Peterhead represents the best hope for the first "clean power" station in the UK and potentially Europe, the power company behind the scheme has said.
Scottish & Southern Energy (SSE) said the plant could be up and running within five years in response to the UK Government's launch of a £1 billion competition to build a carbon capture and storage (CCS) power station for the third time in five years.
UK ministers also announced that Edinburgh University will host a new £13 million CCS research centre.
However, Scottish ministers called on the Tory-LibDem Coalition to prove its commitment to the technology, following previous false starts.
Labour also accused the Coalition of appearing to quietly drop a commitment to get a total of four such plants off the ground by 2020. Earlier this year it was announced that plans for the first CCS power station plant to be built at ScottishPower's coal plant at Longannet, in Fife, were to be scrapped, prompting a cross-border row.
Last night, business leaders warned that, if it was to work, the latest funding competition had to learn the lesson of past failures.
CCS technology has been praised for offering the potential to safely dispose of harmful carbon by burying it underground, but it has yet to be proven to work on a commercial scale.
The Peterhead development, part of a co-operation between SSE and Shell, is competing with a number of other projects across the UK for what experts say is vital Government backing.
Paul Smith, from SSE, said: "For more than six years, we've thought that Peterhead represents the best site in the UK for a gas CCS project.
"Our co-operation with Shell strengthens this proposition even further. The Peterhead project is in a strong competitive position and can proceed at a pace at least equal to other CCS projects in Europe."
Companies have until July to submit a bid, with a decision expected in the autumn. Projects will have to be up and running between 2016 and 2020.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article