UPDATE: 14 UK Projects Apply For EU CCS, Renewable Funding

A total of 14 U.K. projects have applied for European Union funding of around EUR4.5 billion for carbon capture and storage and innovative renewable energy projects across the region, the government said Thursday.

Last week, Scottish and Southern Energy PLC (SSE.LN) with Royal Dutch Shell PLC (RDSB.LN) and Petrofac Ltd. (PFC.LN), Alstom UK Ltd with Drax PLC (DRX.LN), and National Grid PLC (NG.LN) and Peel Energy announced details of their applications for the funding.

U.K. Energy Minister Charles Hendry didn't give details on the remaining applicants for the EU funding, but said that nine of the 14 projects were for CCS and five for renewables.

Three of the CCS applications are based in Scotland and six in England, with four in the Humber and two in the Teeside regions. Seven of the CCS projects are for coal-fired power stations and two are to capture emissions from gas power plants.

"The strong level of interest received for CCS projects in particular is heartening--it shows that U.K. industry is keen to move forward in the development of CCS and confirms the lead that the U.K. is taking in this critical technology," Hendry told executives at the Platts CCS conference in London.

The applications for innovative renewables include tidal stream and wave power projects in Scotland and an offshore wind project based in northeast England.

The government has until May 9 this year to assess the applications against the EU's New Entrant Scheme and U.K. criteria and decide which to put forward to the European Investment Bank for further consideration.

The NER will sell 300 million allowances that have been set aside from the EU Emissions Trading System to provide the funding. At current carbon prices of around EUR15 a metric ton, the allowances would raise around EUR4.5 billion.

Separately, the U.K. government is providing up to GBP1 billion to fund the first commercial-scale CCS project and has committed to support another three projects through a levy on energy bills.

The government plans to call for proposals for the next three CCS projects after the budget on Mar. 23 and to select projects by the end of 2012.

Hendry said the government hoped to award the contract for the first project in the second half of the year to Iberdrola SA's (IBE.MC) UK subsidiary ScottishPower for the Longannet project in Scotland subject to quality and value for money.

ScottishPower was the only company remaining in the competition for U.K. government funding after Germany's E.ON AG (EOAN.XE) pulled out in October last year.

The U.K. wants to become a global leader in CCS technology with a view to exporting it to countries such as India and China that are rapidly expanding their fossil fuel-fired power generating capacity to support booming economies,

But China is already making great strides in developing CCS technology for its own power stations and for export.

The U.K. is also hoping that CCS will play a role in helping to meet stringent EU and domestic targets on cutting greenhouse gas emissions by 2020 and beyond as the electricity sector would need to be mostly de-carbonized by 2050.

Hendry said the government has decided to postpone publishing its CCS roadmap until the autumn rather than the spring so as to incorporate lessons learned from the electricity market reform and completing the front end engineering and design studies for the first demonstration project.

-By Selina Williams, Dow Jones Newswires [phone]; [e-mail]