UPDATE 1-UK govt publishes details of carbon capture tender

Fri Feb 24, 2012 1:13pm EST

* UK govt expects CCS in Britain to start 2016-2020

* Proposals to be made by April 13

* UK says CCS to survive without subsidies in early 2020s

By Karolin Schaps and Gerard Wynn

LONDON, Feb 24 (Reuters) - The UK on Friday published details of its one-billion pound programme to build at least one carbon-capture and storage (CCS) power plant, details widely anticipated since a state-sponsored CCS deal broke down in October.

Calling for proposals for a wide range of engineering projects for CCS, including construction of a power plant, gas storage and pipelines, the Department for Energy and Climate Change's (DECC) notice of contract was published in the European Union's official journal.

"DECC's current intention is for the projects to start demonstrating the carbon dioxide capture, transport and storage by 2016-2020," the document said.

Participants are invited to make proposals by April 13.

The notification is one step short of launching the official tender, which DECC said will follow shortly.

"This is not the formal launch to the competition, it is simply a way of reconfirming our intent to launch shortly and begin to further advertise the process so as many as possible interested participants are aware and can participate," a DECC spokesman said.

The government sees the commercially unproven CCS technology as key to helping it meet legally binding 2020 renewable energy targets.

The government cancelled plans to fund a CCS demonstration project in October as costs spiralled higher than expected, leaving CCS developers concerned about where the 1 billion pounds ($1.59 billion) set aside by the government for a CCS pilot project would end up.

"I'm absolutely aware of the need to provide you with certainty quickly - and to ensure our timetables synchronise with the European NER300 timetable, which we are still very much on track to do," Britain's new Energy and Climate Change Secretary Ed Davey told investors at a conference on Wednesday.

The European Union plans to raise money soon through the sale of 300 million carbon permits called EU Allowances (EUAs) to fund CCS or renewable energy projects through its New Entrant Reserve 300 (NER300) programme.

Many UK pilot projects have also applied for funding through the NER300, including Drax, Alstom and National Grid's North Yorkshire project, Peel Energy's Ayrshire project and the Don Valley Power Project in Yorkshire.

DECC also said in the notice document that it expected CCS projects could be built without government support from the early 2020s onwards as its power market reform proposals to reward low-carbon electricity production will allow CCS to compete with other technologies.

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