Clean coal dealt second blow as Danish energy giant pulls out of Scottish plans

Dong Energy withdraws from 1.6GW Hunterston power station scheme just days after E.ON shelves Kingsnorth
Severin Carrell, Scotland correspondent
guardian.co.uk, Monday 12 October 2009 17.24 BST
Plans for a new generation of "clean coal" power stations were dealt another severe blow after the Danish energy giant Dong Energy announced it was pulling out of plans for a major new coal-fired plant in Ayrshire.
Dong said it was withdrawing from the 1.6GW Hunterston power station scheme, which would eventually use carbon capture technology, and a further coal-fired plant in Germany, to focus its efforts on green energy and cutting its CO2 emissions.
The decision raises further doubts about the future of UK and Scottish government plans to invest heavily in "clean coal" plants after the energy firm E.ON said last week it was shelving proposals for a new coal-burning station at Kingsnorth in Kent. It cited the drop in demand for power due to the recession.
The news caps a dizzying few days for environmentalists, with an announcement at the weekend from airports operator BAA that put plans for a third runway at Heathrow airport in severe doubt. BAA said that it would not submit a planning application for the development ahead of the general election. If the Conservatives win the next general election that will effectively kill the project because the party has said they will include a manifesto commitment not to expand Heathrow, Gatwick or Stansted.
Dong, which brands itself as a climate-friendly power company, said that the economics of coal were too difficult for it to invest in new plants. Its withdrawal raises significant problems for the junior partner in the 50:50 joint venture at Hunterston, the Manchester-based property company and airport operator Peel Holdings.
It has invested in windfarms and has a 24% stake in the mining company UK Coal but it has never built a coal-fired power station. Environment campaigners and the Scottish Green party urged Peel to completely drop the proposal.
Liz Murray, Scottish campaigner for the World Development Movement, said: "It's clearer than ever that dirty coal is a risky investment. Energy companies are finding it impossible to justify such climate-trashing developments."
Richard Dixon, director of WWF Scotland, said: "The Hunterston coal proposal was the wrong sort of scheme in the wrong place. It would have locked us into major climate change emissions for three or four decades, long past the time when we need to have kicked our addiction to burning coal."
E.ON's decision last week suggests the energy industry is unwilling to risk fresh investments in coal but Peel insisted it would continue with the application. Dong would continue giving it technical advice, said Owen Michaelson, chairman of Peel Energy.
"We can all appreciate the business drivers behind this decision," he said. "We are sorry to lose Dong Energy as an investor on this project but are pleased the relationship will continue through their design services."
"Ayrshire Power's [the company formed by Dong and Peel Energy to build Hunterston] overall strategy for the project is unaffected by this decision. We have just completed the latest stage of our public consultations with the local community and other key stakeholders and we now look forward to continuing to progress through the planning process."
The UK energy secretary, Ed Miliband, has insisted no new coal-fired plants can be built in England without the capacity to use carbon capture and storage technology which will bury waste CO2. Environmentalists say this is unacceptable, as the technique is unlikely to be available until 2020.
The Scottish first minister Alex Salmond has publicly backed the Hunterston proposal, since it too would have the capacity to use CCS technology and would allow Scotland to entirely phase out nuclear power.
The Dong plant would sit beside Hunterston nuclear power station, which is due to shut down its last reactor in 2016. The Scottish government has given Hunterston significant support by adding to its national planning framework, which allows it to sidestep local planning rules.