2ND UPDATE:UK Widens Carbon Capture Plans In Bid To Develop Sector

The U.K. government Tuesday relaunched its competition to fund a commercial-scale carbon capture and storage project, widening the scope to include gas power stations as well as coal, industrial emitters and new technologies in a last ditch attempt to develop the sector.

The competition for GBP1 billion funding is part of government efforts to build a CCS industry in the U.K. as it seeks to decarbonize the power sector to meet binding climate change targets and create jobs in new low-carbon industries.

The previous competition, that was launched in 2007, collapsed after bidders pulled out blaming the high cost with the government itself withdrawing last October from negotiations with the remaining group of companies.

U.K. Energy and Climate Change Secretary Ed Davey said the offer was "one of the best anywhere in the world" and would help the U.K. build a CCS industry that could be worth GBP6.5 billion a year to the U.K. economy by late next decade in exports of U.K. expertise and products.

"What we are looking to achieve, in partnership with industry, is a new world-leading CCS industry, rather than just simply projects in isolation," Davey said.

The U.K's main business group, the Confederation of British Industry, urged the government to ensure this competition didn't go the same way as the last one.

"This time around the competition must be simpler and completed as quickly as possible," said CBI director for business environment policy Rhian Kelly.

Companies bidding in the competition include the U.K.'s Drax PLC (DRX.LN) and National Grid PLC (NG.LN), France's Alstom SA (ALO.FR), Linde AG (LIN.XE) subsidiary BOC and oil services company Petrofac Ltd. (PFC.LN).

Although the technology to capture and store carbon dioxide already exists, the entire chain has yet to be deployed on a commercial scale making the costs so high that such projects can't be built without support.

The U.K. wants to become a global leader in CCS technology with a view to exporting it to countries such as India and China that are rapidly expanding their fossil fuel-fired power generating capacity to support booming economies.

But China is already making great strides in developing the technology for its own power stations and for export. The government hopes that by broadening out the competition it still has a chance in competing globally for some of that business.

As well as including CCS fitted to gas-fired power stations, the relaunched competition includes other technologies such as pre-combustion, where the CO2 is removed from the fuel before it is burned, and other industrial emitters such as steel, cement and chemical plants.

In order to qualify projects must be operational by 2016 to 2020 or earlier and be full chain CCS or part chain that can show the prospect of being part of a full-chain project in the future.

Bids must be in by July 3 and a decision on which projects can progress to the next stage is due in the autumn. Subject to the proposals received the government could enter a front end engineering and design contract at the end of 2012 or early 2013.

The government has also made available an additional GBP125 million for research and development to be spent in universities and in developing cheaper components to cut costs and for pilot-scale projects to test the components and systems before they are deployed.

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

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