October 11, 2012 / 2:00 PM / 6 years ago

UK energy minister wants to fund two CCS projects

LONDON (Reuters) - Britain’s energy minister wants to financially support two pilot carbon capture and storage (CCS) projects, a technology the UK is banking on to reduce climate-warming emissions and to develop as a new export product.

Britain sees CCS as a key technology for reducing carbon emissions in the energy sector, and the government has launched a 1 billion pound ($1.60 billion) competition to fund one or more projects.

Secretary of State for Energy and Climate Change, Edward Davey, will next week meet the heads of the UK’s coalition government to make a case for awarding government funds to two CCS projects, an official source familiar with the plans told Reuters.

Up until now it has not being clear whether the competition would fund one or more projects.

“(Davey) is calling for support for at least two full chain projects,” the government source said.

Britain’s previous attempts to finance CCS projects failed as costs surged above expectations, but the UK is counting on the technology to help it meet legally-binding climate targets and is banking on using it as a new export product to countries which have a vast fleet of polluting coal plants, such as China.

The winner or winners of the competition will be announced soon, a spokesman for the energy ministry said.

Britain’s plan to fund CCS projects runs alongside a European Union program, which has earmarked two UK CCS projects as contenders to win up to 337 million euros ($434.78 million) of funding each raised from the sale of carbon permits in the EU.

EU countries whose projects were short-listed for the funding have to tell the Commission by the end of the month which three projects, including any renewable energy schemes, they would be able to support beyond the EU money to ensure they get built.

“We stand a very, very good chance to get at least one project,” the source said.

The energy ministry spokesman said it would respond to the Commission by the deadline and that the UK’s CCS competition would be aligned with the timetable of the EU-wide program.

He declined to comment on whether Davey was meeting the prime minister next week.

Britain’s Electricity Market Reform proposals, which are currently being assessed by parliament, include a mechanism to guarantee a minimum price of electricity for generators which emit no carbon, including CCS plants.

These so-called contracts for difference make UK an attractive place to invest in CCS projects as they are guaranteed set long-term revenue.

($1 = 0.6242 British pounds) ($1 = 0.7751 euros)

Editing by James Jukwey

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