* Three coal and one gas project chosen
* Don Valley project misses out
* Poland likely to win EU cash
LONDON, Oct 30 (Reuters) - Britain has announced a shortlist of four projects that could receive up to 1 billion pounds ($1.6 billion) from a scheme to fund carbon capture and storage (CCS) technology, the Department for Energy and Climate Change (DECC) said on Tuesday.
The government is providing funding to support the development of CCS technology, which it is banking on to reduce climate-warming carbon emissions and as a new export product.
Britain's previous attempts to finance CCS projects have failed as costs rose above expectations and the technology is currently thought to be around a decade away from commercialisation in Britain.
"The projects we have chosen to take forward have all shown that they have the potential to kick-start the creation of a new CCS industry in the UK. But further discussions are needed to ensure we deliver value-for-money for taxpayers," Secretary of State for Energy and Climate Change Ed Davey said in a statement.
The four short-listed bids are Drax's 304-MW coal plant in North Yorkshire, Shell and SSE's 1,180-MW combined cycle gas plant in Peterhead, National Grid and Petrofac's 570-MW coal-gasification project in Grangemouth and Progressive Energy and GDF Suez's 330-MW coal-gasification project in Teesside.
The government expects to take a final decision on the winners of the competition next year. The precise timetable for this will depend on the projects selected, it said in a statement.
Britain's plan to fund CCS projects runs alongside an EU competition, which has earmarked two UK-based projects as contenders to win up to 337 million euros per scheme.
DECC said it will put forward the Progressive Energy Teesside project and Drax's coal project as its preferred candidates for the EU cash, while the Peterhead project makes the reserve list.
The EU Commission will make a final decision on whether to support a UK-based project at the end of this year.
The UK decision confounded developers of a project located in Don Valley in Yorkshire, which was the EU Commission's preferred winner of its tender.
The CEO of 2Co Energy, which is developing the scheme alongside Korea's Samsung, said the scheme would now be unable to go ahead as a result of the UK government decision.
"We are trying to come to terms with how the UK's most advanced project that has twice been selected by the EU for funding and is currently sitting as Europe's top ranked project has not even made it to the UK's shortlist," he said in a statement.
The Don Valley project also won cash under an earlier EU funding programme.
A UK spokesman said Britain's decision was made on affordability, deliverability and value for the taxpayer.
Don Valley's withdrawal makes it more likely that Poland's Belchatow coal-fired power plant, the biggest emitter of carbon dioxide in the EU, will win the Commission tender, as it was the EU's second choice to receive funding.
Moves to give Poland cash from the sale of EU permits could prove controversial as the country has been seen a barrier to the EU adopting tougher emission reduction targets.