The 500 megawatt power station at Kwinana, 45 kilometres (30 miles) south of Perth in Western Australia, would produce electricity for half a million homes while capturing about four million tonnes of carbon dioxide (CO2) each year.

"As part of the project, we will capture in excess of 90 percent of the CO2 produced and we will sequester it in a geological formation offshore," Hydrogen Energy chief executive Lewis Gillies said.

"That amount of CO2 in one year is the equivalent of taking three quarters of a million cars off the roads of Australia."

The CO2 will be "permanently and securely stored in a geological formation deep beneath the seabed of the Perth basin," the statement said.

Prime Minister John Howard voiced his support for the project.

"Carbon capture and storage projects such as this are crucial to the future of Australia's important coal industry and to the national and global challenge of reducing our greenhouse gas emissions," Howard said in a statement.

He said the government was developing carbon capture and storage legislation to provide investment certainty for the developers of the technologies and was investing in geological mapping to identify sites where carbon dioxide could be stored.

Gillies said Hydrogen Energy was hoping for some financial support from government.

"As with all forms of low-carbon power, they are more expensive than conventional power," he said.

"What we need is some sort of policy mechanism that allows that additional cost to be passed on to the consumer of the country."

If the feasibility study for the project is successful, a final investment decision is likely in 2011, with the station coming online after three years of construction.

"In both of our other projects, in Scotland and California, we actually have local utility partners and that's something we will explore here," Gillies said.

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