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More surprises: 10 Megawatt, 1 billion pound CCS clean coal plant goes into bankruptcy

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  • More surprises: 10 Megawatt, 1 billion pound CCS clean coal plant goes into bankruptcy

    Original story: (December 1, 2010)

    The first near carbon-free gas-fired power plant in the UK is set to begin operating within a year in response to government efforts to stimulate carbon capture and storage technology.The pilot plant is to be built by Powerfuel, a mining and power company, and Calix, an Australian cement maker that has pioneered a method of removing carbon dioxide from gas before it enters power station turbines.

    Calix and Powerfuel have set up a joint venture to build the works next to the latter’s Hatfield colliery near Doncaster, where it is also building a 900 megawatt coal-fired power plant equipped with CCS, with public subsidy.

    The 10 megawatt demonstration plant will help the companies bid for UK and European Union funds. Its “Endex” reactor will capture 90 per cent of the carbon dioxide in fuel gas.

    The deal was announced this week in a parliamentary meeting on CCS, hosted by Jason McCartney and Nigel Adams, two Tory MPs from Yorkshire.

    Adam Dawson, chief executive of the government’s Office of Carbon Capture and Storage, said it had earmarked 1bn ($1.56bn) for CCS demonstration projects in spite of cuts elsewhere. It had also changed the rules recently to allow gas-fired projects to bid for funds.

    Mr Dawson praised plans in Yorkshire for a pipeline network to take carbon captured from power stations, refineries and steelworks into depleted gasfields in the North Sea. “The infrastructure ... is world class,” he said. He added that if the UK could pioneer the technology, it could provide 55,000 jobs nationwide.

    Brian Sweeney, of Calix, said part of the decarbonisation process was already being used in making dolomitic cement, which is more robust than common portland cement, but it would be perfected in the UK. “We are coming to Europe because that is where the market is,” he said. It aims to sell its reactor in the UK, Ireland, Germany and Poland.

    Michael Gibbons, director of Powerfuel Power, said the plant was a “world leading project”.

    Powerfuel, run by Richard Budge, the mining entrepreneur, is to receive €180m of EU money to build a demonstration plant at its new coal-fired power station next to its Hatfield colliery.

    The 2.4bn plant will require more funding if it is to be built by 2015. However, Mr Gibbons said the design plans had been drawn up and contracts were in place, including one with National Grid to pipe away the captured carbon.

    “The biggest market failure in history is in front of us. How do you reward capturing carbon when it costs more than not doing it?” He said a carbon price of at least 20 a tonne would be necessary to make it commercially viable.
    A mere 2 weeks later:

    Powerfuel, which is developing the UK’s first commercial scale clean coal power plant, has gone into administration because of the crippling cost of the project.

    Administrators at KPMG said they hoped to sell the company as a going concern to someone with the 635m ($1bn) necessary to develop the carbon capture and storage (CCS) plant, which would reduce the emissions from burning coal by up to 90 per cent.

    Powerfuel’s coal mine at Hatfield in South Yorkshire and Powerfuel Power, both subsidiaries of the plc, are not affected by the move, nor are its 380 employees.

    Richard Fleming, joint administrator, said: “Developing low carbon energy generation requires a large amount of capital upfront and the CCS development falls 635m short of the investment needed to progress the project beyond the preliminary stage. It needs moving on to a new owner with deeper pockets.”

    He said the mine also required about 30m of capital expenditure for improvements.

    ING, the Dutch bank, and VTB Capital, the Russian state investment bank, are owed about 80m. Accounts show the company made a pre-tax profit of 920,000 in the year to December 31 2009, compared with a 13.2m loss the year before, on turnover of 47.3m (31.5m).

    The move is a blow for Richard Budge, once dubbed “King Coal” after buying the bulk of Britain’s last deep pits from the government in the 1990s.

    Having reopened Hatfield, he staked Powerfuel’s future on the CCS project and bid successfully for European Union funds of €180m ($238m). He brought in Mikhail Abyzov, a Russian mining entrepreneur, and Russia’s Tecalson Investments is the majority shareholder.

    Mr Fleming said Mr Budge had seen his equity wiped out but he could return as buyer. “We will talk to any interested party,” he said. Powerfuel said it was working with administrators “to ensure the best possible outcome for the business, its customers and employees”.

    The administration is also a blow for CCS technology, which the UK and EU see as vital to meeting targets to cut greenhouse gas emissions. Only last week Powerfuel Power announced plans to build a pilot gas power plant with a new CCS technology. However, industry experts warned that few private operators would go ahead without more government support.

    The government is running a competition for up to 1bn in subsidies. A consortium led by Scottish Power is the only bidder after Eon pulled out saying the market was “not conducive”.