London (Platts)--1Dec2008

Conventional coal-fired power generation should only be built in the UK
on condition that it will be retrofitted with carbon capture and storage
equipment by the early 2020s, the independent Committee on Climate Change said
in a report released Monday.

The report stops short of recommending that new coal-fired power plants
should not be built at all without CCS technology.

But it suggests making CCS obligatory for coal-fired plant built after a
certain date (say 2020), and that those built before then be given a deadline
for retrofitting CCS (say 2020-25) or face very extensive limits on their
hours of generation.

One alternative, says the report, would be setting emissions standards
(such as company-specific targets on emissions from power generation) that
imply the need for CCS retrofitting in the 2020s to any conventional plant
added in the next 10 years. Another would be setting a floor price for the
European Union emissions trading scheme.

"These and other possible options warrant further consideration," says
the committee.

Many environmental campaigners are opposed to any new coal-fired build
and have called for planning permission for E.ON UK's proposed 1,600 MW
coal-fired power plant at an existing site at Kingsnorth in Kent to be
rejected.

Around 20 protesters, thought to be objecting to the Kingsnorth
development, attempted to invade E.ON UK's Coventry headquarters Monday. Some
were later arrested by the police.

E.ON UK did not give much indication of where its plans for Kingsnorth
now stood in a statement Monday reacting to the Committee on Climate Change's
report.

"We welcome this report as an important contribution to the debate about
how we keep the UK's lights on while reducing carbon emissions and ensuring
that energy is as affordable as possible," the company said in an email.

"We're pleased that the report confirms future needs for all forms of
clean energy generation, such as nuclear, renewables and fossil fuels with
carbon capture and storage."

"E.ON is aiming to lead the way in all of these to give the UK the
balanced, low carbon energy mix it needs," it said.

The UK's third biggest political party, the Liberal Democrats, said new
coal should not be allowed at all at present.

The party's energy spokesman Steve Webb said in a statement: "It is
simply too high a risk to allow new coal plants like Kingsnorth on the basis
of the promise that its carbon emissions will be captured at some point in the
future."

40% CUTS FROM POWER SECTOR POSSIBLE BY 2020

The committee says some ambitious targets are possible. It says a 40% cut
in emissions below 1990 levels by 2020 is realistically achievable for the
power sector if renewable generation can be increased to 30% of the total.

This would require a similar rate of deployment over the next 12 years to
that seen over the last 10 years in Germany, and a slower pace than that which
has been achieved in Spain.

Alternatively, the UK could reach the same level with lower renewables
but more new nuclear build.

The committee says that the power sector needs to be almost totally
decarbonized by 2030, and then electricity production stepped up so that by
2050 it can meet an increasing share of heat and transport demand.