Carbon capture plan for Peterhead
Two large energy firms have agreed to work together to develop carbon-capture and storage (CCS) in Aberdeenshire - if they can get the funding.
The UK government said it would hand over £1bn to develop CCS, which captures emissions from power stations and burying them under the sea bed.
A pilot project at Longannet in Fife was cancelled last month due to cost.
Now Shell and Scottish and Southern Energy want to develop the pioneering technology at Peterhead power station.
CCS is seen as vital to the future of producing energy from sources such as coal and gas, as it would cut the carbon dioxide (CO2) emissions which are released.
The aim is to capture and liquefy CO2 emissions, which would then be transferred via a pipeline to depleted oil and gas fields under the sea bed.
Longannet, a coal-fired power station, had been the only contender in a long-running competition by the government for a power plant that could become the test ground for carbon capture and storage.
Scottish Power, which operates Longannet, put the cost at £1.5bn.
The UK government decided it did not want to spend more than £1bn on supporting the trial and pulled away from the project.
A statement from Shell and Scottish and Southern Energy (SSE) said their new agreement at the gas-fired Peterhead plant would "accelerate" a programme of design studies.
They said they would be able to begin a full design study in the second half of 2012, if they won money from the UK government or the EU's NER300 fund.
The Peterhead project aims to design and develop a CCS system for capturing emissions after combustion at one of its existing three 385MW combined gas cycle turbines.
The CO2 would then be transported to the Shell-operated Goldeneye gas field in the North Sea using, as far as possible, existing pipeline infrastructure.
SSE chief executive Ian Marchant said: "If long-term targets for reducing emissions are to be met, CCS technology must be applied as widely as possible.
"We therefore welcomed the UK government's decision to include gas-fired generation plant in its CCS demonstration programme.
"However, the development of a commercial-scale CCS demonstration project presents significant challenges and will require appropriate levels of support from both the EU and UK government."
A spokesman for the department of energy and climate change said: "This announcement by SSE and Shell is a welcome reflection of the strong commitment to CCS in the UK.
"Gas CCS will be an important part of our future energy mix and there are a number of promising projects, both gas and coal, in Scotland and England.
"We will be considering projects through an open and transparent selection process to be launched as soon as possible."
Peterhead had been the site for an earlier CCS experiment.
Five years ago plans were developed to produce power from hydrogen, with the resulting carbon dioxide being pumped into the Miller Field by BP using carbon capture.
However, BP pulled the plug on the carbon capture idea after losing patience waiting for government approval.
First Minister Alex Salmond said the new agreement was an "important step forward for the development of CCS in Scotland".
Mr Salmond said: "Following the recent disappointment over Longannet and the previous UK government's abandonment of the earlier Peterhead CCS project, it is essential that Westminster clearly demonstrates its commitment to supporting the commercial development of CCS, not least when the continued commitment from industry is so clear.
"CCS technology could transform carbon-reduction efforts across the world, particularly in fast-growing economies.
"As such, it has the potential to become a significant export industry for these islands, and for Scotland in particular - that's why we are working with the UK CCS Liaison Group to ensure that lessons are learned from the Longannet FEED study."
Labour's Shadow Energy Minister Tom Greatrex said: "CCS is an important part of our drive to produce cleaner energy and reduce carbon emissions in the UK, and the moves towards the first commercial example being in Scotland is to be welcomed.
"The decision of the Tory-led government to withdraw from the Longannet CCS project last month was a body blow. But that should not be the end of the road for CCS in Scotland."
Scottish Liberal Democrat Energy spokesperson Liam McArthur said he welcomed the new development, "after the disappointment of Longannet".
He said: "These proposals show that the ambition to develop this type of technology in Scotland is very much alive and kicking."
Dr Richard Dixon, director of environmental campaign group WWF Scotland, said: "The Peterhead carbon capture proposal has a lot going for it.
"The fact that another energy company is now on board must confirm this scheme as the front runner for the government's £1bn test project.
"With gas forming a significant part of our energy mix and plans to build a new plant in Scotland, testing CCS on gas-fired power stations like Peterhead will be critical given the need to decarbonise our energy supply."
Friends of the Earth Scotland's chief executive Stan Blackley said CCS should not be an excuse for developing new coal and gas-fired power.
He said it should only be developed in order to be "retrofitted" to existing plants.