U.K. Plans to Add Retrofit Carbon Capture to Subsidy Program

The U.K. proposed adding retrofit carbon capture and storage projects to a subsidy program offering guaranteed power prices to low-carbon power plants, a potential lifeline for coal-fired generators.

The proposal would allow CCS projects to qualify for so-called contracts-for-difference regardless of whether they are fitted to new or existing power plants, the Department for Energy and Climate Change said Wednesday in a consultation on its website. At present, only new power plants fitted with the equipment can apply for the contracts.

The measure could be a lifeline for existing coal-fired power plants that face closure as the government steps up efforts to lower greenhouse gases and the costs of emitting carbon rise. It may offer a route back to CCS for Drax Group Plc, and is a potential boost to an SSE Plc and Royal Dutch Shell Plc plan to equip a gas-fired plant with CCS.

“Carbon capture and storage is a potentially important technology for the decarbonization of electricity generation and industrial processes, and is expected to play a key role in the reformed electricity market,” the Energy Department said.

The U.K. is considering whether to close all of its 12 coal-fired power plants by 2023 as part of its effort to reduce greenhouse gases. It’s also helping to pay for planning work on two carbon capture projects that remain in contention for 1 billion pounds ($1.5 billion) of government funding should they decide to build.

Drax, SSE

Drax Group Plc in September pulled out of one of those projects, the White Rose plan to build a new 448-megawatt coal-fired plant adjacent to its existing plant in northern England and capture and store the emissions. Drax Chief Executive Officer Dorothy Thompson said she had wanted to pursue both biomass conversion and CCS, but government policy changes meant the company no longer had the funds to do both.

Drax shares Wednesday rose as much as 9 percent to 289.4 pence in London. Prior to the announcement, it had traded at about 272 pence.

Drax said in September it would still make its site available to the other White Rose partners, Alstom SA and BOC Group Ltd., who said they remain committed.

The other CCS project in the government competition is SSE and Shell’s plan to attach CCS equipment to an existing gas-fired plant at Peterhead in Scotland. SSE shares today were little changed.

“The policy intent is that CfDs should be available to CCS projects in the CCS competition irrespective of whether or not they are based on new or existing power stations,” the energy department said in Wednesday’s consultation, which closes to responses on Dec. 2.

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