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UK energy minister wants to fund two CCS projects

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* Davey to meet PM to ask for support for 2 CCS projects

* EU states to send top 3 projects to Commission by end-Oct

By Karolin Schaps and Susanna Twidale

LONDON, Oct 11 (Reuters) - Britain's energy minister wantsto financially support two pilot carbon capture and storage(CCS) projects, a technology the UK is banking on to reduceclimate-warming emissions and to develop as a new exportproduct.

Britain sees CCS as a key technology for reducing carbonemissions in the energy sector, and the government has launcheda 1 billion pound ($1.60 billion) competition to fund one ormore projects.

Secretary of State for Energy and Climate Change, EdwardDavey, will next week meet the heads of the UK's coalitiongovernment to make a case for awarding government funds to twoCCS projects, an official source familiar with the plans toldReuters.

Up until now it has not being clear whether the competitionwould fund one or more projects.

"(Davey) is calling for support for at least two full chainprojects," the government source said.

Britain's previous attempts to finance CCS projects failedas costs surged above expectations, but the UK is counting onthe technology to help it meet legally-binding climate targetsand is banking on using it as a new export product to countrieswhich have a vast fleet of polluting coal plants, such as China.

The winner or winners of the competition will be announcedsoon, a spokesman for the energy ministry said.

Britain's plan to fund CCS projects runs alongside aEuropean Union programme, which has earmarked two UK CCSprojects as contenders to win up to 337 million euros ($434.78million) of funding each raised from the sale of carbon permitsin the EU.

EU countries whose projects were short-listed for thefunding have to tell the Commission by the end of the monthwhich three projects, including any renewable energy schemes,they would be able to support beyond the EU money to ensure theyget built.

"We stand a very, very good chance to get at least oneproject," the source said.

The energy ministry spokesman said it would respond to theCommission by the deadline and that the UK's CCS competitionwould be aligned with the timetable of the EU-wide programme.

He declined to comment on whether Davey was meeting theprime minister next week.

Britain's Electricity Market Reform proposals, which arecurrently being assessed by parliament, include a mechanism toguarantee a minimum price of electricity for generators whichemit no carbon, including CCS plants.

These so-called contracts for difference make UK anattractive place to invest in CCS projects as they areguaranteed set long-term revenue.($1 = 0.6242 British pounds)($1 = 0.7751 euros)(Editing by James Jukwey)

((karolin.schaps@thomsonreuters.com)(+44)(0)(207 5426622)(Reuters Messaging:karolin.schaps.reuters.com@reuters.net))

Keywords: BRITAIN ENERGY/CCS