(By Shawn McCarthy) - It was supposed to herald the era of “clean coal,” but Saskatchewan now says a proposed coal-fired power plant that would capture and store carbon dioxide is simply too expensive.

Instead, the province will spend $525-million to build natural gas power plants.

In a decision that is a blow to the coal industry, the government-owned utility, SaskPower, said the proposed 450-megawatt coal plant is too expensive, but insisted it is not abandoning the technology.

“We remain fully committed to exploring clean coal as a supply option in the longer term,” SaskPower president Pat Youzwa said yesterday.

Mr. Youzwa said the feasibility study conducted by the utility over the past year concluded that the technology is sound.

“But given the need for new supply by 2010, and given the costs of clean coal at this early stage in its development, it would have been premature to proceed to the construction phase at this time.”

Gary Wilkinson, senior vice-president at SaskPower, said the projected capital cost of the project soared to $3.8-billion from $1.7-billion.

He said SaskPower is now working with its suppliers to drive those costs down, so that the project could be a contender in 2009.

Mr. Wilkinson said SaskPower will also be looking to get a better estimate of potential revenues from the planned sale of the CO{-2} for enhanced oil recovery.

Industry advocates argue that the world will need coal to meet its energy needs, despite the fact that it is the worst polluter in terms of both traditional toxins and carbon dioxide emissions, which contribute to global warming.

The federal government has spent millions of dollars to support the development of clean-coal technology in Canada. And at a conference in Ontario yesterday, federal Liberal leader Stéphane Dion said developed countries “need to speed up all the technology that exists for clean coal” in order to make coal-fired energy compatible with climate change goals.

But so far, there have been no commercial projects that use carbon capture and storage technology; proponents of the Saskatchewan project were hoping to be global leaders.

Oil companies are already buying carbon dioxide from a U.S. source in order to inject it into the ground to stimulate recovery in mature oil fields in southern Saskatchewan.

SaskPower was considering an oxygenation technology, which burns the coal in pure oxygen to create a purer stream of carbon dioxide than exists in current coal-fired power plants. The CO{-2} would then be captured, and piped to existing oil fields where it would be injected underground to enhance oil recovery.

SaskPower studies concluded that 99 per cent of the gas injected into the oil formations would be trapped there.

The utility said it would continue to examine the feasibility of clean coal - and other generation sources such as large-scale hydro - for its next supply decision in 2009.

In the meantime, the province will rely on an additional 400-megawatts from natural-gas-fired plants, plus renewable sources and conservation, to meet Saskatchewan’s power demands, and close the shortfall in supply projected for 2014.

Premier Lorne Calvert said that, by 2020, the province will be getting some 30 per cent of its power needs from renewable sources, such as wind power, hydro and biomass.

Allen Wright, president of the Coal Association of Canada, said he was disappointed with Saskatchewan’s decision not to proceed.

“We were hoping it would go ahead,” he said. “But costs have gone way up, and it’s an expensive proposition.”