E.ON Shifts Carbon Focus From U.K. to the Netherlands

E.ON AG, Germany’s biggest utility, shifted its carbon capture and storage developments from the U.K. to the Netherlands as Britain committed 1 billion pounds ($1.6 billion) to fund the technology.

E.ON today scrapped plans to compete for a subsidy to demonstrate the capture and storage of carbon dioxide from a power station at its Kingsnorth site in Kent, southeast England, leaving Iberdrola SA’s ScottishPower Ltd. as the only company in the running for the money.

“We cannot proceed with the competition,” Paul Golby, chief executive officer E.ON U.K., said in an e-mail. “Having postponed Kingsnorth last year, it has become clear that the economic conditions are still not right for us to progress the project and so, simply put, we have no power station on which to build a CCS demonstration.”

Britain is seeking to cut government spending while securing energy supplies and reduce carbon-dioxide emissions. Energy Minister Charles Hendry said yesterday the nation could host four CCS projects by 2020. “The government is naturally disappointed that E.ON has decided not proceed,” the Department of Energy and Climate Change said in a statement.

No Approval

E.ON wanted to demonstrate the technology on a 1,600- megawatt coal-fired plant to be built next to an existing facility at Kingsnorth. E.ON sought permission to build the plant in 2006 and has so far not gained approval, Jonathan Smith, a Coventry-based spokesman for the company, said by phone. The U.K environmental group Camp for Climate Action staged a week-long protest near the Kingsnorth plant in 2008.

“Carbon capture and storage is a vital technology in the fight against climate change,” E.ON’s Golby said. The company will concentrate on the Maasvlakte project in the Netherlands, he said. “The lessons from that project can be brought back to the U.K. for future generation CCS projects,” he said.

E.ON and Electrabel SA are working to fit CCS technology at a coal power station at its Maasvlakte site. The Dutch government promised a subsidy of as much as 150 million euros in May and the project was awarded 180 million euros of European Union funding as part of a recovery package for the 27-nation bloc, Edwin Kotylak, a spokesman for E.ON Benelux, said.

A final investment decision will be made on the Maasvlakte project in December, he said.

Spending Plan

Britain’s Conservative-Liberal Democrat government has adopted a former Labour plan to fund the first demonstration of capturing carbon and piping it underground for storage in depleted North Sea gas fields at a commercial scale. It also promised subsidies to three more CCS projects via a levy on electricity bills.

The U.K. will give as much as 1 billion pounds to fund the first CCS project at a power station, the government said today in its national spending plan. The government will decide next spring whether the other projects will be funded via a levy or from the public purse, according to the plan. This will be after a review of current climate change levies on industry, which is to be consulted on in November, the review said.

“We welcome that 1 billion has been set aside given the stringent times,” Jeff Chapman, chief executive of the Carbon Capture & Storage Association, an industry group, said by phone. “It’s enough for one project, but it’s not enough for four.”

“We’ve had plenty of delays with this technology and we don’t want more delays,” he said.

Committed

Powerfuel Plc, based in Doncaster, England, won 180 million euros of EU funding for its 900-megawatt Hatfield project in Yorkshire. This would gasify coal and capture the carbon dioxide before the fuel is burnt for burial in depleted gas fields. This type of technology doesn’t qualify for the U.K. competition.

“The ScottishPower consortium remains committed to the carbon capture and storage project at Longannet, and we are on schedule with our front end engineering and design work,” the company said in a statement. The company is working with Royal Dutch Shell Plc and National Grid Plc to add CCS technology at its 2,300-megawatt Longannet coal plant.

E.ON’s existing 2,000-megawatt Kingsnorth plant is due to close by the end of 2015 under European environmental rules.

To contact the reporter on this story: Catherine Airlie at cairlie@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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