Power generators want more clarity

London - Up to four carbon capture and storage (CCS) demonstration facilities are to be built in the UK under ambitious government plans to require coal-fired power operators to capture all carbon emissions from their plants by around 2025.

Under plans announced by Ed Miliband, secretary of state for Energy and Climate Change back in April, all new coal-fired power stations, including demonstration plants, will have to capture at least 25% of their carbon emissions on startup.

Alongside the Government's ongoing competition to build a post-combustion CCS demonstrator, up to three further 300-400MW projects including pre-combustion technology will be funded by a new - yet to be developed - levy mechanism, Miliband announced.

Power generators must prove that any new power station is 'carbon capture ready'. The criteria here include: having sufficient space available to retrofit CCS; a suitable potential offshore area to store carbon dioxide; and a feasible potential transport route from the power station to the storage area

Existing coal-fired plants will be required to have a full-scale CCS retrofit within five years of the technology being judged technically and commercially proven by an independent panel that will include the Environment Agency.

Demonstration projects are expected to start coming on stream by 2014 under the plan, which also envisages the establishment of CCS clusters in regions such as the Thames, Humberside, Teesside, Firth of Forth and Merseyside.

A CCS consultation document for England and Wales will be published this summer, including how to fund a larger demonstration programme and the conditions to be placed on future coal-fired power stations.

"Our estimate is that CCS would add about 2% to the total UK energy bill by 2020," said Miliband, though he added that the amount of subsidies for power generators to build new coal-fired power stations is going to be part of the consultation process.

"I hope we can build a concensus on this because we have got the right balance between future security of supply, which includes having new coal-fired power stations in the energy mix by 2020," said the minister, but adding, "We want to drive as hard a bargain [with the power generators] as possible here."

The Government hopes that European funding will defray some of the costs, but its bargaining position could be compromised by existing EU regulations that will require new coal-fired capacity to be built.

The Large Combustion Plants Directive, for instance, could shut many power plants across Europe by 2015, including at least 10 in the UK that generate 35 thermal gigawatts (GWth) of electricity - around 25% of the country's supply.

Miliband admitted that the UK would not succeed on its own, saying: "You need the right regulatory conditions to drive forward CCS. That is very important both domestically and for international projects as well. With the European money that has been announced and what Obama is doing in the US, this is a real sea change that is happening."

On the shortlist in the initial UK competition to demonstrate the feasibility of CCS are proposals from E.ON, ScottishPower, BP Alternative Energy International Ltd and RWE npower - through its recently acquired majority stake in Peel Energy. Scottish Power, for one, intends to meet the government's 2014 target.

While welcoming the Government's ambitious CCS plans, power companies want more visibility on the level of funding support they might receive for adding CCS to their plants - at an estimated cost of £1 billion a time.

For its part, E.ON called for further clarity on issues such as the conditions themselves and how the Government intends to create a level playing field between new, cleaner coal and existing unabated coal in the UK.

E.ON is now committed to fitting capture technology to its Kingsnorth plant in Kent in accordance with the Government's proposed conditions, as long as it is properly funded, said Dr Paul Golby, chief executive of E.ON UK.

"To that end, we propose that the CO2 from Kingsnorth should be captured and then stored as part of a 'Thames Cluster' that supports the whole of the South East, the highest energy-using region of the UK."

According to the E.ON boss, linking a number of fossil-fired power stations and other industrial sites to a single carbon transportation system would effectively 'future proof' the development of CCS by allowing new facilities to connect quickly to a pipeline that would work much like the existing national grid for electricity transmission.

Meanwhile, ScottishPower said it could meet the Government's CCS Challenge as early as 2014 by retrofitting CCS technology to its existing coal plant at Longannet. This, said the company, would demonstrate, on a large scale, a fully operational CCS system capable of being deployed in the UK and around the world?

"In such difficult economic times, we welcome the Government's renewed and additional commitment to demonstrating carbon capture and storage," said Nick Horler, chief executive of ScottishPower. "Continued momentum on the demonstration project and investment in a UK skills base is essential for the UK to take a real advantage in this emerging market and continue to lead the world in emission reductions."