The U.K. government said Friday it has awarded funding to E.ON AG (EOAN.XE) and a ScottishPower-led consortium for design and development studies as part of a competition to build a commercial-scale carbon capture and storage demonstration project.

The funding will support Front End Engineering and Design studies, which will enable the bidders to advance their designs for ScottishPower's CCS project at Longannet in Scotland and E.ON's scheme at Kingsnorth in southeast England.

"These two promising projects are at the forefront of the U.K.'s efforts to build one of the first commercial-scale clean coal plants in the world," said Energy and Climate Change Secretary Ed Miliband.

The U.K. is keen to encourage the development of carbon capture and storage to help meet its domestic target to cut emissions by 80% by 2050 and shore up energy security. The U.K. also wants to take a global lead in CCS technology so it can export it to countries like China and India, which are rapidly expanding their coal-fired power generation to support growing economies.

The funding for the FEED studies will be drawn from a pot of GBP90 million announced in the 2009 budget. The precise amounts awarded to E.ON and ScottishPower weren't disclosed.

The competition was launched in late 2007 to encourage energy companies to develop commercially viable CCS schemes that could be up and running by 2014. The FEED studies will involve detailed engineering and design work and enables the companies to fully develop their plans as well as cost every aspect of the project.

The FEEDs will be completed within 12 months, after which the final competition winner will be selected to build the CCS system.

The ScottishPower consortium, which is currently operating a carbon capture prototype at its Longannet power station, includes National Grid PLC (NGG), Royal Dutch Shell PLC (RDSB.LN), Aker Clean Carbon and Accenture PLC (ACN).

E.ON aims to have its carbon capture unit connected to its planned Kingsnorth coal power plant.

ScottishPower is the U.K. unit of Iberdrola SA (IBE.MC).

-By Selina Williams, Dow Jones Newswires +44 207 842 9262; selina.williams@dowjones.com