EU, pre-Budget funding to boost clean coal

Confirmation that the government’s Carbon Capture and Storage Incentive will fund four projects, and EU funding for a plant at Hatfield Colliery, Yorkshire, have improved the outlook for UK clean coal.

The government has confirmed in its Pre-Budget Report (see p 56) that the Carbon Capture and Storage (CCS) Incentive, a levy on electricity suppliers, will cover four carbon capture and storage demonstration projects. The funding is dependent on the Energy Bill presented to Parliament in the Queen’s Speech in November.

Until the Pre-Budget Report, the official position had been ambiguous, in that the levy was to cover "up to" four CCS demonstration projects on coal-fired power plants.

The energy and climate department (DECC) told ENDS the funding would cover one or two post-combustion projects on part of a plant’s total capacity, with full retrofit by 2025, and 2-3 full scale pre-combustion or oxyfuel projects from day one. The funding will cover the full CCS chain, from plant through transportation to permanent geological storage, it said.

The clarification that four projects will be funded has been welcomed by stakeholders. Together with the policy consultation response (ENDS Report 418, p 35) and Energy Bill in November, the uncertainty that has dogged the fledgling sector has greatly reduced (ENDS Report 410, pp 15-16). Cross-party support for CCS has also boosted confidence.

But the UK competition to fund post-combustion CCS on part of the capacity of a new coal-fired plant, suffered a setback with the postponement in October of Eon’s Kingsnorth plant due to the recession, until 2016. The plan was to commission it by 2014.

The other contender, a post-combustion retrofit to the existing 2.4GWe Longannet coal-fired power station in Fife, is being proposed by a Scottish Power-led consortium.

DECC stresses the competition is continuing, and that Kingsnorth is still a contender, but said commercial confidentiality would prevent announcement of both date and winner. It was also vague on whether funding would come from direct taxation or the CCS Incentive. It added that £90m of funding for early stage design studies announced in the 2009 Budget will be awarded in early 2010, to either contestant, or both.

Meanwhile, coal-mining and generation group Powerfuel received confirmation that its proposed CCS plant at Hatfield Colliery, south Yorkshire has been chosen by the European Commission for €180m of EU economic recovery funding.

With greater clarity on the CCS Incentive, the 900MWe integrated gasification combined cycle plant is set to catalyse development of the first CCS cluster in the UK (ENDS Report 417, p 4).1

Powerfuel chief executive Richard Budge told ENDS the project has already been cleared for funding and is eligible for the CCS Incentive. It is also seeking further equity finance.

He stressed that early engineering design has already been completed, and construction will start next year. The company is currently negotiating a £200m contract with US company Air Products to provide an air separation unit.

The plant will be built in two phases, initially a Combined Cycle Gas Turbine will run on natural gas by October 2013, converting to hydrogen-rich syngas from gasification of local coal by 2014, capturing and storing 5MtCO2e per year.

In answer to concerns the final phase may never happen, Mr Budge said: "I don’t think this plant will be built without coal gasification." He added the plant will be a commercially viable demonstration project with CCS costs below €50/tonne CO2e, and will enable replication at progressively lower cost, pioneering CCS in the EU.

Even so, the full CCS project, with inherent first-of-a-kind risks, would not happen without the CCS Incentive, Mr Budge said. National Grid is also offering to build an oversized pipeline for CO2 transport to long-term geological storage offshore. He believes Hatfield could be the catalyst for wider regional benefits, including the UK’s first CCS cluster in the Humber region.

Judith Shapiro, policy officer for the Carbon Capture and Storage Association, welcomed the government commitment to four CCS demonstration plants. But she also stressed that it now needed to broaden its focus to look at CCS in other sectors, in gas turbine plant, and at the wider strategic infrastructural issues.

  • The EU has also agreed to help fund nine offshore wind energy projects on top of the six CCS schemes as part of its €1.5bn (£1.3bn) economic recovery package.
  • This includes €40m (£35.5m) for an offshore wind testing centre off the coast of Aberdeen (ENDS Report 411, p 57), and €74.1m (£66m) to help improve grid connections between Shetland and the Scottish mainland.

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