A subsidiary of Germany’s RWE Group, the UK’s Peel Energy, and Denmark’s DONG Energy have formed a joint venture partnership to develop a carbon capture and storage (CCS) demonstration project in the UK.

RWE npower, an integrated UK-based energy company, has taken a 75% stake in Peel Energy CCS Ltd., a venture formerly owned by Peel Energy and DONG Energy. The restructured joint venture successfully prequalified for the UK government’s CCS demonstration competition, the companies said Friday.

The UK CCS demonstration competition was launched in November 2007 with the final goal to demonstrate a full CCS chain by 2014. All contenders must agree to use post-combustion technology to capture 90% of greenhouse gases from the coal plant. It has been widely reported, though not formally disclosed, that the winning bidder could gain £1 billion ($1.5 billion) in public funding to support a 300-MW to 400-MW plant.

The RWE/DONG/Peel group will contend with E.ON’s plant at Kingsnorth, in Kent, and ScottishPower’s plant at Longannet, in Fife.

The group said that if the project won the competition, it would build a carbon capture facility at a supercritical coal-fired power station of up to 400 MW. The companies propose that the CO2 would then be transported to disused gas fields in the North Sea, where it would be permanently stored. The project could be up and running by 2014.
The companies said that the partnership of RWE npower, Peel Energy, and DONG Energy brings together the expertise needed to demonstrate all facets of post-combustion carbon capture, transport, and eventual undersea storage.

RWE npower has already commissioned a separate test facility at its Didcot coal-fired power station in Oxfordshire, capturing CO2 using both post-combustion carbon capture and oxyfuel carbon capture methods. RWE npower 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 complete in 2010, will be the first to capture CO2 direct from a commercially operating power station in the UK.

DONG Energy is also actively involved in the development of CCS technology. Its CCS pilot plant at Esbjerg Power Station in Denmark, part of the CASTOR R&D project, is what the company calls “Europe’s largest CO2 capture facility to date.” It has been capturing the gas since 2005, DONG said.

Peel Energy is expected to bring to the table “a heritage in engineering and experience in delivering major infrastructure projects to the partnership.”

 “Energy companies cannot commit to commercial investment in CCS on a new power station until the technology is proven and seen to be economically feasible,” said RWE npower CEO Andrew Duff. “This could be a major barrier to the construction of much needed new build power plant and so this project is vital to unblocking the potential for coal to play its part in the UK’s long term energy mix.”

Bent Christensen, DONG Energy’s senior vice president said that DONG had been looking at building a new power plant in the UK for some time, and that the opportunity to develop a CCS project was an attractive proposition. “We are attracted to the UK by a proactive attitude towards this technology,” he said.

Sources: RWE, DONG Energy, Peel Energy, European Commission