Britain's Drax set to win 300 mln euro EU carbon capture cash

(Corrects typo in headline)

* EU funding scheme raised 2 bln euros through CO2 permit sales

* Drax plant the only CCS project in the competition

By Susanna Twidale

LONDON, April 17 (Reuters) - British utility Drax is likely to receive a 300 million euro ($414.19 million) grant from the European Commission for a carbon capture and storage (CCS) project after Britain this week told the Commission it would back the scheme.

Chris Davies, a British Liberal member of the European Parliament who steered the law guaranteeing the subsidy through the Parliament, said British support means the project is likely to be awarded the cash when the Commission makes its formal announcement on winners of its NER 300 scheme in June.

"White Rose will be the only CCS project supported out of this pot of money, and the Commission will be relieved it has received government backing," he said by telephone.

Drax declined to comment.

Its White Rose project could become Europe's first CCS plant and advance a technology which the Commission has deemed essential if Europe is to meet targets to cut emissions of heat-trapping gases blamed for climate change.

CCS technology captures and buries carbon dioxide emissions from power stations and heavy industry.

Drax's White Rose project is being developed with BOC Group and Alstom SA (Paris: FR0010220475 - news) in a consortium called Capture Power Ltd and seeks to build a new 426 megawatt coal-fired plant fitted with CCS tehcnology in Yorkshire in Britain.

Davies was one of the architects of the scheme launched in 2009, when the EU promised to finance up to half the cost of at least eight demonstration CCS plants across Europe through the sale of 300 million carbon permits.

When the pledge was made, the EU hoped to raise 6 billion euros based on prices of 20 euros per tonne of carbon dioxide, but carbon prices have since slumped and the permit sales only managed to raise around 2 billion euros, putting more onus on member states to contribute to funding projects.

Full-scale CCS plants at power stations are expected to cost upwards of 1 billion euros to build.

So far the EU scheme has only been able to fund renewable energy projects as all the CCS candidate plants either pulled out or were deemed ineligible after member states were unable to promise financial backing.

The Drax project is the only CCS scheme left in the competition and could receive a maximum of 15 percent of all funds raised, amounting to around 300 million euros.

"That would be a very helpful contribution ... but it is an order of magnitude lower than the UK will need to put in," said Chris Littlecott of environmental group E3G.

Davies said the offer of support by Britain did not amount to a promise of financial guarantees but was enough to reassure the Commission the project is economically sustainable.

A spokeswoman for Britain's energy ministry said it had responded to the Commission.

A European Commission spokesman also confirmed the correspondence and said the competition was "ongoing".

The EU is committed to cutting emissions of greenhouse gases by at least 80 percent below 1990 levels by mid-century.

As the bloc relies on coal for some 25 percent of its electricity, the Commission has previously said without CCS it risks missing that goal.

($1 = 0.7243 Euros) (Additional reporting by Ben Garside; editing by Jason Neely)