechanisms like a 'gainshare' in the Net Zero Teesside Dispatchable Power Agreement to ensure financial benefit for taxpayers and consumers. The Department will continue to evolve these models, working with the National Wealth Fund and Great British Energy.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. keeps the UK on the lowest cost pathway to meeting Net Zero and presents opportunities for growth in a future low carbon global economy. The department estimates that if CCUS is not deployed, taxpayers and consumers would incur greater costs in meeting Net Zero through needing to rely on alternative, more expensive measures to abate carbon. The business models for the different sectors have been designed around sector- specific considerations to deliver value for money in the investments the department is making on behalf of taxpayers and consumers. They have been designed to provide sufficient incentives to deliver CCUS whilst providing a return commensurate with the risk taken by industry without inappropriate profits. There is a balance between the risks and rewards associated with the business models the department has developed. Greater opportunity to the ‘upside’ for taxpayers and consumers means they need to be prepared to take on more risk also. In achieving this balance, the department notes that the business models do have mechanisms to ‘make sure that taxpayers and consumers will benefit financially’ from the success of projects. For example, a ‘gainshare’ mechanism has been included as part of the Dispatchable Power Agreement agreed with Net Zero Teesside which ensures that any excess profits are shared with consumers, thus reducing consumer-funded subsidies. The department will continue to evolve the business models as the sectors develop, including mechanisms to ensure taxpayers and consumers benefit financially from the success of the projects. This will include working with the National Wealth Fund and Great British Energy to understand how they can support delivery of CCUS and drive value for money.