In November 2007, the U.K. government's Department for Business, Enterprise and Regulatory Reform (BERR), announced it intended to help fund the design, construction and operation of a commercial scale, post-combustion, coal-fired power station project which successfully demonstrated the full chain of carbon dioxide (CO2) capture, transport and storage technology. It started a competition amongst project developers to select the one to be funded.
Since the original announcement, the energy responsibilities of BERR were transferred to the Department of Energy and Climate Change (DECC) and nine projects were submitted for consideration in the competition. As of July, 2010 two post-combustion projects remain in the running at coal-fired power stations. They are: Scottish Power's coal-fired Longannet plant in Scotland and E.ON UK's coal-fired Kingsnorth in Kent.
The award for the first project (either Longannet or Kingsnorth) is to go to a coal-fired power plant with an electrical output of at least 300 MW after installation of CCS. The project is to capture around 90% of the CO2 in the flue gases. The captured and purified CO2 is to be transported to an offshore storage facility.
In April, 2009 the European Commission (EC) decided to provide an unspecified amount of funding to help the two shortlisted projects pay for the front-end engineering and design (FEED) studies. These funds were requested by DECC.
Also in 2009, DECC announced the expansion of the program to help fund another three projects for a total of four CCS projects in the U.K. The goal of the program is to demonstrate both pre- and post-combustion capture technologies, which DECC said could include oxy-fuel. The department said it plans to help fund a maximum of two post-combustion plants. All of the CCS projects selected are expected to be tied to power generating stations, either on the grid or serving industrial installations. DECC said it would also consider funding gas-fired power stations.
DECC said the project financing will be provided by the UK CCS Levy, the framework of which is included in the Energy Act 2010. As of July 2010, the UK government is drafting secondary legislation on the detail of the levy, DECC said.
The UK government is also proposing it provide financial support to the additional three CCS projects through a contract for differences (CfD) on the CO2 abated. Financial support would be provided through a strike price payment less the European Union Greenhouse Gas Emission Trading allowance price for each tonne of CO2 abated over an agreed operating period. Additionally, the government is considering a maximum cumulative abatement level to be set in order to cap the amount of financial support paid. Such an arrangement would require potential project developers to work out the strike price they would need to recover the investment in CCS equipment, the additional cost of operating the CCS chain and that would provide the required rate of return. In exchange for funding, DECC said it expects the project developers to take an active role in the dissemination of information and know-how in order to facilitate further CCS projects in the UK and overseas.
In July 2010 DECC also announced it expects to start accepting bids for the other three 300-500MW CCS projects by the end of the year. At the same time it also announced the start of a "market sounding" process for the UK's CCS Demonstration Program, to get industry to help the Department explore workable options for the CCS demonstration project selections and funding processes. The market sounding process is set to end September 15, 2010.
EXPERIENCE:
As of July 2010 only two contenders are left in the competition to become the first of the four projects. They are: Scottish Power's coal-fired Longannet plant in Scotland and E.ON UK's coal-fired Kingsnorth in Kent. These two projects were selected from nine bidders.
