A technology that holds the hope for cleaner use of coal will be tested on a commercial scale for the first time in Canada next year, aiming to resolve big uncertainties about the vast amount of power it will need.

Saskatchewan Power Corp. hopes that a $US1.24 billion ($1.2 billion) refit of its 45-year-old Boundary Dam power plant to capture carbon dioxide emissions will make investors think twice about shifting to gas-fired plants from dirtier coal.

"This will come in on time and on budget," Michael Monea, head of SaskPower's carbon capture and storage (CCS) initiatives, told Reuters in an interview.

The company hopes that its carbon capture technology will reduce Boundary Dam's power output by only a quarter or thereabouts, making it the world's first commercially viable large-scale CCS project at a coal-fired power plant.

Success could spur interest in CCS technology from China to the United States as an effective way to fight climate change.

"We need this as an example of carbon capture and storage actually happening," said Camilla Svendsen Skriung, of the Norwegian environmental group Zero.

The plant is designed to capture one million tonnes a year of the greenhouse gas carbon dioxide from April 2014. It will also trap the pollutant sulphur dioxide.

SaskPower agreed last month to sell the carbon dioxide it captures to Canadian oil company Cenovus Energy - when injected into an oil well, the gas raises the pressure and forces more oil to the surface. Monea did not reveal the price agreed.

Monea said that the key to proving that clean coal is possible is to limit the "parasitic load" - the amount of power needed to capture the carbon and sulphur.

"The big deal for us is parasitic load. The old 140 megawatt plant will be new again, so will probably generate 150 to 155 megawatts. Then the capture plant may mean we lose 40 megawatts of power," he said.

"I am hoping that we will net higher than 110 megawatts (after the carbon has been captured)."

Costs and penalties

There are a few other commercial carbon capture projects, such as the one at the Sleipner natural gas field off Norway run by Statoil, which re-injects a million tonnes of carbon dioxide a year beneath the seabed.

However, high costs and low penalties for emitting carbon mean that such projects have failed to catch on for coal-fired plants as part of efforts to slow climate change.

"Once people hear that the economics are very good, maybe we won't have everybody dash to gas and throw out coal," Monea said. "We hope the rest of the world can learn from our plant."

SaskPower says that the plant will reduce carbon emissions by about 90 percent - the equivalent, it says, of taking 250,000 cars off the roads in the province every year.

Almost 200 nations have set themselves a deadline of end-2015 to agree a United Nations-led pact to combat climate change, with its implementation set for the start of 2020. But after past failures, there is little prospect of a global price on carbon emissions that would help to make carbon capture more viable.

Monea said that lessons from the Boundary Dam refit, aided by a federal government subsidy of $US240 million, will cut costs and mean that future refits can be completed without state aid.

The costs of the Boundary Dam refit were comparable to those for replacing it with a new natural gas plant, Monea said. The plant has ready access to water, which might otherwise be a constraint.

The cost of the refit means that power prices paid by SaskPower's clients will rise by a few cents from the 10 to 11 cents per kilowatt that they pay now, he said.

The European Commission last month said that it failed to find a winner in a contest to fund EU carbon capture and storage projects, deepening doubts that the technology can soon emerge to help to reduce greenhouse gas emissions.