Powerfuel’s U.K. Carbon Project Bids for Slice of European Funds
The Hatfield carbon capture project, whose U.K. owner Powerfuel Plc went into administration in December, could receive a share of funds from the sale of 4.4 billion euros ($6 billion) of carbon dioxide permits.
KPMG International, administrator for coal mine operator Powerfuel, said the Hatfield carbon-capture project applied to a European Commission funding program for clean energy as the bloc seeks to curb emissions from member states. Project sponsors must submit plans to their governments by the deadline today.
“It’s a sign of the fact that it’s business as usual,” Alison Anderson, a Leeds-based spokeswoman for KPMG, said by telephone. Powerfuel is owned by Chief Executive Officer Richard Budge and former Russian billionaire Mikhail Abyzov.
Powerfuel’s assets include a coal mine and a project to build a power station that captures carbon dioxide from gasified coal for underground storage. KPMG has received 10 proposals concerning the assets, Anderson said.
“The expressions of interest have reflected the complexity of this job,” she said. She declined to give further details as the process is commercially sensitive. The company’s debt is about 85 million pounds ($137 million), according to KPMG.
Powerfuel has permission to build a power station at the site near its coal field and already won 180 million euros of European Commission funding. Powerfuel is 653 million pounds short of the investment needed to develop the CCS project, according to KPMG.
New Entrants’ Reserve
The U.K. Department of Energy and Climate Change expects to announce the number of proposals for EC funds received after the deadline later today, with a “more complete announcement” next week, a DECC spokeswoman said by e-mail.
Funds will come from the sale of 300 million allowances to emit carbon dioxide under Europe’s cap-and-trade program. Revenue from the sale will be used to aid carbon-capture and renewable energy projects. The European Investment Bank will sell the permits from the so-called new entrants’ reserve, or NER300, and disburse the revenue via national governments.
Powerfuel has applied to the first round of the contest, where revenue from the sale of an initial 200 million allowances will fund “at least eight CCS projects,” according to the EC. EU carbon allowances traded at 14.73 euros a metric ton at 9:17 a.m. in London. At this price, 200 million permits would raise 2.95 billion euros to be dispersed among them.
Second Round
The final number of projects would depend on the resources available, according to the commission. The second round to sell the remaining 100 million permits allows for the “potential adjustment of the technological, geographical or geological representation of projects,” after the first round awards, the EC said. The total amount of funding for an individual project will be limited to 15 percent of the full amount available, according to the EC.
Britain’s coalition government has pledged 1 billion pounds to fund the first commercial demonstration project to capture and permanently store carbon dioxide. This money will go to a CCS technology that captures CO2 from a coal plant after burning the fuel. Iberdrola SA’s Scottish Power unit is the only company in the running for the funds.
Powerfuel’s plans, to capture emissions before combustion, are among the most advanced in Europe according to Bloomberg New Energy Finance analysts. Pre-combustion is a more efficient option, said Jeff Chapman, chief executive of the Carbon Capture & Storage Association industry group.
“Pre-combustion capture means making hydrogen out of fossil fuel whilst capturing carbon dioxide,” Chapman said.
Vehicles, Homes
This hydrogen can be sold as fuel for vehicles or homes and used as a feedstock in chemical factories. “That’s a lot more flexible and you get revenue stream from that,” Chapman said. “Whether that makes it cheaper is a matter yet to be proven.”
The benefit of capturing carbon dioxide from a coal plant after burning fuel is that it can be retrofitted on existing gas or coal plants, Chapman said.
To contact the reporter responsible for this story: Sally Bakewell in London at Sbakewell1@bloomberg.net
To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net
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