The government's first competition to win funding for a pilot carbon capture and storage plant has been thrown into disarray after Eon pulled out its project at Kingsnorth.
This means that a Scottish Power-led consortium is now the only entrant. It is proposing to build a post-combustion CCS plant at its existing Longannet coal-fired power station in Fife.
Eon made the announcement today just hours before the government was due to confirm how the competition will be financed as part of its comprehensive spending review.
Paul Golby, Eon UK's chief executive, said the "economic conditions are still not right" for Eon to build a 1.6 gigawatt coal-fired power station at the site by 2014, as required by the competition.
However, the announcement is confusing. Last year, Eon postponed plans to build the plant until 2016 due to the recession. But the energy and climate change department (DECC) said it would still be considered for funding (ENDS Report, December 2009).
Eon's announcement is just the latest embarrassment to the government's CCS plans.
It came a week after coal magnate Richard Budge, chief executive of Powerfuel, announced his company was postponing plans for a pioneering 900-megawatt coal plant with CCS at Hatfield due to uncertainty over finance.
CCS stakeholders and experts also recently sent letters to the Treasury calling for the retention of the proposed CCS levy to finance projects (ENDS Report, March 2010).
An Eon spokesman said the company "would consider" entering future rounds of the CCS competition, but "those will also require projects to be completed by a certain date and until we have clarity on timelines we cannot make a decision".
It will now focus its efforts on a CCS project in the Netherlands. It is working with Gdf Suez and the Rotterdam Climate Initiative to examine the feasibility of building a 250 megawatt post-combustion CCS plant at Maasvlakte near Rotterdam. It would be fitted onto a coal-fired power station currently under construction.