Recession puts £1bn coal power station plan on backburner

Plans to build a £1 billion coal-fired power station in Kent were shelved today as owner E.ON blamed lower demand for electricity because of the recession.

Green campaigners celebrated the news. The Kingsnorth station had been at the centre of protests over fears that the new plant would increase carbon emissions and climate change.

German-owned E.ON cited "economic conditions" for the decision, which means the existing power station at Kingsnorth will close before the end of 2015. E.ON's UK chief executive Dr Paul Golby said: "The economic conditions are still not right for us to progress."

The announcement will embarrass the Government as E.ON's plant, which was set to supply 1.5 million homes, was one of only two schemes shortlisted in the Department of Energy and Climate Change's competition for funding to fit technology to capture and permanently store carbon emissions.

Experts had suggested the carbon capture and storage sector could sustain up to 100,000 jobs by 2030 and contribute up to £6.5 billion a year to the UK's economy. The remaining scheme is from Scottish Power.

Greenpeace campaigner Jim Footner said: "This is a victim of the recession, not a result of progressive climate change policy from the Government. The threat of unabated carbon emissions will remain until we see the Government bring in a limit on power plant emissions."

E.ON first applied for permission to build the Kingsnorth power plant in 2006, but then asked for the decision to be put off until ministers had made a decision on whether it must be fitted with carbon capture technology.

Ed Miliband, then the Secretary of State for Energy and Climate Change, later ruled that new coal-fired plants would have to fit the new technology.

E.ON then won a share of a £90 million pot to develop carbon capture systems. However, industry insiders said that the bidders had recently been warned of cuts to that funding.