Miliband calls full steam ahead for CCS, despite Kingsnorth delay

Ed Miliband today reaffirmed the government's commitment to the development of carbon capture and storage (CCS) plants in the UK, despite E.ON's announcement that it had shelved plans for a new coal plant at Kingsnorth in Kent, and confirmation yesterday from Danish power firm Dong Energy that it is pulling out of the project to build a 1.6GW coal-fired power station in Ayrshire, Scotland.

The government is currently running a competition to completely fund a £1bn CCS plant in the UK. Kingsnorth was one of four plants in the running for the funding, alongside plants put forward by RWE npower in Essex, Scottish Power in Fife, and Dong Energy and RWE npower in Oxfordshire.

But E.ON has suspended plans to replace Kingsnorth, citing a decrease in energy demand because of the recession. And recent reports in The Guardian suggested the Treasury was re-examining funding CCS projects because of economic pressure.

Meanwhile, Dong announced yesterday that it was withdrawing from the 1.6GW Hunterston power station scheme, which was not part of the CCS competition but was expected to fit the technology at a later date. Dong's partner on the project, Peel Energy, said that it would continue with the planned development, but the Danish energy giant's contention that it had walked away from the project as a result of the unfavourable economics of building a new coal plant means that it could face difficulties attracting new investors.

The moves from E.ON and Dong have been widely interpreted as a major blow to the government's plans to build up to four CCS demonstration plants in the UK. But speaking on the fringes of a CCS industry conference in London earlier today, energy and climate change secretary Ed Miliband insisted that the government funding competition and wider plans had been unaffected by the decisions.

"Decisions of private companies are not going to stop us driving forward with carbon capture and storage," he said. "The recession is not going to divert us. There is no shortage of companies coming forward."

Miliband refused to be drawn on whether this meant that E.ON had withdrawn Kingsnorth from the competition or whether another plant would take its place on the shortlist.

The government is due to announce the winner of the competition next year. E.ON has delayed a decision on Kingsnorth "for up to two to three years" – seemingly ruling it out of the competition – though it says it remains committed to CCS "as a group" and insisted last week that it was still in the funding competition.

Miliband said the government would introduce legislation in the next session of parliament that would allow for a levy on energy bills that could then fund "between two and four" CCS projects.

Previous analysis by the Department of Energy and Climate Change suggests that the new levy will add two per cent to energy bills between now and 2020.

In related news, E.ON chief executive Paul Golby told delegates at the Carbon Sequestration Leadership Forum that the company's decision to delay Kingsnorth had not been influenced by the environmental activists who have staged a series of high-profile protests at the plant, and also hinted that relations between the company and the protestors remain decidedly frosty.

"It was purely based on economic reasons, it has nothing to do with the people who invaded my power station," he said, adding that they were "the same people now on top of the Houses of Parliament - I hope it wasn't too warm a night last night."