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Controversial plans for a new coal-fired power station with carbon capture and storage (CCS) technology in North Ayrshire have been dropped.

Ayrshire Power confirmed it was withdrawing a planning application for the facility at Hunterston.

The company blamed the economic slowdown and funding uncertainty for the move.

The decision means a public inquiry into the proposed development will not now proceed this autumn.

The Scottish government said the withdrawal was a commercial decision for Ayrshire Power.

In November, North Ayrshire Council rejected the firm's Hunterston plans after more than 20,000 objections were lodged.

The decision was welcomed at the time by environmental campaigners but Peel Energy-owned Ayrshire Power insisted it would fight on.

In a statement on Tuesday, the company said it had decided to drop its plans.

It also confirmed it was withdrawing the project from the UK government's CCS competition, which is offering up to £1bn for schemes to trap and bury carbon dioxide.

Project director Muir Miller said: "Whilst we believe we have a strong case to succeed in the planning inquiry, we cannot proceed with the significant risk that the current power station design and fuel mix could not be funded and built in the necessary timetable following the grant of consent.

"However, we remain convinced that this project could give Scotland a superb opportunity to lead the development of full-scale carbon capture and storage, which will be vital in reducing global emissions and accords with Scottish government policy to cut carbon emission and back-up intermittent renewable energy supplies.

"The project would also bring a large number of new jobs and new economic opportunities to a hard-pressed area which has been impacted particularly badly by the recession."

Mr Miller said the company still believed that new coal-fired power stations fitted with carbon capture and storage "would play an important part in plugging the energy gap" until alternative sources of low carbon energy could replace fossil fuels.

He added: "Hunterston remains an ideal location for such a power station.

"However, the timing of the economic slowdown and funding uncertainty have not worked in our favour.

"We will now take some time to consider our options and determine under what circumstances we will revisit our proposals."

Energy Minister Fergus Ewing said: "The decision not to take the current Hunterston coal power station project application forward at this time and to withdraw the project form the UK government's Carbon Capture and Storage competition is a commercial decision for Ayrshire Power Limited.

"The Scottish government strongly supports CCS as a critical new technology to transform the way we generate power, help reduce carbon emissions and ensure security of supply."

Campaigners from the Say No to Hunterston Coalition said they were delighted the planning application was being withdrawn.

WWF Scotland director Richard Dixon said: "Peel have finally seen sense over the most unpopular planning application ever in Scotland.

"With the local community and North Ayrshire Council against it, over 22,000 objections and no chance of winning the public inquiry, walking away was the only sensible option."

The Scottish Wildlife Trust also welcomed the news, saying it was "the right decision".

Chief executive Simon Milne said: "A large part of an important habitat in the Firth of Clyde has been saved.

"This area has nationally important eelgrass beds and the best inter-tidal mudflats for feeding wildfowl and waders in the Clyde, as well as supporting other wildlife including otters, the nationally scarce plant seaside centaury and a rare type of cuckoo bee."

Green MSP for Glasgow, Patrick Harvie, said Ayrshire Power's move was "welcome, if extremely overdue".

"Carbon capture was often cited by promoters of the scheme but it is widely accepted that such technology is a distant dream," he said.

"I hope today's U-turn sends a clear signal that the arguments for fossil fuels simply don't stack up, allowing us to pursue Scotland's renewables potential with vigour."