Summit Power Group, a U.S. developer of low-carbon power projects, said Tuesday it has entered into an agreement with U.K power and gas network operator National Grid PLC (NG.LN) and oil services company Petrofac (POFCY, PFC.LN) to seek U.K. government funding for the development of a low-carbon power plant that includes carbon capture and storage, or CCS.

The Caledonia Clean Energy Project in Grangemouth in Scotland will be submitted to the U.K. government's competition for GBP1 billion ($1.6 billion) funding for a CCS project and signals the competition could be under way again.

Last October the government pulled out of talks with a group of companies seeking to build a CCS project at a coal plant in Longannet in Scotland after failing to reach agreement.

The proposed Summit coal-fired power plant will have more than 90% carbon capture and also produce hydrogen gas for commercial use.

The carbon dioxide captured will be transported via pipeline to St. Fergus by National Grid and then transferred offshore to be stored under the North Sea by Petrofac subsidiary CO2DeepStore.

The project site has been selected to take advantage of the potential to supply other facilities with industrial gas and to support carbon capture.

The location is also close to the North Sea for both storage of the carbon dioxide and, later, for enhanced oil recovery opportunities, and enables the reuse of existing pipelines.

Summit Power is currently developing a similar project in Texas and intends to replicate many aspects of that at Grangemouth.

The U.K. government is seeking to develop CCS technology to help cut emissions of climate warming gases from coal and gas power plants to meet stringent EU and domestic targets for 2020 and beyond.

It said last week it plans to relaunch the competition with more details soon.