Dong Energy and Peel Holdings to Set up $3 Billion, 1,600-Megawatt Coal-Fired Power Plant in Scotland

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Researched by Industrial Info Resources (Sugar Land, Texas)--Dong Energy (Fredericia, Denmark) and Peel Holdings (Manchester, United Kingdom) are planning to develop a 1,600-megawatt (MW) coal-fired power plant in Scotland at a cost of $3 billion. The proposed project will comprise two units with a power generation capacity of 800 MW each. Biomass will constitute 15% of the feedstock for the power units while the remainder will be obtained from coal.

The two firms plan to set up the plant at a site next to the aging Hunterston B nuclear power plant in Ayrshire currently operated by the British Energy Group Plc (LSE:BGY) (London). The nuclear power plant is slated for a shutdown by 2016 as per the Scottish government's unilateral moratorium on new projects in the nuclear power sector.

Dong Energy and Peel Holdings intend to seek planning permission for the coal-fired power project in 2009. Although the twin power plants are slated to come into operation by 2014, the project is in its infancy with the firms currently involved in initial environmental assessment on the premise of an outline design and is likely to be commissioned only in 2018.

The proposed project is dependent on coal imports since local supplies are not of the desired quality and their use is likely to result in high emission levels of carbon dioxide. Ayrshire handles a large proportion of Scotland's coal imports, thereby eliminating the need and cost of the transportation of massive amounts of coal to the proposed plant. Peel Holdings will import coal for the power project through the adjacent deepwater port owned by the firm.

The two firms claim that the plant would be designed to reduce emission levels of carbon dioxide by 25% compared with conventional coal-fired power plants. They are also optimistic about reducing emission levels by as much as 90% if the project includes development of carbon capture and storage (CCS) facilities onsite.

Dong Energy and Peel Holdings have formed a joint venture with RWE Npower (Swindon, United Kingdom) to develop a CCS plant in the U.K. and the joint venture has prequalified for the U.K. Government's CCS Demonstration competition. If the project is successful in the competition, the joint venture would be involved in developing a CCS facility of up to 400 MW that would be integrated with a new-generation coal-fired power plant. Emitted carbon dioxide would be transported to idle gas fields in the North Sea for permanent storage. The project is likely to come into operation by 2014.

Climate campaigners oppose the proposed coal-fired power venture for more reasons than one. At the forefront is the age-old concern of carbon dioxide emission levels from the coal-fired power plant that is still a decade away from coming into operation and will be based on a technology that is yet to be licensed. Despite claims by the Dong Energy and Peel Holdings about guaranteed reductions in emission levels, there are concerns that the project could increase Scotland's emission levels of carbon dioxide by 10% and undermine the government's plans to reduce greenhouse gas emissions by 80% by 2050.

Furthermore, the move to shut down the Hunterston B nuclear power plant is being viewed as a retrograde step at a time when Scotland is facing an energy deficit and there is increasing focus worldwide on generating cleaner nuclear power. The proposed shutdown also implies the closure of an industrial establishment that contributes more than $75 million in revenues to the local economy. This is being sharply criticized in the context of the economic recession prevalent worldwide.

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