The Killingholme fields: E.ON plans 'clean coal' power plant

E.ON and its UK subsidiary Powergen are to build a new £1bn clean-coal plant in Lincolnshire, close to the Killingholme gas-fired station on Humberside.

The plans for the new project, which will capture and store CO ₂ to generate "carbon-free" electricity, herald a new era in environmentally friendly generation from coal.

E.ON chairman Wulf Bernotat unveiled the plans last week at a conference on environmental sustainability in Berlin. This followed an announcement by E.ON's German rival, RWE, of its intention to build a clean-coal plant in Tilbury on the Thames Estuary at a cost of £800m.

Both companies aim to build 450-megawatt plants. RWE hopes to start generation by 2016, while E.ON is looking to inaugurate its plant in 2011.

A combination of high gas and oil prices, new technology and worries about security of energy supply is making coal an attractive option for power generation, spurring on new investment in environmentally friendly plants.

The technological challenge is considerable. Capturing, liquefying and storing the CO ₂ produced during the generation process is both demanding and costly. Drax Power, which operates the UK's largest coal-fired station, has so far shied away because of the expense.

However, continental generating businesses are taking up the challenge. Vattenfall, the Swedish power company, aims to launch a 30MW clean-coal plant near Berlin in 2008. This will burn local lignite, while both the E.ON and RWE plants should be able to import cleaner coal by sea.

Vattenfall and RWE are both looking at inland underground storage in disused mines or gas fields, while E.ON is considering storage in offshore gas or oil reservoirs where the CO ₂ can be used to raise production levels.

The prospect of generating carbon-free electricity is exciting several other energy companies. At Peterhead in Scotland, BP, together with Scottish and Southern Electricity, is engaged in a £330m generation project, separating CO ₂ from hydrogen before "sequestrating" the CO ₂ in the Miller Field reservoir beneath the North Sea.

The dash for gas that started in the 1980s has cut the role of coal-fired stations, which currently account for one-third of the UK's power generation. Yet Britain's mines, which once seemed in terminal decline, still supply around half of the coal used. On current trends, gas is set to rise from 30 per cent to 60 per cent of British power generation by 2020.