Four carbon capture projects shortlisted for share of £1bn Government funding

The Department of Energy and Climate Change (DECC) said that the four projects were selected from eight bids on the basis of their deliverability, value for money and ability to meet the Government's timetable to deliver cost-competitive CCS by the 2020s. They will now take part in "intensive commercial negotiations with the Government" ahead of a final decision on which projects to support further in the New Year.

"We have received some quality bids from industry who have really risen to the challenge set by the competition," Energy Secretary Ed Davey said. "The projects we have chosen to take forward have all shown that they have the potential to kick-start the creation of a new CCS industry in the UK, but further discussions are needed to ensure we deliver value-for-money for taxpayers. Today's announcement is an important step towards an exciting new industry, one that could help us reduce our carbon emissions and create thousands of jobs."

The four successful bids came from the Captain Clean Energy Project in Grangemouth, Scotland; the Teeside Low Carbon Project; the White Rose Project on the Drax site in North Yorkshire and a retrofit project at an existing gas turbine power station in Peterhead. Three of the four projects have also applied for European Commission funding via New Entrant Reserve (NER300) allowances.

Among the four projects that were unsuccessful was the Don Valley Project in Stainforth, Yorkshire, a 650MW pre-combustion facility already at an advanced stage. The project, which has twice been selected for EU funding, topped the list of European projects competing under the NER300.

"Leaving aside the rights and wrongs of the Don Valley project's non-inclusiuon, it is heartening to see a broad range of projects being taken through to the next stage," said energy law expert Euan McVicar of Pinsent Masons, the law firm behind Out-Law.com. "There is no real surprise that there were four shortlisted bidders at this stage, competitive tension and a range of bidders being key to DECC's value for money requirements."

CCS is a technology used to prevent carbon dioxide (CO2) from being released into the atmosphere from the use of fossil fuel in power generation. A CCS project captures the CO2 produced by a power plant before storing it in such a way that it does not enter the atmosphere.

Projects can be full chain, meaning that they are capable of carrying out all steps in the process, or part chain. Development of CCS technology could save the UK as much as £45bn by 2050, according to a Technology Innovation Needs Assessment (21-page / 1MB PDF) published by the Government in August.

The CCS Commercialisation Programme is the Government's second competition to provide funding and additional support to developing projects, announced in April as part of its CCS Roadmap strategy document. The funding is intended to support the upfront costs of early projects, while potential longer term support could be made available through the use of low carbon Contracts for Difference (CfDs).

The NER300 is a European Commission competition for innovative renewable projects, including CCS. It is likely to support two or three CCS projects across Europe as part of its initial funding round, on which it is due to make an announcement before the end of the year. Projects eligible for NER300 funding must also be backed by member states.

Davey said that the Government had written to the Commission to confirm its support for the shortlisted Teesside and White Rose projects, as well as the Peterhead project which is on the NER reserve list, "subject to their ultimate success" in the UK funding competition.

"We will remain in close contact with the European Commission in the coming months as they take their decisions on which projects to support with European funding," Davey said.