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A key £2.7 billion UK coal gasification power station that would feature carbon capture and storage on a commercial scale in 2016 has been placed on hold until the UK's coalition government clarifies its policy and incentives regime for the technology, Powerfuel chief executive Richard Budge said in an interview.
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Delaying Powerfuel's 900 MW Hatfield project would mean a delay to the commissioning and full-scale commercial operation of the power plant that is one of several CCS plants the government hopes to set up.
"We're ready, we've got the contractor ready to go and we've got the contracts and the commercial guarantees in place for phase 1 – we're that close," Budge told Dow Jones Newswires.
Powerfuel had planned to construct the world's first large-scale integrated gasification combined cycle power station with carbon capture capability in two phases with the plant operating on natural gas in 2013 in the first phase. By 2015 the power station would have the gasification and carbon capture units installed and then move to full commercial operation in the second quarter of 2016.
"All we need now is the leadership from government and the actual policy that they're going with and identification that we will receive the CCS levy," said Budge.
The previous Labour government enacted the levy on electricity suppliers to fund up to four CCS pilot projects. However, the incentive is reported to be under threat due to the pressures of the Comprehensive Spending Review, which will be published October 20, where the government will detail its proposed cuts.
Although the CCS levy won't directly impact the government as it is a levy on suppliers, and ultimately on consumers, it would need to be administered by the Department of Energy and Climate Change and Britain's energy regulator Ofgem, and as such would have an impact on government accounting.
The CCS levy was estimated to raise up to £10 billion over its 15-year lifespan.
"For the government to withdraw from the levy would create huge uncertainty about the deliverability of U.K. CCS policy," said Matthew Spence, director of the think tank Green Alliance that has campaigned for the levy to be retained.