RWE npower buys its way back into UK CCS competition

RWE npower has re-entered the UK government's competition to fund a 400MW carbon capture and storage (CCS) demonstration plant, by yesterday taking a 75 per cent stake in one of the bidders, Peel Energy CCS.

The original shortlist for the competition comprised the UK unit of Germany's E.ON, a consortium led by Scottish Power, Peel Energy, and BP's Alternative Energy, though BP has since pulled out.

RWE npower had originally hoped to make the shortlist, but was excluded for technical reasons.

The energy giant consequently hinted that it was considering legal action over the decision, but has now effectively bought its way back into the competition, shelling out an undisclosed sum for the majority stake in engineering firm Peel Energy's CCS subsidiary.

The company was formerly owned by Peel Energy, a unit of Peel Holdings, and Denmark's Dong Energy. They will now take smaller stakes in the project.

RWE npower chief executive, Andrew Duff, said that he was convinced that CCS will have a significant role to play in the UK's energy sector over the coming years.

"Clean coal generation is vital for us to reconcile the often conflicting interests of security, environment and affordability, given the impending closure of many of our older power stations," he argued.

The competition between E.ON, Scottish Power and Peel Energy is likely to be fierce, with the winner expected to see the government pick up the much of the bill for a project that should result in the development of a tried and tested CCS technology that would be ready for commercial export.

Bent Christensen, senior vice president at Dong Energy hinted that the involvement of both the Danish energy firm and RWE in Peel Energy's bid would strengthen its chances of winning.

"Our combined expertise and commitment to this technology represent a strong and compelling proposition," he said.

Peel Energy has already commissioned a separate CCS test facility at its Didcot coal-fired power station in Oxfordshire, and is also due to begin construction of a CCS pilot plant at its Aberthaw coal-fired station in Wales next year.

The plant, due to be completed in 2010 would be the first to capture CO2 direct from a commercially operating power station in the UK.

The news comes as oil giant Shell and Dutch energy firm Essent agreed to undertake a feasibility study for a 1,000MW CCS plant in the south west of the Netherlands. If it goes ahead, the plant would be the largest CCS project to date.