The government’s long-awaited plans to make the UK a world leader in carbon capture and storage (CCS) technology were revealed today as it launched a new £1bn competition and roadmap for the fledgling industry.

Plans to capture emissions from a potential 30GW of power stations and industrial facilities are outlined in the new roadmap, along with policy measures to help pay for the new technology, which according to the Department of Energy and Climate Change (DECC) could create an industry worth £6.5bn a year and supporting 100,000 jobs by the 2020s.

The government said the £1bn funding competition would be available to support an unspecified number of projects that are intended to be up and running between 2016 and 2020.

The funding will not necessarily cover the full capital costs of any one project, but the government expects to leverage private capital to support the projects as a result of the long-term contracts for difference (CfD) outlined in its Electricity Market Reforms, which promise higher prices for low carbon energy.

Energy and Climate Change Secretary Ed Davey, who revealed the competition launch last week, also announced £125m of funding over four years for CCS research and development, including a new £13m UK CCS Research Centre based at the University of Edinburgh and knowledge-sharing programmes with both UK and international projects.

Morever, a new CCS Cost Reduction Task Force will be established to help ensure CCS can be cost-competitive with other low-carbon technologies by the 2020s.

Davey said that together these measures comprised an offer that is “one of the best anywhere in the world” and would help the UK capitalise on its transferable oil and gas industry skills and substantial storage capacity – thought to be capable of keeping 100 years of emissions safely in geological formations.

“What we are looking to achieve, in partnership with industry, is a new world-leading CCS industry, rather than just simply projects in isolation – an industry that can compete with other low-carbon sources to ensure security and diversity of our electricity supply, an industry that can make our energy-intensive industries cleaner and an industry that can bring jobs and wealth to our shores,” Davey added. “This is a really exciting time for the fledgling CCS industry.”

The competition is dependent on state aid approval from the European Commission, but a spokesman for DECC told BusinessGreen the government was very confident of getting the go-ahead given the support the EU has shown for CCS.

Brussels views CCS as in the common European interest and has its own funding mechanism, known as the NER300 process, to support a number of projects across the EU. Six UK projects have applied for the funding and DECC’s timetable is designed to dovetail with the NER300 process.

The spokesman said a decision on which projects would be taken to the next stage of the competition should be announced by autumn this year, with applicants potentially entering a front end engineering design (FEED) contract in late 2012 or early 2013.

Industry welcomed the certainty the new roadmap provided, especially after the previous competition descended into farce with every applicant withdrawing from the process.

Experts noted that there were considerable changes between the new roadmap and the previous competition.

Gone is the pledge to have four commercial-scale CCS plants up and running by 2020, with Energy Minister Charles Hendry admitting on Radio Four this morning the government is now content to see what the industry wants to provide rather than dictate targets.

Gas as well as coal-fired plants will be considered for funding, while competitors in the new process will be helped by exemptions to the Emissions Performance Standard and the Carbon Price Floor in proportion to the CO2 captured and stored.

There is also a renewed focus on industrial applications, where according to the government the CCS has the potential to save up to 38Mt of CO2 per year by 2030, and developing clusters of factories and power plants sharing infrastructure that would enable the effective decarbonisation of whole industrial regions.

This aspect was particularly welcomed by Lewis Gillies, chief executive of 2Co Energy, whose £5bn Don Valley Power Project aims to create such a cluster in Yorkshire and Humberside – an area that is estimated to contribute around 18 per cent of the UK’s total emissions.

“The government must support UK projects that are ready to go and can make the biggest difference to the environment, jobs and the economy,” he said. “The Don Valley Power Project is the best place in the UK to kick-start a new carbon capture industry and export those skills around the world.”

Meanwhile, Dr Jeff Chapman, chief executive of the CCS Association (CCSA), hailed the new roadmap as “one of the most comprehensive support packages for CCS in the world”.

“Today’s announcement … [sends] a positive signal to the CCS industry, who are ready and waiting to respond,” he added.

“The government has recognised that only with a firm long-term policy, coupled with clear financing mechanisms, will we enable CCS to fulfil its role in reducing emissions and decarbonising the power sector by 2030.”

But the CBI warned the government had to learn from the lessons of the previous, failed competition.

“This time around the competition must be simpler and completed as quickly as possible,” said Rhian Kelly, director for business environment policy, at the industry group.

“If we are to gain any advantage from developing this important technology in the UK, the government cannot afford to waste this opportunity.”