January 30, 2008 1:51 PM PST

DOE scraps FutureGen 'clean coal' project for new tack

Posted by Martin LaMonica

The Department of Energy announced on Wednesday that it has pulled out of a carbon-capture technology project in favor of a restructured funding mechanism.

The DOE last year signed an agreement with the FutureGen Alliance, a coalition of coal and oil companies, to spend about $950 million on a demonstration coal-fired power plant that injects carbon dioxide emissions underground. Last December, a site for the FutureGen project in Matoon, Ill., was announced by the Alliance.

On Wednesday, the DOE said that it has scrapped that agreement and issued a new request for information, which will solicit proposals for demonstration plants that generate at least 300 megawatts. The DOE also said that President Bush's 2009 budget will include a request for $648 million in so-called clean coal research.

The reason for the restructuring is a projected cost increase to $1.8 billion, said DOE Deputy Secretary Clay Sell during a conference call with reporters.

The DOE said that advances in carbon capture and storage technology mean that power plants will be able to store 30 percent more carbon dioxide than when the project was first conceived in 2003.

Under the new plan, a demonstration plant will be built by 2015, he said. A decision on funding is expected by the end of this year. Sell said it was conceivable that members of the FutureGen Alliance, who have said they will continue with the project, could participate in the overhauled FutureGen project.

He added that the request for information will not be limited to the integrated gasification and combined cycle (IGCC), the technique anticipated in the original FutureGen plan and the focus on the DOE's "clean coal" research and development.

The DOE will pay 100 percent of the carbon capture and storage portion of projects, Sell said. Under the former arrangement, the DOE shouldered too much financial risk, he said.

The restructured plan "protects the government's exposure and ensures that it is financially and politically viable," he said.

The decision is a bitter defeat for members of the FutureGen Alliance and those who had lobbied to have the project sited in Illinois.

Carbon capture and storage is considered an important technology to reducing overall greenhouse gas emissions, but the technology is unproven at a large scale. A study from the Massachusetts Institute of Technology last year called for government funding of carbon capture projects to work out technical issues.

Also scrapped from the previous FutureGen plans is technology to generate electricity during the carbon capture process.