Acorn CCS loses £200m grant status as UK shifts to loans and equity

The UK Government has converted £200 million in grant funding for the Acorn carbon capture and storage project in Aberdeenshire into loans and potential equity, energy minister Martin McCluskey confirmed.

The switch, made by Chancellor John Healey, means the remaining UK Government support for Acorn will flow as loans or as a stake in the project rather than as direct grants. Some of the original £200 million, awarded at the last spending review, has already been drawn down by the developers — and that money stays in place.

Acorn proposes storing emissions from across Scotland under the seabed of the North Sea. The project could support about 15,000 jobs at its peak.

Scotland's First Minister John Swinney said he was "deeply concerned" about the changes to the funding mechanism.

What did the minister say?

Speaking on the BBC's Sunday Show, McCluskey said the government had needed to "reprioritise" budgets to fund its defence investment plan.

"We awarded £200 million in grant funding at the last spending review," he said. "Some of that has already been drawn down by the developers, and the money that they've already drawn down remains in place."

He set out two reasons for the funding shift. First, he argued loans and equity offer better value: "It means that perhaps we could choose to take a stake in that project, which would give a return to the taxpayer."

Second, he pointed to broader budget pressure. "We've had to make some really difficult choices to reprioritise within budgets in order to fund the defence investment plan, which is obviously a priority for the Government."

In short, the Treasury wants a financial return on CCS support where it can get one, and defence spending now outranks grant-based decarbonisation funding.

How wide does the change reach?

McCluskey said the government has had to "reprioritise" carbon capture and storage programmes right across the UK — and that some have been stopped outright, not just converted from grants to loans and equity.

He did not name the halted programmes. But the signal for the sector is blunt: Acorn keeps support; other CCS schemes in the UK pipeline may not.

What happens next for Acorn?

Despite the funding overhaul, McCluskey insisted the project has a future.

"We are making sure that there is support there for the Acorn project," he said. "We want that project to succeed, and the developers who I'm speaking to later this week will come forward with proposals, and that funding is on the table."

That puts the developers' next proposal submission at the centre of the story. The £200 million commitment still exists on paper — but its form has changed, and the terms of any loan or equity deal have not been disclosed.

For a project sized at 15,000 peak jobs and a North Sea storage network meant to carry emissions from across Scotland, the difference between a grant and a commercial stake is not cosmetic. Equity and loans shift risk and potential returns from the developers to the Treasury.

The next milestone is concrete: the developers' proposals, due after McCluskey's meetings with them this week, will show whether the restructured £200 million keeps Acorn on track.