Concerns over the price to consumers led to the competitions demise, according to the National Audit Office (NAO).
The Carbon Capture and Storage (CCS) competition was the second bid by the government to support schemes in the UK that capture pollution from power stations or heavy industry and store it permanently underground.
LATEST NAO REPORT —> Carbon Capture and Storage: the second competition for government support — https://t.co/TomxfdpEpe pic.twitter.com/rMKEnREjLI
— NationalAuditOffice (@NAOorguk) January 20, 2017
The report, which was produced by the NAO, warned that it was "currently inconceivable" that the CCS projects would be developed with government support, and that the competition costs did not achieve value for money.
In 2012, the Department of Energy and Climate Change, which is now part of the Department for Business, Energy & Industrial Strategy (BEIS), began the program without agreeing with the treasury on the amount of financial support that would be available over the life time of the projects.
This ultimately contributed to the Treasury pulling its pledged US$1.2 billion in capital funding in late 2015, resulting in the competition's cancellation.
Shortly before the project was cancelled, it had two preferred bidders — the White Rose consortium in North Yorkshire which planned to build a new coal plant with the technology and Shell's scheme in Peterhead, Aberdeenshire.
The initial estimations made by the NAO said that the competition would cost consumers between U $2.4 billion and US$7.3 billion. However by 2015, these costs had risen to almost US$10 billion. The Treasury became concerned that the project would not be cost-effective to consumers.
The Treasury also said that it would not guarantee further investment needed to expand the technology and there were better uses for the money.
This is not the first time a competition run by the government to kick-start CCS has been cancelled. In 2011, the government having spent U $70 million had to stop the project.
"The department has now tried twice to kick-start CCS in the UK, but there are still no examples of the technology working," said Amyas Morse, head of the National Audit Office.
"There are undoubtedly challenges in getting CCS established, but the department faced an uphill battle as a result of the way it ran the latest competition," she added.
A spokesperson for BEIS said that although the door has not closed on carbon capture and storage of technology, the key decision to control government spending and protect consumer bills is of paramount importance.
