Electricity generator Scottish Power is threatening to withdraw from a project to build a flagship pilot carbon capture & storage (CCS) facility at Longannet coal-fired power station near Fife, Scotland, unless the Treasury gives it £0.5bn more funding.
If the Treasury can't produce the money, this will be a severe blow to the UK's hopes of becoming a world leader in the technology. Urgent talks are being held between Scottish Power, DECC and the Treasury.
Do you fancy their chances, especially after Osborne's anti-green speech at the Tory Conference? I don't.
The plant is the UK's second largest coal-fired power station and Europe's third largest. If CCS proved to be successful it could capture between seven million and eight million tonnes of carbon dioxide a year and make a serious contribution to tackling the UK's overall emissions.
George Osborne had earmarked £1 billion for the project, but Scottish Power, owned by the Spanish company Iberdrola, is now asking for half as much again. It is supposed to be up-and-running in three years.
A competition to find contenders to build pilot CCS projects was begun in 2007 by the previous Labour administration, and there had been five entrants.
Now the project at Longannet is the only one remaining in the running, since E.On pulled out of constructing a coal-burning power station at Kingsnorth in Kent earlier this year.
Last May, a study by Scottish Enterprise suggested more than 5,000 Scottish jobs could be created by three proposed CCS schemes, including the one at Longannet.
Jeff Chapman, chief executive of the Carbon Capture & Storage Association, remains upbeat, saying that even if this project were not to go ahead, “there are lots of others ready to take its place”.
DECC is still insisting that a way will be found for the project to proceed, and an announcement will be made before the year's end.
It is expected that some of the funding will come from the sale of CO2 permits by the European Investment Bank that are beginning in a month's time.
The Bank is being given 300 million EU carbon permits by the European Commission, which are reserved for new entrants into the EU's emissions trading scheme from 2013, and is being told to sell 20 million units per month through next year in order to raise funds for renewable energy and carbon capture and storage projects in all the member states.
CCS has always been touted by the conventional energy sector as being a vital weapon in the armoury to fight climate change, not least because if successful it would allow 'business-as-usual' to continue without the release of climate-warming gases to the atmosphere.
Critics of the technology have always argued that its cost would prove prohibitive, that it is unproven and would take too long to implement to make a significant dent on global emissions in time to curb dangerous climate change.
The loss of the scheme would also affect proposals for a £3bn CCS-enabled coal-fired power station in Ayrshire, by Ayrshire Power, a company owned by Peel Energy Ltd, to be situated near Hunterston B nuclear power plant.
A coalition of environmental groups that includes WWF, RSPB Scotland, Friends of the Earth, Oxfam, and the Scottish Wildlife Trust had mounted a legal challenge to the plans which a judicial review over-ruled on 4th October.
Developers of several other proposed power plants are also waiting to see if they can be constructed using CCS. Scottish Power itself is hoping to fit it to a new gas turbine power station at Cockenzie in East Lothian, which has also just received planning permission.
Only in June, ScottishPower, National Grid and Shell announced plans to create an onshore pipeline to carry up to two million tonnes of CO2 from Longannet to the North Sea.
Last month the Energy Technologies Institute (ETI) launched a £3m, two-and-a-half year project involving EDF Energy, E.ON, Rolls-Royce and Petrofac, to create a modelling tool-kit capable of simulating the operation of all aspects of the CCS chain, from capture and transport to storage.
ETI Chief Executive Dr David Clarke believes that “around a third of the UK’s electricity could be generated from coal, gas, biomass or hydrogen turbines fitted with CCS by 2050".
“CCS infrastructure is complex," he says, "and will need to be rolled out rapidly to meet those targets."
The ETI has already announced £29m worth of CCS projects, including a next generation capture demonstration project led by Costain and an appraisal of the UK’s potential storage sites led by Senergy. Scottish Power has had funding to scope out its own projects.
The ETI is also commissioning a project to develop and demonstrate cheaper carbon capture technologies specifically for gas fired power stations. An announcement on who will carry out the work on this project is expected in early 2012.
There are several different types of CCS technology, depending on whether it is retrofitted to an existing plant or intrinsic to a new-build, and depending on the fuel burnt.
Costs can be reduced if the gas is used to help extract more oil and gas from the North Sea fields into which it is pumped. The most optimistic studies put a figure of £150bn on the amount of fuel that could be obtained in this manner.
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