Federal funding expires in September 2015

The FutureGen project was officially launched by the G.W. Bush administration in 2004.  Ten years later it is still in the early stages of development.  That’s a description that would typically attach to a problem-plagued project, and there is no denying that FutureGen has often come close to sinking out of sight from the immense weight of its financial, technical, and government-related complications. 

But after being rebooted as FutureGen 2.0 by the Obama administration in 2009, there are signs today that the project is picking up speed.  The fed continues to offer to cover about 80 percent of the project’s costs, but the FutureGen 2.0 Alliance of coal-energy and mining companies now faces the difficult task of spending a great deal of federal money in a short time before current funding is terminated. 

The Alliance—which has been whittled down to 5 companies after once comprising 13—continues to express optimism that a small commercial coal-fired power plant that uses oxy-combustion and all the elements of carbon capture and sequestration (CCS) can be completed and connected to the grid, possibly as early as 2017. 

Switch to oxy-coal combustion

FutureGen was conceived as a clean coal undertaking.  The idea behind clean coal is that with modern technology, coal can continue to occupy its spot as the top provider of energy in the United States  without also being the top polluter.  The two codependent technologies specific to FutureGen are oxy-combustion and CCS.  Oxy-combustion combusts fossil fuels in an environment with a high-oxygen concentration, rather than in air.  This eliminates from the process most, if not all, nitrogen found in air, resulting in flue gas that is almost pure carbon dioxide (CO2).  The collection of CO2, the first step in CCS, is thereby expedited.  The remaining elements in CCS are compression of the captured CO2 into a liquid and injection into deep geological formations for long-term storage.  The storage well may be on the same site as the power plant, or it may need to be transported, ideally by pipeline, to an off-site well.

All these elements have been demonstrated—oxy-combustion, CO2 capture and condensation, and transport to and injection into a deep well.  But the individual parts have not been integrated into a single commercial-size power plant.  That’s where FutureGen 1.0 entered the picture in 2004.  The original project was also slated to use CCS, but would have relied on integrated gasification combined cycle (IGCC), a technology that also separates gases as required for CCS.  But IGCC requires considerably more new construction than oxy-combustion, which can be implemented with plant retrofits, and the switch to oxy-combustion was made with the launch of FutureGen 2.0.

To a large extent, the early work of the Alliance was predicated on the membership of Ameren Energy Resources, which agreed to use Department of Energy (DOE) funding to retrofit its power plant in Meredosia, Illinois, into FutureGen 2.0.  Ameren would be responsible for the capture part of CCS.  But Ameren then withdrew from both the Alliance and the DOE agreement.  Subsequently, members of the remaining Alliance reached a deal with Ameren to purchase portions of the Meredosia facility.  The Alliance companies, rather than Ameren, would use the DOE funding initially intended for Ameren to undertake retrofitting of the Meredosia facility.  

The departure of Ameren forced the Alliance to redesign the project, that is, with the Alliance in charge of the capture portion of CCS, rather than Ameren.  Redesign of FutureGen has in fact occurred on a number occasions during FutureGen’s history, notably the scaling down of generating capacity from 275 megawatts (MW) (with IGCC) to about 200 MW (with oxy-combustion).   The project also calls for a new 30-mile pipeline to transport the CO2 to the well site.

Final design near completion

While no construction of any type has yet occurred, the design of FutureGen 2.0 is now in its advanced stages, and the Alliance says it hopes final design will be completed by March 2014.  As it is now conceived, the project will capture at least 90 percent (approximately 1.2 million tons annually) of CO2 during steady-state operation of the repowered Meredosia facility.  The captured CO2 would be transported by the pipeline to wells, where it would be injected approximately 4,000 feet below ground into a geologic saline formation.  The Alliance has obtained the subsurface rights to 6,800 acres that will accommodate the injected CO2.  The life of the project is projected at 20 years, but the storage itself is designed to be permanent. 

Several other pieces of positive news have also arrived:

• In December 19, 2012, the Illinois Commerce Commission approved a power purchase agreement that requires the state’s electric utilities (ComEd and Ameren Illinois), as well as the alternative retail electric suppliers, to purchase electricity from FutureGen 2.0 for 20 years.
• In January 2014, the DOE issued a record of decision (ROD) that confirmed its desire to provide the Alliance with $1 billion in funding, the majority of which was appropriated under the American Recovery and Reinvestment Act (ARRA).  The ROD was preceded by DOE’s October 2013 environmental impact statement (EIS) for FutureGen 2.0, in which the DOE found that the project, including the pipeline, offered substantial benefits as a template for the control of climate-changing greenhouse gas (GHG) emissions from coal-fired power plants.  Further, the EIS found that the Alliance has plans in place to mitigate any potential detrimental impacts the project might have on agricultural areas or wetlands. 
• In February 2014, the Illinois Commerce Commission granted the Alliance a certificate to allow construction of the CO2 pipeline and related facilities, pending receipt of permits from all state, federal, and local government authorities.  The Alliance is still waiting to receive Safe Drinking Water Act Class VI CO2 underground injection control (UIC) permits from the EPA. 

But FutureGen 2.0 is far from a done deal.  As noted, the integration of oxy-combustion and CCS has never been achieved at a full-size commercial power plant.  Also, the relationship of FutureGen to power generation in the United States is uncertain, particularly in light of EPA’s proposed New Source Performance Standards (NSPS) for new coal-fired power plants, which would require partial CCS.  An EPA final rule could conceivably result in two developments. 

Should FutureGen 2.0 prove successful, it can, in combination with the final NSPS, promote the use of CCS as a means of ensuring that coal remains a growing part of the nation’s energy profile.  Or, two, EPA’s rule could cause energy companies to embark on a wholesale switch to natural gas and end the construction of new coal-fired power plants to avoid complying with the Agency’s proposed stringent CO2 emissions limit whether or not FutureGen 2.0 proves to be a smashing success. 

Funding dilemma

According to a report by the Congressional Research Service (CRS), much of the concern about FutureGen is implementing the cost-share agreement between the Alliance and the DOE.  The Alliance has estimated the total cost of the FutureGen 2.0 program to be $1.3 billion, with $730 million used toward retrofitting and repowering the Meredosia power facility and $550 million for the construction of the CO2 pipeline, storage site, and training and research center. 

But since its inception in 2004, total federal expenditures on FutureGen have been low, between $110 million and $120 million as of early 2014.  According to the CRS report, which was published February 10, 2014, the Alliance has spent only $74 million of the $995 million in ARRA funding appropriated by Congress for the project.  That funding expires September 30, 2015, and there are questions as to whether the Alliance will be able to make use of all the funds in the remaining time. 

The CRS says that the DOE may allow the Alliance the flexibility to accelerate the cost-share and expend the ARRA-provided funding to cover capital costs before using private funds from the Alliance to cover its portion of the cost-share.  Construction is expected to begin in early spring 2014, at which point, project costs should increase quickly and dramatically.  However, the DOE possesses the authority to terminate funding if it is not satisfied with the rate of progress. 

FutureGen and future rulemaking

The DOE is also funding two other programs that promote CCS.  The Clean Coal Power Initiative (CCPI) now comprises three utility projects that focus on using captured CO2 for enhanced oil recovery; the projects are valued at $6.1 billion, with a $1 billion contribution from the DOE.  Also, the Industrial Carbon Capture and Storage program (ICCS) is a nonutility large-scale industrial CCS program supported by $1.4 billion in federal funds, 70 percent of the total $2 billion ICCS budget.  

The projects in these programs are regularly cited by the administration as evidence that CCS will eventually have broad applications.  Also, in its proposed NSPS for CO2 emissions from new power plants, the EPA referenced multiple projects as evidence that CCS met CAA’s requirement that the best system of emission reduction (BSER) used as a basis for the standard must be adequately demonstrated.  However, FutureGen was not included in the proposal as an example that CSS is an adequately demonstrated technology.  Given that FutureGen is still in the design phase, that omission is understandable. 

Even so, the status of FutureGen in the coming year may have an impact on future federal rulemaking.  Specifically, should the EPA follow through on its proposed rule, the Agency is expected to then propose an NSPS for existing fossil-fuel power plants.  Opponents of EPA’s plan to regulate GHG emissions from power plants have continually argued that CCS has not been adequately demonstrated and therefore, cannot be used as the basis for NSPS.  This has certainly been a concern for new coal-fired power plants, but it would become exponentially more worrisome should the Agency seriously consider CCS as BSER for existing plants that are modified.

President Obama has directed the EPA to issue a proposed NSPS for existing facilities by June 2014 and a final rule 1 year later.  Many options other than CCS are available for BSER for existing plants, and the EPA has stated that there are no plans at present to give CCS serious consideration.  However, should the Alliance make exceptional progress with FutureGen and bring the project to completion considerably under budget, that position may change.  At the very least, the EPA would have no choice but to consider CCS as part of the BSER mix. 

CRS report on FutureGen

William C. Schillaci
BSchillaci@blr.com