FutureGen’s Demise Shows Carbon Capture for Coal Faces Woes

(Bloomberg) — The U.S. government has pulled the plug on a

project in Illinois to capture carbon, a significant setback for

development of a technology that may be critical to the future

of coal.

The Energy Department said Tuesday it’s pulling support for

FutureGen Industrial Alliance Inc., a public-private partnership

to build a coal plant that would store its carbon emissions deep

underground instead of sending the gases skyward.

The project, proposed more than a decade ago, was supposed

to demonstrate the feasibility of a new, climate-friendly way to

use coal, which remains the largest single source of electricity

generation in the U.S. Instead, the combination of approaching

deadlines, leery investors and reluctant power buyers scuttled

the project.

“Carbon capture is important because we cannot address

climate change adequately without it,” said John Thompson, a

director of the Clean Air Task Force, a Boston-based

environmental group. “The importance of CCS hasn’t

diminished.”

President Barack Obama’s administration used FutureGen to

show it remained committed to the fossil fuel as it advanced

climate rules that sought to limit coal use. Illinois lawmakers

saw the project as an economic engine for the state, which is

the fifth-biggest coal producer in the U.S.

The Energy Department spent $202 million on the Meredosia,

Illinois, plant about 90 miles (145 kilometers) north of St.

Louis.

Wary Investors

Investors, however, remain wary of carbon capture projects,

which are unproven even as the federal government has spent

billions of dollars to make the technology economically viable.

The projects aren’t a “destination for serious financial

commitment,” said Christine Tezak, an energy analyst at

ClearView Energy Partners LLC in Washington. “The major change

agent this industry needs is a technological breakthrough.”

That hasn’t happened yet, and that’s bad for tackling

climate change. While wind and solar power gain market share,

they still represent just a fraction of power production. Coal

produced about 38 percent of the electricity used in the U.S. in

November, the last month figures are available, according to the

U.S. Energy Information Administration, which analyzes federal

energy data. And while coal use in the U.S. is forecast to hold

steady, its use in China and India is set to soar.

Stimulus Award

“If we are to have any hope of avoiding the worst aspects

of climate change, we need CCS on a whole host of things” from

coal plants to factories, Thompson said, referring to carbon

capture and storage or sequestration.

FutureGen won $1.1 billion in federal money in the economic

stimulus in 2009, and was championed by Illinois lawmakers

including Democratic Senator Richard Durbin, his party’s No. 2

leader in the chamber.

Durbin, who tried to add a provision in last year’s

spending bill to extend the deadline, said the project struggled

to attract sufficient commercial interest. He called the

government’s withdrawal a “huge disappointment.”

The Energy Department determined that FutureGen’s sponsors

couldn’t meet the September deadline to get the project’s plans

finalized, said Christopher Smith, assistant secretary of energy

for fossil fuels.

Deadline Dilemma

“This is unfortunate for us. This is a project we worked

very hard on,” Smith said at a meeting in Washington of the

Global CCS Institute, an industry-supported group based in

Melbourne. “We were simply undone by some timelines established

by statute.”

Smith said another project funded by the department —

Hydrogen Energy California — faces a similar deadline crunch.

That project “has had challenges,” he said.

Ken Humphreys, chief executive officer of the FutureGen

Alliance, said in a phone interview that private investors were

holding back until an Illinois court decided on a challenge to a

rate increase that would cover the project’s cost. FutureGen

would have received financial backing once the court case was

resolved, he said.

Other projects are in progress, though none operating. NRG

Energy Inc. is spending $1 billion on equipment to remove carbon

dioxide at a Houston-area coal plant, and plans to sell it to

nearby oil fields to help generate further production.

Expensive Plant

Southern Co.’s Kemper plant in Mississippi, which will use

a chemical process to cut the carbon emitted from a coal plant

to a level on par with the natural gas plant, is still under

construction. Southern says it will cost $6.2 billion, up from

$2 billion, making it the most expensive coal plant in U.S.

history.

In West Virginia, American Electric Power Co. spent $114

million to test carbon-capture equipment on its Mountaineer

plant. The company pumped gas underground for about 18 months,

then pulled out of a deal with the federal government to build a

commercial-scale project in 2011, because of the “uncertain

status of U.S. climate policy and the continued weak economy.”

And in west Texas, Summit Power Group LLC is well past its

deadline to begin construction on a plant that would make

electricity, urea and carbon dioxide to sell.

In Canada, SaskPower International Inc. installed carbon

capture equipment on the Boundary Dam plant, establishing the

first commercial-level operation of its kind when it opened last

year.

Industry Rebuke

“A lot of the problem is just the size of the projects,”

Jeffrey Price, who wrote a report on incentives for the

International Energy Agency, said at the Washington forum.

“It’s not like putting some solar panels on someone’s house.”

Environmental groups including the Sierra Club and Friends

of the Earth opposed the project, saying coal can’t be burned

safely or cleanly.

The demise of FutureGen drew a rebuke from the American

Coalition for Clean Coal Electricity. The Washington-based group

said the decision reflected the administration’s lack of

commitment to the technology.

Senator Joe Manchin, a West Virginia Democrat and a coal

supporter, said lawmakers including Durbin may try to extend the

September deadline to let the department spend the money. A

provision to suspend the deadline was in a Senate spending bill

but was dropped from the version Congress passed.

Budget Request

Under Obama, the U.S. has invested $6 billion in the

technology. And the 2016 budget request would add to that: about

$2 billion worth of tax credits for coal plants that capture and

bury their emissions.

The Energy Department also is seeking applications for loan

guarantees that could back up as much as $8 billion in projects

in carbon capture and storage projects. Manchin expressed

frustration that the program had yet to be used.

“They won’t spend what they have,” he told reporters.

The department’s participation in FutureGen wasn’t a loss

because it helped further development of carbon capture

technologies, spokesman Gibbons said. The U.S. had spent about

$116.5 million since 2010 on the planned 200-megawatt power

plant and $86 million developing an underground storage site.

“Our hope is that industry and government will continue to

find ways to develop CCS technology for a cleaner, more secure

energy future,” CEO Humphreys said in a statement.

To contact the reporters on this story:

Jim Snyder in Washington at

jsnyder24@bloomberg.net;

Mark Drajem in Washington at

mdrajem@bloomberg.net

To contact the editors responsible for this story:

Jon Morgan at

jmorgan97@bloomberg.net

Steve Geimann, Romaine Bostick

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