Leading U.K. Carbon Capture Project Saved From Administration

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GALWAY, IRELAND--May 13, 2011--Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--One of the U.K's most advanced carbon capture and storage (CCS) projects has been saved from administration following a deal with UK-based carbon capture specialist, 2Co Energy (London, England).

2Co Energy has agreed to acquire Powerfuel Power Limited (Doncaster, England) and its CCS project at the proposed 900-megawatt (MW) coal-fired, integrated gas combined-cycle plant in Hatfield, South Yorkshire. Powerfuel went into administration at the end of last year, claiming that it could not raise the rest of the funds needed to construct the €759 million ($1 billion) plant. For additional information, see December 13, 2010, article - U.K.'s Leading Carbon Storage Project Seeks Buyer.

The Hatfield project, which will now be renamed the Don Valley Power Project, is regarded as one of the U.K.'s leading carbon capture and storage projects. In October 2009, the project was the only U.K. carbon capture project to secure funding from the European Commission, with an award of €180 million ($237 million). For additional information, see October 9, 2009, article - Hatfield CCS Project Tipped for European Funding.

In addition to buying out Powerfuel Power, 2Co energy has put in place a financial guarantee that will enable the €180 million grant from the European Commission to be drawn down. The Don Valley Power Project is expected to be constructed and commissioned by 2015-16 and will be capable of capturing and storing up to 5 million tonnes per annum of CO2, deep under the seabed of the North Sea.

Earlier this week, the project emerged as one of those selected by the U.K.'s Department of Energy and Climate Change (DECC) to compete in the next round of the European Union's (E.U.) New Entrant Reserve 300 (NER 300) fund. For additional information, see May 11, 2011, article - U.K. Carbon Capture Projects Compete For E.U. Funding.

"Given the political commitment to CCS in the U.K. and the E.U., we are extremely pleased to be able to step into this project," said Lewis Gillies, Chief Executive, 2Co Energy. "Using coal so that it has a low carbon footprint meets energy security needs as well as CO2 emissions reduction targets. Equally importantly, the potential for using CO2 for Enhanced Oil Recovery (EOR) could help meet U.K. fiscal needs as it would bring access to taxation revenue from extra North Sea oil production and significantly reduce the overall cost of CCS to the U.K."

2Co Energy will be working with U.K. electricity and gas company, National Grid plc (NYSE:NGG) (London) on the transportation and storage aspect of the project, and they are currently evaluating two options. 2Co Energy will focus on the technical and economic evaluation of potential CO2 storage and EOR projects in the central North Sea, while National Grid will focus on saline formations in the southern North Sea, that could be made available for 2Co Energy's project, or others, in a future Yorkshire cluster of projects.

Chris Train, National Grid's network operations director, argued that the Don Valley Power Project has "a vital role to play in the early development of a CCS cluster on Humberside, which could help make a major contribution to the UK's move to a low carbon economy. By allowing flexible coal- and gas-fired power stations to stay in our future generation mix, CCS also offers a major boost to maintaining the security of our energy supplies".

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