Britain to fund four clean coal trials

LONDON (Reuters) - Britain will fund up to four large-scale demonstration projects to limit climate-warming carbon emissions from coal plants, through a levy on electricity bills, the government said on Monday.

The statement filled out details on plans announced in April, saying no new coal plants could be built in Britain without fitting technology to trap and bury carbon emissions from coal plants -- called carbon capture and storage (CCS).

Britain would fund up to four CCS demonstrations: two plants would trap carbon emissions before burning of the coal, called pre-combustion, and the other two would trial post-combustion.

The pre-combustion plants would have to fit CCS on all power output from day one, while the post-combustion plants would fit CCS to about a quarter of their electricity generation initially -- equal to at least 300 megawatts (MW) of net output -- rising to all power production by 2025.

The initial cost of the technology would be met with a levy which would add an extra 2 or 3 percent to electricity bills, energy and climate change minister Ed Miliband said.

The extra cost of retrofitting the post-combustion plants through 2025 would be met either by a carbon price or a levy, if the carbon price were too low.

"The levy will be available for retrofits should the carbon price not be high enough," said Miliband.

Britain will fund one CCS plant through a competitive bidding process. Miliband said two companies had submitted bids to enter the next phase of that process -- the UK arm of German power company E.ON and Scottish Power, part of Spain's Iberdrola.

The UK arm of Germany's RWE, RWE npower, and their partners Denmark's DONG Energy and Britain's Peel Energy, said on Monday they had pulled out of the competition because it was taking too long.

"The consortium made its decision to withdraw from the competition ... because the competition timetable is not compatible with the partner companies' respective coal development plans."

CCS is expensive but seen as crucial for limiting the amount of carbon dioxide emitted by coal- and gas-fired power plants.

(Reporting by Peter Griffiths, Gerard Wynn, Dan Fineren and Kwok Wan; editing by Sue Thomas)