This now leaves only two competitors in the running, E.ON AG and ScottishPower, but E.ON's CCS ambitions have been undermined by the company's recent decision to shelve construction of the Kingsnorth coal-fired plant.
In a statement, the DONG consortium said: "The consortium made its decision to withdraw from the competition for funding for a 400-megawatt CCS demonstration project because the competition timetable is not compatible with the partner companies' respective coal development plans."
The CCS competition was launched in March 2007, but despite strenuous vocal support, the government still has not chosen the projects that will receive funding. BP plc withdrew from the competition in mid-2007, claiming the government was taking too long to pick the winners.
RWE npower, a subsidiary of RWE AG, now intends to strike out on its own, announcing that the company will shortly submit a planning application for what could be the UK's largest carbon-capture pilot project, planned for the company's 1,500-MW coal-fired power plant in Aberthaw, Wales. RWE npower aims to build a 3-MW demonstration plant, claiming it will be at least eight times the size of existing 'post-combustion' projects in the UK and will operate twice as long. RWE already has operational CO2-capture plants at npower's Didcot Power Station in Oxfordshire and at Niederaussem in Germany.
Launching the government's clean-coal policy framework, Energy and Climate Secretary Ed Miliband, said: "There is no solution to the problem of climate change either at home or abroad without a solution to the problem of coal: cheap and reliable, but the most polluting fuel. Already from the European budget, 180 million euros has provisionally been offered to assist Hatfield power station fit CCS, and I can confirm that we have received bids from E.ON and Scottish Power for the next stage of the current CCS competition for a post-combustion power station.
"Early next year, we will allocate the up to £90 million (US$149 million) set aside for the next bid or bids that will go forward to the detailed design and engineering stage. Our aim is for carbon capture and storage to be ready to be deployed 100% on all new coal-fired power stations by 2020."
He added: "I can confirm that under our new framework, there will be no new coal-fired power stations without CCS. With immediate effect, to gain development consent all new coal plants will have to show that it will demonstrate CCS from the outset on around 400 megawatts of total output. Our plans are based on up to four projects between now and 2020, including up to two post-combustion projects and up to two pre-combustion projects. The pre-combustion demonstration projects are expected to have 100% CCS on their coal capacity from day one. The post-combustion projects will be expected to retrofit CCS to 100% of their capacity, within five years of 2020."
With the construction of a new plant in Kingsnorth now shelved by E.ON, the leading CCS project in the UK is ScottishPower's pilot at the Longannet coal-fired power plant in Fife, on Scotland's east coast. Last month, ScottishPower announced that it had completed the pilot successfully.
Commenting on ScottishPower's new CCS bid, Chief Executive Nick Horler said: "The UK government CCS competition is progressing well, and we are delighted to have submitted this detailed study. This competition will facilitate the biggest CCS demonstration project anywhere in the world, and I firmly believe that we have the required government support, the technical expertise and the abundant natural resources to lead the world in the development of this technology. The ScottishPower Consortium is ready to demonstrate CCS at a commercial-scale at Longannet from 2014."