UK says decision "soon" on new coal plants

LONDON, Feb 26 (Reuters) - Britain said on Thursday it backed the building of new coal plants and would make a decision soon on whether these must have expensive, climate-friendly technologies fitted called carbon capture and storage (CCS).

"The energy mix will change by 2015 as existing coal and oil plants close," Mike O'Brien, Minister of State for Department of Energy and Climate Control, said at the McCloskey Coal UK Conference.

"We will need new fossil fuel plants including coal if we are going to maintain diversity in energy mix and energy security. That's why Carbon Capture and Storage (CCS) is a key technology for the UK and the global community," he said.

CCS technology captures CO2 from power plants and buries it underground.

Small-scale demonstration power plants to prove the viability of CCS technology are being built in Europe. A government-funded UK large-scale demonstration power plant with CCS is intended to be in place by 2014.

Coal-fired generation produces two and a half times the CO2 emissions of gas.

O'Brien stressed that the government was trying to balance future energy need with the need to meet climate change targets.

"We know we face a significant generation capacity gap by 2015 and we know we have to make decisions on new units soon."

His comments were interpreted optimistically by some delegates to mean the government may allow some new coal-fired plants to be built before CCS technology is proven by 2014.

RWE npower, a unit of German power generator RWE (RWEG.DE), will build more gas plants than coal plants to replace its ageing coal-fired facilities, Kevin Akhurst Managing Director of Generation at RWE npower, told the conference.

But utilities are struggling to take decisions about long-term investments because of the current lack of clarity in government plans, he said.

"I couldn't decide to build a new coal-fired plant today which is CCS ready because I don't know how much it will cost in the long-term or how well the technology will work," he said.

"Utilities need as much clarity and stability in the regulatory regime as we can get as we're making multi billion pound investments which only pay back after 20 years," he said.

(Reporting by Jackie Cowhig; Editing by Keiron Henderson)