FutureGen’s demise another blow to CCS

In another blow to promoters of carbon capture and storage (CCS) the much-touted FutureGen 2.0 coal power project in Illinois has collapsed following a US Department of Energy decision to withdraw funding for the plant.

While the concept of the FutureGen project dates back to approximately 2003, the real impetus came from a federal government process seeking bids from state governments wanting to host potential CCS projects.

In September 2005, the FutureGen Industrial Alliance – a consortium of coal companies and power utilities – announced its plan to build a shiny new 275 megawatt (MW) coal plant designed to capture approximately 90 per cent of the carbon dioxide emissions for storage in a deep saline aquifer. (The plant was proposed as an Integrated Gasification Combined Cycle (IGCC) plant in which coal is converted to syngas which then fuels the power plant.)

Along with plenty of hype about it being the “world’s first zero emissions power plant”, what was touted as a $1 billion project attracted generous financial and policy support from both the Illinois government and the Bush and Obama administrations.

Before long, however, doubts about the viability of the project began to emerge.

Originally proposed with the US Department of Energy slated to cover 74 per cent of the project costs, the agency became alarmed when its share ballooned from a projected $US620 million to approximately $US1.3 billion.

By December 2007 DOE was demanding changes to the cost-sharing agreement, as well as to the design. In early 2008 DOE withdrew its funding support for the project.

While the project floundered for a while, the FutureGen Alliance was undeterred. With some serious mining and power industry heavy hitters in its ranks – including BHP Billiton, Rio Tinto, Peabody Energy, American Electric Power, Southern Company and Consol Energy – the alliance flexed its political muscles and federal funding was soon back on the table.

Rebirthed as FutureGen 2.0

After the initial setback, the project was rebirthed in 2010 as FutureGen 2.0. Instead of building a new plant the consortium proposed taking the 65 year old oil-fired unit 4 at Ameren’s power plant in Meredosia, Illinois and converting it to a coal plant with an installed capacity of 229MW.

Instead of using IGCC technology it was proposed to use oxy-combustion technology in which coal is burnt with oxygen to create a flue gas with a higher carbon dioxide concentration. This way the costs of carbon capture and storage could be reduced.

Even so, what had become a US$1.62 billion price tag was daunting for a plant which would only supply 166 megawatts to the grid.

Even with the DOE’s pledge for $1.1 billion from the American Recovery and Reinvestment Act of 2009 the FutureGen Alliance still needed to stump up the rest of the costs and find a market for what would be very expensive power.

In December 2012, the Illinois Commerce Commission mandated that Commonwealth Edison (ComEd) and Ameren Illinois had to purchase the electricity from the project for 20 years.

What started as a brazen move to shore up the viability of the project for potential private investors and lenders ended up backfiring badly. The utilities and others challenged the decision requiring them to buy expensive power in the courts, with one of these challenges slated for hearing later this year.

As the project dragged on and the finances of both utilities and coal companies worsened, the enthusiasm of original alliance participants waned. American Electric Power, Luminant, Southern Company, BHP Billiton, Rio Tinto, Consol Energy, EON US amongst others had all bailed out.

With legal actions (and here) hanging over the project and the FutureGen Alliance reduced to a lonely looking rump dominated by a few coal companies – Peabody Energy, Glencore and Anglo American – the project’s days were numbered.

The alliance’s dated website – with the last media release dating back to April 2014 and the last announcement from February 2012 – added to the public impression that FutureGen 2.0 was a zombie project staggering towards its inevitable demise.

When news broke yesterday that the DOE had cancelled its funding support for the project in order to “best protect taxpayer interests”, few were surprised. Of the US1.1 billion pledged to the project, US$202 million had already been spent and clearly the DOE didn’t want to throw good many after bad.

Even so, Peabody Energy complained and argued that the Obama administration should continue to spend taxpayer’s money on the project. However, in its most recent annual report Peabody does not disclose how much they have spent on the project or intend to in the near future.

The demise of FutureGen has followed the same old pattern that has bedevilled numerous other CCS projects. Initial hype and generous public support have been followed by cost overruns, engineering problems, wariness of lenders and public and utility opposition.

As with the Boundary Dam project in Canada, the costs of new CCS plants are so prohibitive that proponents have settled instead for revamping worn out old plants. In the case of Boundary Dam project, a small 40-year old coal unit nearing retirement was rebuilt instead of building renewables or even gas-fired capacity. Similarly, the FutureGen Alliance was planning on converting an old oil-fired unit to coal.

If the FutureGen project had in fact been built, it would have offered no climate mitigation benefit compared to energy efficiency programs, renewable capacity or even a gas-fired plant.

CCS gloom in Europe too

The demise of FutureGen project adds to the increasingly gloomy mood amongst supporters of CCS technology.

Three weeks ago four major European Union electricity utilities – RWE, Electricité de France, Vattenfall and Gas Natural Fenosa – announced that they had had quit their membership of the pro-Carbon Capture and Storage (CCS) lobby group, Zero Emission Platform.

In their resignation latter the utilities stated that they had “restricted time and budget”. They also complained that “we do not have the necessary economic framework conditions in Europe to make CCS an attractive technology to invest in.”

With the growth of renewable energy driving wholesale market prices lower, falling demand and the imposition of new pollution standards in European Union countries, conventional coal power is under sustained challenge. With carbon prices kept at low levels to appease industry groups and community opposition to new coal mines and coal power stations, there is limited likelihood that CCS projects will eventuate unless heavily underwritten by taxpayers or electricity consumers.

On the same day that the four utilities announced their departure from ZEP, Klaus Dieter Borchardt, the Director of Internal Energy Market at the European Commission’s Energy Directorate, told a European Power Plant Suppliers Association conference that “if we want to use coal we have to deliver on CCS.”

However, he said, “the reality is that CCS is not a success – it’s on its way to complete failure. If we are not able to turn this around we will still have all the criticisms against coal.”

Bob Burton is a Contributing Editor of CoalSwarm and a Director of the Sunrise Project, a non-profit group promoting a shift away from fossil fuels. With Guy Pearse and David McKnight he co-authored Big Coal: Australia’s Dirtiest Habit. His Twitter feed is here.