Clean Coal
DOE's Decision to Restructure FutureGen Should Be Based on a Comprehensive Analysis of Costs, Benefits, and Risks Gao ID: GAO-09-248 February 13, 2009Coal-fired power plants generate about one-half of the nation's electricity and about one-third of its carbon dioxide (CO2) emissions, which contribute to climate change. In 2003, the Department of Energy (DOE) initiated FutureGen--a commercial-scale, coal-fired power plant to incorporate integrated gasification combined cycle (IGCC), an advanced generating technology, with carbon capture and storage (CCS). The plant was to capture and store underground about 90 percent of its CO2 emissions. DOE's cost share was 74 percent, and industry partners agreed to fund the rest. Concerned about escalating costs, DOE restructured FutureGen. GAO was asked to examine (1) the original and restructured programs' goals, (2) similarities and differences between the new FutureGen and other DOE CCS programs, and (3) if the restructuring decision was based on sufficient information. GAO reviewed best practices for making programmatic decisions, FutureGen plans and budgets, and documents on the restructuring of FutureGen. GAO contacted DOE, industry partners, and experts.
The original FutureGen program and the new restructured FutureGen program attempt to use CCS at coal-fired power plants to achieve near-zero CO2 emissions and to make CCS economically viable. However, they take different approaches that could affect CCS's commercial advancement. First, the original program aimed at developing knowledge about the integration of IGCC and CCS at one plant; in contrast, the new program could provide opportunities to learn about CCS at different plants, such as conventional ones that use pulverized coal generating technology. Second, the original program was operated by a nonprofit consortium of energy companies at one plant, while the new program called for CCS projects at multiple commercial plants. The new, restructured FutureGen differs from most DOE CCS programs. The new FutureGen would develop and integrate multiple CCS components at coal-fired plants (including CO2 capture, transportation, and storage underground). Other programs concentrate on only one CCS component and/or a related component (e.g., capture or capture and compression). However, Round III of DOE's Clean Coal Power Initiative (CCPI) is a cost-shared partnership with industry that funds commercial CCS demonstrations at new and existing coal-fired plants. The new FutureGen is most like CCPI in that both fund CCS commercial demonstrations at several plants to accelerate CCS deployment and require that participants bear 50 percent of the costs, but DOE expects the new FutureGen to have more funding for commercial demonstrations than CCPI. Moreover, the new FutureGen targets a higher amount of CO2 to be captured and stored (at least 1 million metric tons of CO2 annually per plant) than CCPI (300,000 metric tons). Contrary to best practices, DOE did not base its decision to restructure FutureGen on a comprehensive analysis of factors, such as the associated costs, benefits, and risks. DOE made its decision, largely, on the conclusion that costs for the original FutureGen had doubled and would escalate substantially. However, in its decision, DOE compared two cost estimates for the original FutureGen that were not comparable because DOE's $950 million estimate was in constant 2004 dollars and the $1.8 billion estimate of DOE's industry partners was inflated through 2017. As its restructuring decision did not consider a comprehensive analysis of costs, benefits, and risks, DOE has no assurance that the restructured FutureGen is the best option to advance CCS. In contrast to the restructuring decision, DOE's Office of Fossil Energy had identified and analyzed 13 options for incremental, cost-saving changes to the original program, such as reducing the CO2 capture requirement. While the Office of Fossil Energy did not consider all of these options to be viable, it either recommended or noted several of them for consideration, with potential savings ranging from $30 million to $55 million each.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-248, Clean Coal: DOE's Decision to Restructure FutureGen Should Be Based on a Comprehensive Analysis of Costs, Benefits, and Risks
This is the accessible text file for GAO report number GAO-09-248
entitled 'Clean Coal: DOE's Decision to Restructure FutureGen Should Be
Based on a Comprehensive Analysis of Costs, Benefits, and Risks' which
was released on March 11, 2009.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
February 2009:
Clean Coal:
DOE's Decision to Restructure FutureGen Should Be Based on a
Comprehensive Analysis of Costs, Benefits, and Risks:
GAO-09-248:
GAO Highlights:
Highlights of GAO-09-248, a report to congressional requesters.
Why GAO Did This Study:
Coal-fired power plants generate about one-half of the nation‘s
electricity and about one-third of its carbon dioxide (CO2) emissions,
which contribute to climate change. In 2003, the Department of Energy
(DOE) initiated FutureGen”a commercial-scale, coal-fired power plant to
incorporate integrated gasification combined cycle (IGCC), an advanced
generating technology, with carbon capture and storage (CCS). The plant
was to capture and store underground about 90 percent of its CO2
emissions. DOE‘s cost share was 74 percent, and industry partners
agreed to fund the rest. Concerned about escalating costs, DOE
restructured FutureGen. GAO was asked to examine (1) the original and
restructured programs‘ goals, (2) similarities and differences between
the new FutureGen and other DOE CCS programs, and (3) if the
restructuring decision was based on sufficient information. GAO
reviewed best practices for making programmatic decisions, FutureGen
plans and budgets, and documents on the restructuring of FutureGen. GAO
contacted DOE, industry partners, and experts.
What GAO Found:
The original FutureGen program and the new restructured FutureGen
program attempt to use CCS at coal-fired power plants to achieve near-
zero CO2 emissions and to make CCS economically viable. However, they
take different approaches that could affect CCS‘s commercial
advancement. First, the original program aimed at developing knowledge
about the integration of IGCC and CCS at one plant; in contrast, the
new program could provide opportunities to learn about CCS at different
plants, such as conventional ones that use pulverized coal generating
technology. Second, the original program was operated by a nonprofit
consortium of energy companies at one plant, while the new program
called for CCS projects at multiple commercial plants.
The new, restructured FutureGen differs from most DOE CCS programs. The
new FutureGen would develop and integrate multiple CCS components at
coal-fired plants (including CO2 capture, transportation, and storage
underground). Other programs concentrate on only one CCS component
and/or a related component (e.g., capture or capture and compression).
However, Round III of DOE‘s Clean Coal Power Initiative (CCPI) is a
cost-shared partnership with industry that funds commercial CCS
demonstrations at new and existing coal-fired plants. The new FutureGen
is most like CCPI in that both fund CCS commercial demonstrations at
several plants to accelerate CCS deployment and require that
participants bear 50 percent of the costs, but DOE expects the new
FutureGen to have more funding for commercial demonstrations than CCPI.
Moreover, the new FutureGen targets a higher amount of CO2 to be
captured and stored (at least 1 million metric tons of CO2 annually per
plant) than CCPI (300,000 metric tons).
Contrary to best practices, DOE did not base its decision to
restructure FutureGen on a comprehensive analysis of factors, such as
the associated costs, benefits, and risks. DOE made its decision,
largely, on the conclusion that costs for the original FutureGen had
doubled and would escalate substantially. However, in its decision, DOE
compared two cost estimates for the original FutureGen that were not
comparable because DOE‘s $950 million estimate was in constant 2004
dollars and the $1.8 billion estimate of DOE‘s industry partners was
inflated through 2017. As its restructuring decision did not consider a
comprehensive analysis of costs, benefits, and risks, DOE has no
assurance that the restructured FutureGen is the best option to advance
CCS. In contrast to the restructuring decision, DOE‘s Office of Fossil
Energy had identified and analyzed 13 options for incremental, cost-
saving changes to the original program, such as reducing the CO2
capture requirement. While the Office of Fossil Energy did not consider
all of these options to be viable, it either recommended or noted
several of them for consideration, with potential savings ranging from
$30 million to $55 million each.
What GAO Recommends:
GAO recommends that DOE re-examine its restructuring decision, based on
the comparative costs, benefits, and risks of the original and
restructured programs, as well as other incremental options for
modifying the original program. DOE provided technical comments but did
not comment on the report‘s recommendations.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-248]. For more
information, contact Mark E. Gaffigan at (202) 512-3841 or
gaffiganm@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
The Goals of the Original and Restructured FutureGen Programs Are
Largely Similar, but the Programs' Different Approaches May Lead to
Different Results:
The Restructured FutureGen Differs from Most of the Other DOE Carbon
Capture and Storage Programs, but It Is Similar to CCPI in Several
Ways:
DOE Did Not Support Its Decision to Restructure FutureGen with
Sufficient Information on Costs, Benefits, or Risks:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Budget Authority and Obligations for FutureGen:
Appendix III: Comments from the Department of Energy:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Storage and Emissions Goals for the Original and Restructured
FutureGen Programs:
Table 2: Key Differences in the Approaches of the Original and
Restructured FutureGen Programs:
Table 3: DOE Programs Supporting Carbon Capture and Storage:
Table 4: DOE Budget Authority and Obligations for FutureGen, Fiscal
Years 2004 through 2008:
Abbreviations:
Alliance: FutureGen Industrial Alliance:
Btu: British Thermal Units:
CCPI: Clean Coal Power Initiative:
CCS: carbon capture and storage:
CO2: carbon dioxide:
DOE: Department of Energy:
EOR: enhanced oil recovery:
FE: Office of Fossil Energy:
IGCC: Integrated Gasification Combined Cycle:
IPCC: Intergovernmental Panel on Climate Change:
NEPA: National Environmental Policy Act of 1969:
NETL: National Energy Technology Laboratory:
syngas: synthesis gas:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
February 13, 2009:
The Honorable Bart Gordon:
Chairman:
Committee on Science and Technology:
House of Representatives:
The Honorable Brian Baird:
Chairman:
Subcommittee on Energy and Environment:
Committee on Science and Technology:
House of Representatives:
The Honorable Daniel Lipinski:
House of Representatives:
The Honorable Jerry Costello:
House of Representatives:
Key scientific assessments have underscored the urgency of reducing
carbon dioxide (CO2) emissions to help mitigate climate change. Given
the United States' heavy reliance on coal-fired power plants, which
emit significant quantities of CO2, many of these scientific
assessments have cited carbon capture and storage (CCS), a developing
technology, as a crucial component of any strategy for addressing
climate change. CCS involves separating CO2 from other gases emitted in
power plants; capturing the CO2; compressing it into a liquid form;
transporting it (for example, by pipeline) to suitable locations;
injecting it into deep underground geologic formations, such as
depleted oil reservoirs and saline formations, for long-term storage;
and finally, monitoring the presence of the CO2 at the storage site for
a long period of time. Developing CCS is particularly important since
total world CO2 emissions are expected to increase significantly in the
near future as the United States continues to use its large coal
reserves and as rapidly developing countries, such as China and India,
increasingly rely on coal to generate electricity. To date, however,
CCS has not been demonstrated on a commercial scale at a power plant,
although key stakeholders, such as the International Energy Agency, an
organization that advises 28 member countries on energy policy, have
noted the importance of commercial-scale demonstration projects for
advancing the technology's widespread commercialization.
In 2003, the Department of Energy (DOE) announced its FutureGen program
as a $1 billion venture, partnering with the electric power industry to
design, build, and operate the world's first coal-fired, zero-emissions
power plant. In 2005, the FutureGen Industrial Alliance (Alliance), a
nonprofit consortium of some of the largest coal producers and electric
power companies in the world, formed to join DOE in this effort. The
Alliance agreed to fund 26 percent of the program, and DOE agreed to
fund the remaining 74 percent--of which DOE anticipated receiving
funding contributions for about 8 percent of the program's total cost
from foreign government partners. The agreement was subject to
renegotiation and renewal or continuation by both DOE and the Alliance
at various stages. In addition to FutureGen, DOE has other clean coal
programs with CCS components. For example, Round III of the Clean Coal
Power Initiative (CCPI) seeks cost-shared partnerships with industry to
fund commercial CCS demonstration at coal-fired power plants.
FutureGen was originally conceived as a research and development
project to integrate CCS with another developing technology--integrated
gasification combined cycle (IGCC)--in a single power plant at
commercial scale.[Footnote 1] In IGCC power plants, coal is gasified to
produce a synthesis gas (syngas), consisting primarily of hydrogen,
carbon monoxide, and CO2. In a process called precombustion CCS, the
CO2 is removed and separated from the syngas before the gas is burned
in a combustion turbine to generate electricity. Through IGCC,
electricity is generated more efficiently than through conventional
pulverized coal-fired technology, the process most widely in use,
because IGCC uses less coal to generate the same amount of electricity.
In addition, oxygen-fired IGCC plants produce CO2 as a concentrated gas
stream at high pressure that may be captured and stored more easily and
cheaply than CO2 from a typical pulverized coal-fired power plant,
which emits CO2 that must be separated from other gases before storing.
Construction on FutureGen was scheduled to begin in 2009, and
operations were to begin in 2012. In that year, FutureGen was to begin
capturing, storing, and monitoring the stored CO2 for 3 to 5 years, and
then continue monitoring the stored CO2 for 2 more years. In addition,
the FutureGen plant was being designed to serve as a living laboratory
host facility for emerging clean coal research programs, including
DOE's ongoing coal research program, to help develop advanced
technologies that could (1) improve CCS and IGCC, and (2) advance
research in other areas, such as hydrogen fuel cells.
By mid-2007, partly because of cost escalations for building power
plants around the world, DOE had become increasingly concerned about
potential escalating costs for FutureGen. For example, the price of
cement, large quantities of which are required for building power
plants, had increased by about 30 percent from 2004 to 2006, and
certain labor costs for building power plants had increased by over 25
percent, or almost twice the rate of general inflation, from 2001 to
2007. In October 2007, to address these concerns, DOE began
renegotiating its share of program costs with the Alliance. In December
2007, after DOE finished conducting the extensive environmental
analyses required by the National Environmental Policy Act of 1969
(NEPA)[Footnote 2] of four potential sites that took over a year, the
Alliance announced that it had selected Mattoon, Illinois, for the
location of FutureGen. However, DOE had not yet issued its NEPA Record
of Decision.[Footnote 3] Further, DOE had advised the Alliance not to
announce a site selection until the Record of Decision had been issued,
as contemplated by the cooperative agreement. Subsequently, in January
2008, DOE announced that it would not continue its cooperative
agreement with the Alliance and that it was going to take a different
approach to FutureGen. DOE stated that this decision was based on
concerns over potential cost escalations and the need to more quickly
advance commercial technology.
DOE's new approach--the restructured FutureGen--focuses on
demonstrating CCS at multiple new or existing commercial coal-fired
power plants that may use IGCC or other types of coal plants, such as
existing pulverized coal-fired power plants, which comprise 99 percent
of all existing coal-fired power plants in the United States. Under the
restructured FutureGen, DOE would fund several projects proposed by
industry, including entities such as electric power companies, to add
CCS to commercial power plants. The plants would begin using CCS by the
end of 2015; and, as planned under the original FutureGen, they would
be required to capture, store, and monitor the stored CO2 for 3 to 5
years, and to continue monitoring the stored CO2 for an additional 2
years. In June 2008, DOE announced that it anticipated providing up to
$1.3 billion for the entire restructured FutureGen program, with
certain caps in funding for each individual project. The original
FutureGen was a DOE research and development project, but the
restructured FutureGen is a DOE commercial demonstration project. Under
the Energy Policy Act of 2005, a nonfederal source must generally fund
not less than 20 percent of a DOE research and development project and
not less than 50 percent of a DOE demonstration and commercial
application project--that is, industry partners share more of the costs
of demonstration projects.[Footnote 4] However, with both the original
and restructured FutureGen, a nonfederal source must pay at least 50
percent of any demonstration component's cost.[Footnote 5] In October
2008, DOE received a small number of applications for the restructured
FutureGen; however, some of these applications are for proposals
outside of the restructured FutureGen's scope. DOE is currently
assessing proposals received and had stated it expected to announce a
selection of projects by December 2008; however, as of the beginning of
February 2009, it had made no decision. DOE requested supplemental
information from restructured FutureGen applicants which will be
reviewed prior to any selection decision.[Footnote 6]
While IGCC is a promising technology for generating electricity from
coal, currently, coal-fired electricity is almost exclusively generated
in existing pulverized coal-fired power plants. In these plants,
pulverized coal is combusted in air to boil water, which raises steam
that, in turn, is routed to turbines to generate electricity. The CO2
that results from burning coal is exhausted in the flue gas at
atmospheric pressure.
In addition to generating electricity in pulverized coal-fired plants
or utilizing IGCC technology, oxyfuel combustion is another
developmental technology not yet deployed at a commercial scale that
could burn pulverized coal to generate electricity. In oxyfuel
combustion plants, coal would be burned in pure oxygen diluted with
recycled CO2 or water. Oxyfuel combustion technology could also be one
of the technologies considered by DOE in its CCS research efforts,
including the restructured FutureGen.
You asked us to examine (1) the goals of the original and restructured
FutureGen programs, (2) the similarities and differences between the
restructured FutureGen program and other DOE carbon capture and storage
programs, and (3) the extent to which DOE used sufficient information
to support its decision to restructure the FutureGen program.
In conducting our work, we reviewed FutureGen appropriations, cost
estimates, budget justifications, and other DOE documents, including
the cooperative agreement and proposed terms for renegotiating the
agreement between DOE and the Alliance. We also met with officials from
DOE's Office of Fossil Energy (FE), including the National Energy
Technology Laboratory (NETL) and the Office of Clean Coal, in addition
to officials from the Alliance. We conducted semi-structured interviews
with 14 knowledgeable stakeholders from the electric power and coal
industries, nonprofit research organizations, academia, and others to
determine, among other things, the potential benefits of and key
differences between the original and restructured FutureGen programs.
We also reviewed public responses to DOE's request for information
about the restructured FutureGen and its funding announcement. Finally,
we reviewed our recent work and guidance on best practices for cost
estimation, program management, and programmatic decision making. A
more detailed description of our scope and methodology is presented in
appendix I.
We conducted this performance audit from June 2008 to February 2009, in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Results in Brief:
The overall goals of the original and restructured FutureGen programs
are similar in that both programs aim to produce electricity from coal
with near-zero emissions by using CCS and to make that process
economically viable for the electric power industry. However, the two
programs would take different approaches to achieving their goals
resulting in, according to knowledgeable stakeholders, two largely
distinct programs that could affect aspects of the commercial
advancement of CCS differently in the following ways:
* Type of information gained. The original FutureGen aimed at
developing knowledge about the integration of IGCC and CCS at one power
plant. In contrast, the restructured FutureGen could provide
opportunities to learn about CCS at different types of coal-fired power
plants because the program would be open to coal-fired plants utilizing
technologies other than IGCC, such as conventional pulverized coal and
oxyfuel combustion. However, under the restructured program, learning
about the integration of IGCC and CCS is only possible if DOE receives
applications proposing IGCC and selects one for funding.
* Speed of widespread commercialization of CCS. It is unclear whether
the original FutureGen program or the restructured program would
advance the broader roll out of CCS across all of industry more
quickly. According to DOE documents, the restructured program is to
begin deploying CCS at one or more commercial facilities that generate
power for sale in 2015, approximately 5 years earlier than the original
program's commercial operations could begin. However, the original
program would have begun generating, if not marketing, electricity in
2012. Also, unlike the restructured program, the original program
through the Alliance would have included a wide variety of industry and
international partnerships, thereby fostering widespread
commercialization of CCS technology and the use of that technology.
* Testing advanced technology. The original FutureGen would have served
as a living laboratory host facility for emerging technologies, aimed
at the goal of near-zero emissions (such as hydrogen fuel cells), and
for gaining broad industry acceptance for these technologies. In
contrast, the restructured FutureGen would not include a facility for
testing these technologies, and its ability to advance them would,
therefore, be limited.
The restructured FutureGen differs in important ways from most of DOE's
other CCS programs, with the exception of one program--Round III of
CCPI. Both the restructured FutureGen and CCPI (1) fund the commercial
demonstration of CCS at coal-fired power plants, and (2) require
industry participants to bear at least 50 percent of costs. The
restructured FutureGen would potentially have more available funding
for commercial demonstrations than CCPI, and the restructured FutureGen
targets a higher amount of CO2 to be stored (at least 1 million metric
tons of CO2 stored annually, per plant) than CCPI (300,000 metric tons
of CO2 stored or put to use annually, per plant). However, because
CCPI's goals may be more realistic or attainable for commercial
partners than those of the restructured FutureGen, CCPI may receive
more proposals and, hence, more industry participation. Regarding the
restructured program's differences from most of the other CCS programs,
the restructured FutureGen would integrate key components of CCS at
commercial coal-fired power plants, such as CO2 capture, compression,
transport, storage, and monitoring of stored CO2; in contrast, most of
DOE's other CCS programs concentrate on developing individual
components of CCS, such as CO2 storage, and/or an individual component
and a related one, such as capture and compression.
DOE did not use sufficient information to support its decision to
restructure FutureGen. According to our recent work and best practices,
a decision to terminate or significantly restructure an ongoing program
should be informed by timely and sufficient information on the costs,
benefits, and risks of such a decision.[Footnote 7] DOE did not prepare
a comprehensive analysis of the costs, benefits, and risks of its
decision to replace the original FutureGen with the restructured
program. DOE made its decision based, in large part, on its conclusion
that construction and material costs for the original program would
continue escalating substantially in the indefinite future and that
life-cycle costs were likely to double. However, according to economic
forecasting organizations, such as DOE's Energy Information
Administration, significant cost escalations for building power plants,
in general, do not typically continue in the long run. Also, DOE
reached this conclusion by comparing its cost estimate for the original
FutureGen ($950 million in constant 2004 dollars) with the Alliance's
2006 estimated life-cycle costs for the program through 2017 (about
$1.8 billion, considering inflation). In explaining his decision to
restructure FutureGen, the Secretary of Energy noted that the projected
program cost had "nearly doubled," from $950 million to $1.8 billion.
However, that assertion did not take into account a major difference
between the two estimates: one was based on constant dollars and the
other on inflated dollars. Our analysis indicates that the Alliance's
estimate in constant 2005 dollars would be approximately $1.3 billion-
-an increase of about $370 million, or about 39 percent, over DOE's
estimate, not a near doubling of costs. As DOE's restructuring decision
was not based on a comprehensive analysis of the associated costs,
benefits, and risks, DOE has no assurance that the restructured program
is the best option to accomplish the goal of promoting the accelerated
and widespread commercial advancement of CCS. In contrast to the
restructuring decision, FE identified and analyzed 13 other options for
incremental, cost-saving changes to the original program, such as
reducing the CO2 capture requirement. While FE did not consider all of
these options to be viable, it either recommended or noted several of
them for consideration, each with potential savings from $30 million to
$55 million.
To help ensure the widespread commercial advancement of CCS while
protecting taxpayer interests, we are recommending that, before
implementing significant changes to FutureGen or before obligating
additional funds for such purposes, the Secretary of Energy should
direct DOE staff to prepare a comprehensive analysis comparing the
relative costs, benefits, and risks of a range of options, including
the original and restructured FutureGen programs and incremental
options for modifying the original program.
In commenting on a draft of this report, DOE thanked us for the
opportunity to review the draft. In its response, DOE did not provide
comments on the report's conclusions or recommendations. However, DOE
provided us with technical comments, which we have incorporated into
the report, as appropriate. See appendix III for DOE's comments and our
response to these comments.
Background:
Global emissions of greenhouse gases, such as CO2, from human
activities have grown markedly since preindustrial times--since about
the year 1750--with an increase of 70 percent from 1970 to 2004. Most
scientists agree that increased greenhouse gases in the atmosphere are
the primary cause of the rise in global temperatures in recent decades.
The Intergovernmental Panel on Climate Change (IPCC) expects greenhouse
gas emissions to continue to increase over the next few decades,
resulting in a continued rise in global temperatures and related
harmful impacts, including the flooding of large populated coastal
areas, a reduction in the production of some crops and livestock
productivity, and a decrease in the availability of fresh water in
certain parts of the world.
According to the National Academy of Sciences, CO2 levels in the
atmosphere are currently at their highest in at least 650,000 years and
are continuing to rise. Global increases in concentrations of CO2 in
the atmosphere are due primarily to the burning of fossil fuels--such
as petroleum and coal--for energy, industrial processes, and
transportation. Coal is currently the world's leading source of
electricity, and the use of coal to generate electricity around the
world is projected to double by 2030. Coal-fired power plants provide
about one-half of the supply of electricity used in the United States,
and DOE's Energy Information Administration estimates that coal
accounts for approximately one-third of the total CO2 emissions in the
United States. In addition, the International Energy Agency anticipates
that the two largest developing countries--China and India--will drive
increased demand for coal to meet their growing electricity needs.
According to the International Energy Agency, these countries' heavy
reliance on coal has already contributed significantly to recent
increases in global CO2 emissions.
To prevent the anticipated increase in coal-fired electricity
generation from emitting significant amounts of CO2 into the
atmosphere, many are suggesting CCS as a tool that allows for continued
coal use, while mitigating its effect on the climate.[Footnote 8] CCS
comprises several components: separating CO2 from other gases emitted
by the plant; capturing emitted CO2; compressing the CO2 into a fluid
state to facilitate its transportation; transporting it to a storage
location; injecting the CO2 into geologic formations, such as depleted
oil and gas reservoirs and saline formations, for storage; and
monitoring the storage site to verify that the CO2 remains in place. A
successful CCS system must integrate all of these components.
Currently, three major approaches have been identified for capturing
CO2 at coal-fired power plants: (1) generating electricity using
pulverized coal as a fuel in conventional power plants with
postcombustion capture of CO2, (2) generating electricity using IGCC
technology with precombustion capture of CO2, and (3) using pulverized
coal as a fuel in power plants that utilize oxyfuel combustion
technology to generate power and capture CO2.
* Postcombustion capture and pulverized coal-fired power plants:
Pulverized coal-fired power plants, which comprise 99 percent of all
existing coal-fired power plants in the United States, burn pulverized
coal to boil water, which raises steam that, in turn, is routed to
turbines to generate electricity. The CO2 that results from burning
coal is exhausted in the flue gas at atmospheric pressure and a
concentration of 10 to 15 volume percent. Postcombustion capture of CO2
occurs after the coal is burned. The technology for capturing the CO2
could be retrofitted onto existing power plants. However, according to
DOE, the postcombustion capture of CO2 is a challenging approach
because (1) the low pressure and dilute concentration dictate a high
actual volume of gas to be treated; (2) trace impurities in the flue
gas tend to reduce the effectiveness of the CO2 adsorbing processes;
and (3) compressing captured CO2 from atmospheric pressure to pipeline
pressure (about 1,200 to 2,000 pounds per square inch) requires a large
amount (an estimated 20 to 40 percent) of the electric power generated
by the power plant.[Footnote 9]
* Precombustion capture and IGCC power plants: This approach would be
used at coal plants that use IGCC, a technology for generating
electricity that has been deployed on a commercial scale at only two
coal-fired power plants in the United States. In an IGCC plant, coal is
gasified through a thermochemical process to break it down into its
chemical constituents and produce a synthesis gas (syngas) which
consists mostly of hydrogen, carbon monoxide, and CO2.[Footnote 10] The
syngas is then treated to remove contaminants, such as ammonia and
mercury, and burned in a combustion turbine to generate electricity.
Precombustion capture in IGCC plants can occur because the CO2 in the
syngas is at a very high pressure, which allows it to be captured
before the combustion of the syngas.
* Oxyfuel combustion: Oxyfuel combustion, which is in its developmental
stages, is a technology that is being developed for using coal to
generate electricity that could reduce CO2 emissions. According to DOE,
oxyfuel combustion could be applied to existing pulverized coal-fired
plants. Oxyfuel combustion burns coal using pure oxygen diluted with
recycled CO2 or water. As a result, oxyfuel combustion emits primarily
CO2 and water vapor, with some excess oxygen, facilitating the capture
of the CO2 by condensing the water in the exhaust stream. Because
separating out the CO2 is not necessary under this approach, the CO2
capture consists essentially of drying and compressing the CO2.
However, depending on the level of excess oxygen and other trace
components, some additional gas cleanup may be required to make the CO2
suitable for transportation.
After being captured, the CO2 would be transported, likely via
pipeline, to a storage site and injected at depths of over 800 meters
(or about 2,600 feet) into underground geologic formations (such as
depleted oil reservoirs and saline formations), thought to be conducive
for isolating the CO2 for hundreds to thousands of years. We reported
in 2008 that among the barriers to CCS deployment are regulatory and
legal uncertainties regarding the liability for CO2 leakage and the
ownership of CO2, once injected. Once injected, the CO2 must be
monitored to ensure it does not escape into the environment.[Footnote
11]
On February 27, 2003, the President announced FutureGen as a cost-
shared project between DOE and industry to create the world's first
coal-fired, zero emissions electricity and hydrogen production power
plant. The production of hydrogen was to support the President's
Hydrogen Fuel Initiative to create a hydrogen economy for
transportation. The original FutureGen plant was planned to operate at
a commercial scale as a 275 megawatt IGCC facility that would capture
and store at least 1 million metric tons of CO2 per year. In December
2005, DOE signed a cooperative agreement with the nonprofit Alliance.
[Footnote 12] Pursuant to the agreement, the Alliance was to design,
construct, and operate the FutureGen plant, and DOE was to provide
project oversight, conduct the environmental analyses required by NEPA,
and coordinate the participation of foreign governments.[Footnote 13]
The project was to run through November 2017 and operate as the
cleanest fossil fuel-fired power plant in the world. After completion
of the formal project, the FutureGen plant was expected to continue
operating for the typical lifespan of a power plant--usually 30 to 50
years--generating electricity and providing a platform for energy
research. On January 30, 2008, DOE announced that it had decided to
take the FutureGen program in a different direction. DOE stated that it
would demonstrate CCS at multiple commercial-scale power plants,
including retaining the integration of CCS and IGCC. DOE referred to
this new approach as the restructured FutureGen program. In June 2008,
in a funding announcement for the restructured program, DOE stated that
it expected it would have about $290 million available through fiscal
year 2009 for its share of funding for the program. (See app. II for an
overview of DOE budget authority and obligations for FutureGen.)
The Goals of the Original and Restructured FutureGen Programs Are
Largely Similar, but the Programs' Different Approaches May Lead to
Different Results:
The overall goals of the original and restructured FutureGen programs
are largely similar in that both programs seek to produce electricity
from coal with near-zero emissions by using CCS, and to make that
process economically viable for the electric power industry. However,
the programs outline different approaches for achieving their goals,
which could affect the commercial advancement of CCS differently in
several ways.
With a Few Key Exceptions, the Goals of the Original and Restructured
Programs Are Largely Similar:
Both the original and restructured programs aim to establish the
feasibility and economic viability of producing electricity from coal
with near-zero emissions by employing CCS. The programs' goals for
storing CO2 and limiting other emissions, such as mercury and sulfur,
are also similar; except that the requirement for the amount of carbon
to be captured has been reduced from 90 percent in the original program
to 81 percent in the restructured program (see table 1).
Table 1: Storage and Emissions Goals for the Original and Restructured
FutureGen Programs:
Storage and emissions goals: Carbon;
Original FutureGen: Capture at least 90%[A];
Restructured FutureGen: Capture at least 81%[A].
Storage and emissions goals: CO2;
Original FutureGen: Store at least 1 MMT/year[B];
Restructured FutureGen: Store at least 1 MMT/year[B].
Storage and emissions goals: Sulfur;
Original FutureGen: Remove at least 99%;
Restructured FutureGen: Remove at least 99%[C].
Storage and emissions goals: Mercury;
Original FutureGen: Remove at least 90%;
Restructured FutureGen: Remove at least 90%[D].
Storage and emissions goals: Btu NOx;
Original FutureGen: Reduce to less than .05 lb/million;
Restructured FutureGen: Reduce to less than .05 lb/million.
Storage and emissions goals: Btu particulate matter;
Original FutureGen: Reduce to less than .005 lb/million;
Restructured FutureGen: Reduce to less than .005 lb/million.
Source: GAO analysis of DOE program documents.
[A] The original FutureGen program's goal is to capture 90 percent of
the CO2 in the total plant gas stream, while the restructured FutureGen
program requires capture of 81 percent of the carbon in the total plant
gas stream. According to DOE officials, the carbon capture goal of the
restructured program includes the capture of CO2, as well as other
carbon-based gases--such as methane (CH4), another greenhouse gas. DOE
officials explained that they changed the measure from CO2 to carbon
for clarification purposes and because the restructured FutureGen was
designed to accommodate a range of gasification and combustion
technology configurations. Also, while the goal for the restructured
FutureGen states 90 percent carbon capture, the minimal performance
requirement is 81 percent of carbon.
[B] Per demonstration unit or plant.
[C] Based on the sulfur content of the coal, or less than 0.04
lbs/million Btu if there is low sulfur concentration in the coal.
[D] Based on the mercury content of the coal.
[End of table]
Knowledgeable stakeholders told us that this decrease in carbon capture
is of modest significance and that a goal of 81 percent is still very
ambitious and costly. DOE received similar feedback in responses to its
request for information from the public about its plan to restructure
FutureGen. Eighteen of the 49 respondents indicated that the 90 percent
goal would be too restrictive for industry participants because of the
additional energy required to capture and compress CO2, often referred
to as the energy penalty, and the fact that no power plant to date has
been designed to operate with the conditions necessary to achieve a 90
percent capture. Some respondents suggested setting a lower capture
goal, such as 65 percent, and adopting an incremental approach over
time to reach 90 percent that would eventually allow industry to obtain
baseline data and demonstrate reliability and widespread confidence in
CCS. One respondent wrote that the "90% capture level was appropriate
for a 'living laboratory' like the originally proposed FutureGen
project but a 30% level is most suitable for a commercial IGCC
facility."
Both the original and restructured programs would operate plants at a
commercial size.[Footnote 14] However, the restructured program, a DOE
commercial demonstration project, seeks to accelerate the commercial
deployment of CCS (that is, generating and selling electricity to earn
profits) by implementing CCS at one or more commercial facilities by
2015--approximately five years earlier than the original program's
commercial operations could begin. The original program, a DOE research
and development project, would begin generating electricity in 2012, a
few years earlier than the restructured FutureGen; but, it could not
begin operating as a profit-seeking commercial facility until after the
nonprofit Alliance sells it, which is currently anticipated to occur in
2020. Knowledgeable stakeholders told us that the restructured
program's time line for the commercial deployment of its project(s)
might be ambitious because legal and environmental issues related to
siting and permitting, in particular for CCS, could slow
implementation. They also stated that the required NEPA analyses, which
must be completed prior to beginning construction, could take up to 3
years. In contrast, DOE had completed its NEPA analyses for the
original FutureGen. Moreover, the governments of the two states--Texas
and Illinois--where the four finalist sites for the original FutureGen
were located, had agreed to assume liability for the injected CO2. DOE
officials told us that, unlike the original program, a primary goal of
the restructured FutureGen was to facilitate the siting and permitting
process for CCS by implementing multiple projects in different
locations.
The Different Approaches for Achieving Goals Could Have Different
Impacts on the Commercial Advancement of CCS:
Because of the different approaches for achieving their goals, the
original and restructured FutureGen programs could have different
impacts on the commercial advancement of CCS (see table 2).
Table 2: Key Differences in the Approaches of the Original and
Restructured FutureGen Programs:
Original FutureGen: Only includes IGCC;
Restructured FutureGen as currently designed: May or may not include
IGCC; IGCC was identified as a goal, but its inclusion in the program
depends on the applications received and selected.
Original FutureGen: Accelerated deployment of CCS at commercial
facilities is not a goal;
Restructured FutureGen as currently designed: Accelerated deployment of
CCS at commercial facilities is a goal.
Original FutureGen: Includes a living laboratory host facility for
advanced technologies, such as fuel cells;
Restructured FutureGen as currently designed: Does not include a living
laboratory host facility for advanced technologies.
Original FutureGen: Project would be operated by a nonprofit consortium
of 11 industry partners (FutureGen Industrial Alliance);
Restructured FutureGen as currently designed: Each project could be
operated by a nonprofit or for-profit entity.
Original FutureGen: Research and development project (DOE cost share
capped at 74%);
Restructured FutureGen as currently designed: Demonstration project
(DOE cost share capped at 50%).
Original FutureGen: Consists of one plant;
Restructured FutureGen as currently designed: Potential for multiple
sites, depending on the applications received and selected.
Original FutureGen: Includes international involvement;
Restructured FutureGen as currently designed: No international
involvement.
Source: GAO analysis of DOE program documents.
[End of table]
The type of information gained from the programs may vary. First, the
original program would have developed knowledge about CCS at IGCC
plants, while the restructured program could allow for opportunities to
learn about CCS at both IGCC and other types of coal plants.
Knowledgeable stakeholders whom we contacted stated that DOE could
benefit by taking advantage of the opportunity under the restructured
FutureGen program to learn about CCS at multiple types of plants. They
explained that opportunities to learn from multiple plant sites in
different regions with various technologies would provide a wide range
of knowledge about the implementation of CCS in various contexts.
Similarly, 30 of 49 respondents to DOE's request for information about
the restructured program indicated that it would be beneficial if the
restructured program were to include both IGCC and other types of coal
plants. In addition to other organizations, such as the National
Academy of Sciences, we have noted that the benefits of learning about
CCS technologies are also applicable to existing pulverized coal-fired
plants, since they account for an overwhelming share (about 99 percent)
of the world's coal-fired power plants.[Footnote 15] However, one of
the intended benefits of the restructured program--providing
opportunities to learn from multiple plants about various technologies-
-may not be fully realized since DOE received only a small number of
applications. If an application for IGCC has not been received or is
not selected, the loss of an IGCC plant with integrated CCS capability
is significant because, according to the draft strategic planning
document for the restructured program, demonstrating this technology is
a key solution for reducing atmospheric CO2 emissions from coal-fired
power plants. Comments submitted to DOE and knowledgeable stakeholders
we interviewed indicated that the carbon capture goal for the
restructured program was too restrictive for commercial facilities. One
stakeholder stated that the restructured program goals might be overly
optimistic about what commercial projects are willing to do. As a
result of receiving only a small number of applications, the
restructured program is not as likely to develop as broad a base of
knowledge as it could have if more applications were received.
Second, it is unclear whether the original FutureGen program or the
restructured program could have advanced the broader roll out of CCS
more quickly across all of industry. According to DOE documents, the
restructured program is intended to begin deploying CCS at one or more
commercial facilities in 2015, approximately five years earlier than
the original program's commercial operations (that is, generating and
selling electricity) could begin. The original program, a DOE research
and development project, would have begun generating electricity in
2012, a few years earlier than the restructured FutureGen, but it could
not have begun operating as a profit-seeking commercial facility until
after the nonprofit Alliance sold it, which was anticipated to occur in
2020. Moreover, unlike the restructured program, the original FutureGen
would have included a wide variety of industry partners (including
foreign government partners, which are absent from the restructured
program). In addition, more industry partners could have joined the
Alliance and its 11 members over the course of the original program. As
a result of its wider participation, the original FutureGen could
potentially have advanced the broader roll out of CCS across all of
industry and internationally, instead of at only a few commercial
facilities, more quickly than the restructured program. DOE officials
told us that the original program would likely improve the global
advancement of CCS more quickly than the restructured program due to
its various international partnerships. They stated that DOE is
developing an approach to recoup the loss of international involvement
that resulted from restructuring FutureGen.
Third, the restructured program will not serve as a living laboratory
host facility for technologies emerging from energy research and
development programs aimed at the goal of near-zero emissions and for
gaining broad industry acceptance for these technologies. The original
FutureGen plant was to be designed with the ability to test various
technologies that are scalable to full size, such as fuel cells,
advanced gasification, and membrane air separation systems. Without the
opportunity to test these emerging research and development
technologies, the restructured FutureGen might result in a slower
advancement of CCS than the original program may have yielded.
According to the cooperative agreement between DOE and the Alliance,
emerging technologies, such as fuel cells, could have been tested at
the original program's living laboratory host facility. In a September
2007 presentation to DOE's Deputy Secretary, NETL noted the impact of
removing the living laboratory, saying it would "significantly delay
the availability of the technology for commercial deployment" and have
a "significant programmatic impact." DOE officials told us that they
have not yet determined where these technologies will be tested.
The Restructured FutureGen Differs from Most of the Other DOE Carbon
Capture and Storage Programs, but It Is Similar to CCPI in Several
Ways:
DOE manages a portfolio of clean coal programs that research and
develop CCS technology or demonstrate its application. Focusing on
commercial coal-fired power plants, the restructured FutureGen would
integrate key components of CCS, such as CO2 capture, compression,
transport, storage, and monitoring of CO2 at the storage location.
However, the restructured FutureGen is similar in some ways to Round
III of CCPI, but CCPI's goals are more modest than those of the
restructured FutureGen and, hence, may be more achievable for industry
partners. The other CCS programs include the (1) Regional Carbon
Sequestration Partnerships, (2) Innovations for Existing Plants
Program, (3) Advanced Turbines Program, (4) Advanced Integrated
Gasification Combined Cycle Program, and (5) Round III of the Title 17
Incentives for Innovative Technologies Loan Guarantee Program (Loan
Guarantee Program). Four of these five CCS programs do not integrate
all key components of CCS and concentrate on developing one or two
related components of CCS, such as CO2 separation, CO2 storage, or CO2
capture with related compression.
The Restructured FutureGen Program Is Similar to Round III of CCPI in
Several Ways, but CCPI's Goals May be More Achievable for Industry
Partners:
Both the restructured FutureGen and CCPI are cost-shared partnerships
with industry, in which DOE funds no more than 50 percent of the costs.
Like the restructured FutureGen, Round III of the CCPI program funds
the commercial demonstration of CCS at coal-fired power plants.
[Footnote 16] Round III of CCPI seeks to demonstrate, at a commercial
scale, advanced coal-based technologies that capture and store carbon,
or put CO2 emissions to beneficial reuse, such as to enhance oil
recovery.[Footnote 17] The proposals for Round III of CCPI were due to
DOE by January 15, 2009, and DOE expects to announce its selections in
July 2009.
In public comments on DOE's request for information and the draft
funding announcement for the restructured FutureGen, two respondents
noted the similarity between the restructured FutureGen and CCPI. They
suggested that DOE explain the linkages and possibly combine the
programs. However, important differences exist in the two programs'
goals. First, while both programs have annual requirements for the
capture of CO2 emissions, the restructured FutureGen requires 1 million
metric tons of CO2 per plant, while CCPI requires 300,000 metric tons
of CO2 per plant. Knowledgeable stakeholders told us that CCPI's goal
of capturing 300,000 metric tons of CO2 is more realistic and
attainable by commercial facilities than the restructured FutureGen's
goal of 1 million metric tons. Another noteworthy distinction is that
the restructured FutureGen requires the 1 million metric tons of CO2
emissions to be stored in saline formations, whereas the 300,000 metric
tons of CO2 emissions that CCPI requires to be captured can either be
stored or be put to beneficial reuse, such as to enhance oil recovery.
The latter opens up more options for industry partners and can serve as
an attractive opportunity for increasing revenue in the project by
selling the CO2. Finally, because CCPI's goals may be more realistic or
attainable for commercial partners, more proposals may be submitted to
CCPI than the restructured FutureGen. For example, two officials from
electric utility companies said that, despite the potentially greater
amount of funding available through the restructured FutureGen ($1.3
billion, subject to future appropriations) than CCPI ($440 million,
subject to future appropriations), their companies would apply for CCPI
over the restructured program because they could meet CCPI's goals.
The Restructured FutureGen Differs from Most Other DOE CCS Programs:
The restructured FutureGen and other DOE CCS programs strive to reduce
CO2 emissions by advancing CCS. However, while most of these programs
do not integrate all key components of CCS, the restructured FutureGen
integrates all key components of CCS. The other CCS programs include
the (1) Regional Carbon Sequestration Partnerships, (2) Innovations for
Existing Plants Program, (3) Advanced Turbines Program, (4) Advanced
Integrated Gasification Combined Cycle Program, and (5) Round III of
the Title 17 Incentives for Innovative Technologies Loan Guarantee
Program.
The Regional Carbon Sequestration Partnerships seek to develop the
technology, infrastructure, and regulations necessary to implement CO2
storage.[Footnote 18] The 7 regional partnerships are composed of over
350 organizations, 42 states, 4 Canadian provinces, and 3 Native
American tribes. Now entering Phase III,[Footnote 19] the regional
partnerships are working to implement 7 large-scale projects that will
demonstrate the long-term, effective, and safe storage of CO2 in the
major underground geologic formations throughout the United States and
portions of Canada. The CO2 stored through the projects can come from
coal-fired power plants or other sources, such as ethanol production
plants. The injection of CO2 into geologic formations will continue
over several years, and the monitoring will continue through 2017.
The Innovations for Existing Plants Program focuses on developing CO2
capture and compression technologies to assist existing coal-fired
power plants.[Footnote 20] Through this program, DOE is providing $36
million in funding for 15 projects to develop new and cost-effective
CO2 capture technologies for existing power plants. According to DOE,
all 15 projects selected have received funding. The projects will be
implemented across 11 states and will last for 2 to 3 years. Projects
will focus on five areas of interest for CO2 capture: membranes,
solvents, sorbents, oxyfuel combustion, and chemical looping.
The Advanced Turbines Program focuses on creating the technology base
for turbines that will permit the design of IGCC plants with CCS that
can operate at near-zero emissions, thereby facilitating CO2 capture.
According to DOE, the development of new turbines technology could
improve applications of IGCC by reducing the costs of producing
electricity from coal.
Similarly, the Advanced Integrated Gasification Combined Cycle Program
also focuses on one aspect of CCS--developing gasification technology
to enable CO2 capture. The program aims to develop advanced
gasification technologies to enable CO2 capture with minimal impact on
the cost of electricity. DOE reports that by 2012, gasification
technology will be integrated at pilot scale with CO2 separation,
capture, and sequestration into near-zero atmospheric emissions
configurations that can, ultimately, provide electricity with less than
a 10 percent increase in cost.
Finally, Round III of the Title 17 Incentives for Innovative
Technologies Loan Guarantee Program will provide up to $8 billion in
loan guarantees for energy projects that satisfy three criteria: avoid,
reduce, or sequester air pollutants or greenhouse gases; employ new or
significantly improved technologies, compared with commercial
technologies in service at the time the guarantee is issued; and
provide a reasonable prospect of repayment.[Footnote 21] Initial
applications for Round III of the program were due to DOE in December
2008. We recently reported on DOE's progress in (1) issuing final
regulations to govern this program, (2) taking actions to help ensure
that the program is managed effectively and to maintain accountability,
and (3) determining whether there were inherent risks due to the nature
and characteristics of this program that may affect DOE's ability to
make the program pay for itself and support a broad spectrum of
innovative energy technologies.[Footnote 22] Table 3 summarizes the
comparison of DOE programs supporting CCS.
Table 3: DOE Programs Supporting Carbon Capture and Storage:
Description:
Restructured FutureGen: Demonstration of capture and storage of CO2;
Clean Coal Power Initiative (Round III): Demonstration of capture and
storage, or beneficial reuse, of CO2;
Regional Carbon Sequestration Partnerships: Demonstration of CO2
storage in geologic formations;
Innovations for Existing Plants Program: Develops CO2 capture and
compression technologies for pulverized coal power plants, which
represent the majority of existing coal plants;
Advanced Turbines Program: Creation of new turbines for IGCC plants
that will include CCS and facilitate near-zero atmospheric emissions;
Advanced Integrated Gasification Combined Cycle Program: Supports the
development of advanced gasification technologies to enable CO2 capture
with minimal impact on the cost of electricity;
Loan Guarantees (Round III): Loan guarantees for activities at
retrofitted and new facilities that incorporate carbon capture and
sequestration, other beneficial uses of carbon, or advanced coal
gasification.
Integrates all key CCS components[A]:
Restructured FutureGen: Yes;
Clean Coal Power Initiative (Round III): Yes;
Regional Carbon Sequestration Partnerships: No[B];
Innovations for Existing Plants Program: No;
Advanced Turbines Program: No;
Advanced Integrated Gasification Combined Cycle Program: No;
Loan Guarantees (Round III): Possible.
Commercial site:
Restructured FutureGen: Yes;
Clean Coal Power Initiative (Round III): Yes;
Regional Carbon Sequestration Partnerships: No;
Innovations for Existing Plants Program: No;
Advanced Turbines Program: No;
Advanced Integrated Gasification Combined Cycle Program: No;
Loan Guarantees (Round III): Yes.
Demonstration or R&D:
Restructured FutureGen: Demonstration;
Clean Coal Power Initiative (Round III): Demonstration;
Regional Carbon Sequestration Partnerships: R&D;
Innovations for Existing Plants Program: R&D;
Advanced Turbines Program: R&D;
Advanced Integrated Gasification Combined Cycle Program: R&D;
Loan Guarantees (Round III): N/A.
DOE cost share:
Restructured FutureGen: 50%[C];
Clean Coal Power Initiative (Round III): 50%[C];
Regional Carbon Sequestration Partnerships: 80%[D];
Innovations for Existing Plants Program: 80%;
Advanced Turbines Program: 80%;
Advanced Integrated Gasification Combined Cycle Program: 80%;
Loan Guarantees (Round III): N/A.
Carbon storage required (amount and location):
Restructured FutureGen: Yes, storage required; At least 1 million
metric tons/year of CO2 must be stored in a saline formation and any
excess of 1 million metric tons/year can be put to beneficial reuse,
such as for enhanced oil recovery;
Clean Coal Power Initiative (Round III): No, storage not required;
300,000 metric tons/year can either be stored or put to beneficial
reuse, such as for enhanced oil recovery;
Regional Carbon Sequestration Partnerships: Yes, storage required; Some
will store up to 1 million metric tons/year in geologic formations;
Innovations for Existing Plants Program: N/A;
Advanced Turbines Program: N/A;
Advanced Integrated Gasification Combined Cycle Program: N/A;
Loan Guarantees (Round III): N/A.
Source: GAO analysis of DOE program documents.
[A] Key components include capture, compression, transport, storage and
measurement, monitoring and verification.
[B] The Regional Partnerships will conduct large-scale geological
sequestration testing that will require the participants to secure
sufficient quantities of CO2 needed to demonstrate CO2 storage,
monitoring, and verification. However, while DOE will cost share in the
acquisition of CO2, it will not fund the development and/or testing of
CO2 capture technologies under the Regional Partnership program.
[C] DOE cost sharing is generally capped at 50 percent. According to
DOE officials, it is quite common under DOE's commercial demonstration
programs for the Government cost share to be well below 50 percent of
the total project cost.
[D] DOE cost sharing is generally capped at 80 percent. Private sector
cost sharing under the seven Regional Partnerships averages 34 percent.
[End of table]
DOE Did Not Support Its Decision to Restructure FutureGen with
Sufficient Information on Costs, Benefits, or Risks:
According to our recent work and best practices, a decision to
terminate or significantly restructure an ongoing program should
typically be informed by timely and sufficient information on the
costs, benefits, and risks of such a decision. While DOE had reason to
be concerned about the escalating costs of the original FutureGen, it
made its decision to cancel that program and replace it with the
restructured FutureGen based, in large part, on a comparison of cost
estimates that were not comparable. That is, it compared one estimate
that was in current dollars with one that was in constant dollars. In
restructuring FutureGen, DOE did not sufficiently analyze the costs,
benefits, and risks of canceling the original FutureGen and replacing
it with a significantly restructured program. A comprehensive analysis
could have helped DOE determine how the costs, benefits, and risks of
the restructured FutureGen compared with those of the original
FutureGen. Because it did not conduct such an analysis, DOE cannot be
assured that the restructured program is the best option to accelerate
the widespread commercial advancement of CCS more quickly than the
original program. Other options, rather than dramatically restructuring
the program, were possible that could have preserved some of the
benefits of the original program, including ensuring the integration of
IGCC and CCS at the FutureGen facility. For example, FE identified and
analyzed 13 other options for incremental, cost-saving changes to the
original program, such as reducing the CO2 capture requirement. While
FE did not consider all of these options to be viable, it recommended
or noted several of them for consideration with potential savings from
$30 million to $55 million each.
DOE Decided to Restructure FutureGen Based, in Large Part, on a
Comparison of Cost Estimates that Were Not Comparable:
In January 2007, as part of its initial conceptual design report for
the original FutureGen, the Alliance estimated the cost of the original
program at about $1.8 billion. The Alliance's report explained that
this estimate included inflation through 2017--the last year of the
anticipated life of the program--and was the equivalent of almost $1.4
billion in constant 2006 dollars. This report also stated that, after
subtracting anticipated revenue from program activities, such as the
sale of electricity, the estimate was similar to DOE's 2004 estimate of
$950 million. However, DOE officials told us that DOE's estimate did
not subtract anticipated revenue. In March 2007, after approving the
Alliance's cost estimate, DOE renewed the cooperative agreement with
the Alliance to proceed with developing a preliminary design for
FutureGen by June 2008, including a revised cost estimate and a risk
analysis. The preliminary design was to be based on a specific site and
technology for the program--information that has an important impact on
the program's overall cost because labor expenses vary from location to
location, and technology costs and designs, such as for turbines, vary
depending on the specific manufacturer and vendor.
The March 2007 renewed cooperative agreement listed approximately $1.8
billion as the current estimated cost of the project. However, senior
DOE officials soon began to express concerns about escalating program
costs, and they directed FE officials to develop recommendations for
controlling costs. In September 2007, FE officials presented several
recommendations for incremental changes to control costs to the Deputy
Secretary of Energy; they also noted various measures already in place
for controlling costs, such as monthly progress reports and a risk
management program. Importantly, none of the recommendations indicated
that DOE should cancel the original program and restructure FutureGen;
moreover, FE officials told us that they did not prepare any analysis
or recommendations for senior DOE officials that resembled what was to
become the restructured program.
According to DOE, following this presentation, senior DOE officials
directed FE to negotiate with the Alliance new cost sharing
arrangements under the cooperative agreement, which was scheduled for
continuation in June 2008. The Alliance agreed to meet to renegotiate
the terms of the cooperative agreement. Over the course of several
meetings, the parties discussed various funding scenarios and exchanged
proposed term sheets. Subsequently, however, the Alliance and DOE did
not reach agreement. In December 2007, the Alliance sent a letter to
DOE stating that it preferred to proceed under the existing cooperative
agreement until FutureGen's costs and risks could be assessed with
input from the preliminary design report and cost estimate that were
due by June 2008.
Also in December 2007, the Secretary of Energy briefed senior
presidential advisers that the estimated cost of FutureGen had nearly
doubled--from $950 million to $1.8 billion--and that costs were
expected to continue rising. In addition, according to the briefing
documents, DOE planned to end its partnership with the Alliance and was
developing a new strategy for FutureGen that would cap the government's
financial exposure. The briefing documents explained that DOE's new
approach for FutureGen would fund only the CCS-related technology
associated with multiple commercial IGCC plants, rather than the entire
construction of a single plant with CCS. Around this time, according to
DOE officials, senior DOE officials directed FE to develop the
restructured FutureGen program. In response, these officials told us,
many high-level offices within DOE collaborated on developing a draft
strategic planning document for the restructured program. According to
these officials, the draft strategic planning document that they
finalized in January 2008 was the first complete document about the
restructured FutureGen. On January 30, 2008, DOE publicly announced
that it was restructuring FutureGen to provide a ceiling on federal
contributions and that the restructured program was a more cost-
effective approach. On this same day, DOE notified the Alliance that it
was restructuring FutureGen and would not continue its cooperative
agreement with the Alliance. DOE informed the Alliance that it was
restructuring FutureGen in response to serious concerns over
substantial escalation in projected costs, including what the agency
concluded would be the likely continued escalation of the costs. DOE
officials also stated that they disapproved of the Alliance's decision
to announce the selection of a project site before DOE issued its NEPA
Record of Decision. According to DOE, prior to the site selection
announcement and without knowledge of the Alliance's choice of site,
DOE had asked the Alliance not to go forward with the announcement and
further advised the Alliance against making an announcement until the
Record of Decision had been issued. DOE officials also said that, in
their negotiations on measures that could limit DOE's financial
exposure, they lost confidence in the ability of the Alliance to fund
its share of the project cost.
Although comparing cost estimates can provide valuable insight about
the impact of escalating costs on a project, DOE based its decision to
restructure FutureGen, in large part, on a comparison of cost estimates
that were not actually comparable. That is, in 2004, DOE had estimated
that the cost of the original FutureGen would be $950 million in
constant 2004 dollars. In contrast, the Alliance's 2007 estimate of
about $1.8 billion was in current dollars, which reflected inflation
over the course of the program from 2005 through 2017.[Footnote 23] In
explaining his decision to restructure FutureGen to senior presidential
advisers, the Secretary of Energy indicated that the projected program
costs had "nearly doubled," from $950 million to $1.8 billion. However,
comparing constant dollars, which exclude inflation, with current
dollars, which reflect inflation, is misleading. Our calculations show
that the Alliance's current dollar estimate of roughly $1.8 billion is
equivalent to approximately $1.3 billion in constant 2005 dollars--an
increase in total program costs of about $370 million, or about 39
percent--not a near doubling of costs.[Footnote 24]
In addition, the cost estimates by DOE and the Alliance were prepared
early in the project and, as a result, were based on conceptual designs
for FutureGen, including power plant case studies and a blanket 10
percent increase incorporated into the Alliance's estimate to allow for
the first-of-a-kind nature of some of the plant's components and
integration issues. However, neither estimate considered costs for
specific types of technology or a specific location. If DOE had waited
approximately 6 months for the Alliance's technology-specific and site-
specific cost estimate, due by June 2008 as part of its preliminary
design report, before deciding whether to restructure the program, it
would have had the benefit of more current and complete information,
including the latest information on escalating costs, when making
decisions about how to move forward with FutureGen.[Footnote 25] In
addition, regarding FutureGen's total cost, the March 2007 cooperative
agreement stated that DOE and the Alliance recognized that many
uncertainties--such as plant design, site selection, and market
conditions--still existed in developing a firm cost estimate.[Footnote
26]
In May 2008, the Secretary of Energy testified before Congress that
FutureGen was conceived as a $950 million venture and that its
estimated cost had increased to roughly $1.8 billion; however, the
Secretary's prepared statement did not indicate that the first estimate
was in constant dollars, while the second was in current dollars.
[Footnote 27] The Secretary also testified that DOE believed its costs
would continue to escalate. We requested that DOE provide us with the
analysis that supported DOE's anticipated escalation. In October 2008,
DOE officials told us that the ongoing cost escalations were
unprecedented and that they had looked internally across various
indexes, including the Bureau of Labor Statistics, to get a sense of
prospective escalation. However, they stated that they did not have any
written or comprehensive analysis. They added that they did not prepare
a position paper, study, or generate any analysis examining current or
future escalation for the decision to restructure FutureGen. Moreover,
economic forecasting organizations, such as DOE's Energy Information
Administration, have found that significant cost escalations, such as
those for building power plants over the past several years, do not
typically continue in the long run.[Footnote 28]
A Comprehensive Analysis Could Have Helped DOE Determine How the Costs,
Benefits, and Risks of the Restructured FutureGen Compared with Those
of Other Options:
DOE did not prepare a comprehensive analysis comparing the relative
costs, benefits, and risks of the original and restructured FutureGen
programs before making the decision to replace the original program
with the restructured FutureGen. On two different occasions, DOE
officials told us that the agency did not prepare such an analysis.
These officials told us that the Secretary of Energy's May 2008
congressional testimony included the agency's official explanation for
why it decided to restructure FutureGen. In September 2008, we asked
DOE to provide us with additional information, including the agency's
official position on why it decided to restructure FutureGen, all the
factors upon which DOE based the decision, the extent to which the
decision was based on documented supporting analysis, and a copy of any
such analysis. In January 2009, after we sent a draft of this report to
DOE for review and comment, DOE responded to our request for additional
information, stating that the detailed analysis supporting its decision
to restructure FutureGen could be found in the draft strategic planning
document for the restructured program and that this document discussed
the factors considered by DOE in making the decision to restructure
FutureGen. However, as previously discussed in our findings, the draft
strategic planning document was not completed in time to inform the
decision to restructure FutureGen. In addition, we do not consider the
draft strategic planning document to be comprehensive because it did
not assess:
1. whether costs for the original FutureGen would escalate
substantially in the future;
2. the relative costs, benefits, and risks for all of the types of
plants for which the restructured FutureGen was eligible to receive
proposals, such as conventional pulverized-coal and oxyfuel combustion
plants, but only contemplated proposals for IGCC plants;
3. the risk that industry respondents might not propose an IGCC plant
for the restructured FutureGen;
4. the risk that industry respondents might not propose enough viable
projects for the restructured FutureGen;
5. the costs, benefits, and risks of making incremental changes to the
original FutureGen alongside the relative costs, benefits, and risks of
the restructured FutureGen; and:
6. any potential overlap between the restructured FutureGen and other
DOE programs.
A comprehensive analysis could have supported DOE's decision making in
several ways. First, it could have helped DOE assess the risk that
industry respondents to DOE's request for applications under the
restructured FutureGen might not propose an IGCC plant. DOE received
public comments indicating that such an outcome was possible because
IGCC is not yet prevalent in the industry--only two commercial IGCC
plants currently operate in the United States--and other technologies
may provide better opportunities to meet the restructured program's
requirements, among other reasons. Applying CCS at existing,
conventional pulverized coal-fired plants is important because those
plants comprise almost all operating coal-fired plants in the United
States and abroad. However, according to DOE, IGCC plants integrated
with CCS are important for reducing CO2 emissions in the future. Both
DOE's press release announcing the restructured program and the updated
draft strategic planning document, dated July 1, 2008, that DOE
provided Congress indicated that the restructured program would include
IGCC. The funding announcement for the restructured FutureGen
highlighted the important contribution that an IGCC plant integrated
with CCS would make toward the nation's energy needs, such as providing
continued fuel diversity for generating electricity and mitigating
dependence on more expensive and less secure sources of energy. As late
as May 2008, the Secretary of Energy indicated in congressional
testimony that the restructured program would likely include IGCC,
stating that advances in technology and the market, in addition to
regulatory uncertainty, would provide incentives for industry to begin
deploying commercial-scale IGCC plants with CCS.
In addition, a comprehensive analysis could have helped DOE assess the
risk that industry respondents might not propose enough viable projects
from which DOE could then assess and make multiple selections. Such an
analysis could also have helped DOE assess whether the new cost-share
arrangement would provide sufficient incentive for enough proposals to
be selective. In the draft planning documents and press release
announcing the restructured program, DOE stated that it restructured
FutureGen, in part, because market conditions had changed in such a way
that DOE could fund multiple industry projects and accomplish even more
widespread commercialization of CCS and related information sharing
across the industry than what would have been accomplished by the
Alliance's consortium of 11 coal producers and electric power
companies. However, DOE only received a small number of applications
and some proposed projects were outside the restructured FutureGen's
scope. As a result, widespread commercialization and information
sharing seem less likely than under the original program. DOE also
asserted that the restructured program would hasten the time frame for
full-scale commercial operation of CCS. However, even if DOE accepts
all applicable applications, the restructured program could implement
CCS sooner than the original program at only a few commercial sites
rather than, as stated before, on a more widespread and international
scale.
Finally, DOE also could have used a comprehensive analysis to help
compare the relative costs, benefits, and risks of the restructured
FutureGen with those of making incremental and other changes to the
original program in order to control or offset costs. For example,
prior to the decision to restructure FutureGen, FE identified and
analyzed 13 options for changes to the original program, such as
reducing the CO2 capture requirement, which aimed at reducing costs
while continuing to retain some of the original program's key benefits.
DOE noted that some of the potential changes would have a detrimental
impact on the original program's objectives, while other potential
changes would not significantly impact project objectives. Of these
changes, FE either recommended or noted that DOE should be willing to
consider several options with potential savings from $30 million to $55
million each. Some of these scenarios were broached during negotiations
with the Alliance in the fall of 2007.
Conclusions:
According to DOE, electric power industry, academic, and other
officials and experts, for the foreseeable future, coal, which is
abundant and relatively inexpensive, will remain a significant fuel for
the generation of electric power in the United States and the world.
However, coal-fired power plants are also a significant source of CO2
and other emissions responsible for climate change. Hence, for at least
the near-term, any government policies that seriously address climate
change will need to have a goal of significantly reducing CO2 and other
emissions from coal-fired power plants. CCS, while still in its
infancy, can be a promising technology to achieve these purposes. By
integrating IGCC and CCS technology at a living laboratory host
facility, DOE's FutureGen program was intended to address significant
technological, cost, and regulatory issues associated with the
implementation of CCS at a new plant. However, in early 2008, citing
concerns about a "doubling of costs," DOE abruptly canceled the
original FutureGen program and announced a dramatic restructuring. The
restructuring cast aside the initial concept and substituted a request
for multiple projects to be proposed by industry that would retain the
goal of capturing and sequestering 1 million metric tons of CO2, and
would accept technologies other than IGCC. The restructured FutureGen
left open the possibility of successfully applying CCS technology to
existing conventional, pulverized coal-fired power plants--an important
goal in its own right, since those plants account for almost all of the
coal-fired generating capacity in the United States and abroad.
However, there are already existing programs to address CCS at existing
plants, and the decision to remove the FutureGen program's specific
focus on cutting edge technology (IGCC) at new plants was not well
explained.
In at least two ways, DOE's decision, which affected potentially up to
$1.3 billion in federal funding, was not well considered. First, the
decision was made on the basis of a flawed comparison of life-cycle
costs for the original FutureGen, in that DOE compared an estimate of
constant dollars to an estimate of inflated dollars. Second, the
decision was not based on a systematic and comprehensive comparison of
the costs, benefits, and risks of the original FutureGen versus the
restructured FutureGen. An expanded analysis of the costs, benefits,
and risks of the original FutureGen compared with a range of
modifications to the program could have included incremental changes to
the original FutureGen program that could have preserved some of its
original goals and benefits while mitigating costs. Such an analysis
might also have detailed the risk that DOE would receive only a small
number of applications and that those applications might not include
IGCC. The analysis could also have considered whether DOE's $1.3
billion contribution for total program funding presents the best option
for advancing the overall goals of CCS in both existing and future
plants.
Recommendations for Executive Action:
To help ensure that important decisions about the FutureGen program
reflect an adequate knowledge of the potential costs, benefits, and
risks of viable options, and to promote the attainment of the goals of
the program while protecting taxpayer interests, we are making the
following two recommendations to the Secretary of Energy:
1. Before implementing significant changes to FutureGen or before
obligating additional funds for such purposes, the Secretary of Energy
should direct DOE staff to prepare a comprehensive analysis that
compares the relative costs, benefits, and risks of a range of options
that includes (1) the original FutureGen program, (2) incremental
changes to the original program, and (3) the restructured FutureGen
program.
2. In addition, the Secretary should consider the results of the
comprehensive analysis and base any decisions that would alter the
original FutureGen on the most advantageous mix of costs, benefits, and
risks resulting from implementing a combination of the options that
have been evaluated.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Secretary of Energy for
review and comment. DOE did not comment on the recommendations and
conclusions of the report; however, it provided technical and
clarifying comments, most of which we have incorporated, as
appropriate. For example, we revised the report to reflect DOE's
comment that it had reached its decision to restructure FutureGen,
based on concerns about increasing costs associated with constructing
the original FutureGen project and that it had attempted to negotiate a
more favorable cost sharing agreement with the Alliance. However, DOE
added that it had stopped those negotiations because it believed that
the Alliance would not be able to financially partner with DOE to
complete the project. We also revised the report to reflect information
provided by DOE about the role of IGCC in the original and restructured
FutureGen efforts, the type of knowledge likely to be disseminated by
the original and restructured FutureGen efforts, and budget and
appropriation data for FutureGen, beginning in fiscal year 2004. DOE's
comments are reprinted in appendix III, along with our responses.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of this report
to the Secretary of Energy, the DOE Office of the Inspector General,
and interested congressional committees. This report also will be
available at no charge at GAO's Web site at [hyperlink,
http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-3841 or gaffiganm@gao.gov. Contact points for
our Office of Congressional Relations and our Office of Public Affairs
may be found on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix IV.
Signed by:
Mark Gaffigan:
Director, Natural Resources and Environment:
[End of section]
Appendix I: Scope and Methodology:
We examined (1) the goals of the original and restructured FutureGen
programs, (2) the similarities and differences between the restructured
FutureGen and other Department of Energy (DOE) carbon capture and
storage programs, and (3) the extent to which DOE used sufficient
information to support its decision to restructure the FutureGen
program.
To examine the goals of the original and restructured FutureGen
programs, including the results of the different approaches for meeting
these goals, we reviewed relevant appropriations and agency documents,
including budget justifications from fiscal years 2005 through 2009;
the program plan for FutureGen that DOE submitted to Congress in 2004;
the cooperative agreement between DOE and the FutureGen Industrial
Alliance (Alliance), and its subsequent renewals; DOE's draft strategic
planning documents and funding announcement for the restructured
program; and public responses to DOE's request for information about
the restructured FutureGen and its funding announcement. We also
reviewed congressional testimony about FutureGen and related topics by
officials from the Alliance; DOE, including the Secretary of Energy;
and other knowledgeable stakeholders, such as academic and industry
researchers. In addition, we met with and reviewed documents provided
by officials and researchers from DOE, the Alliance, industry,
nonprofit research organizations, and academia. In particular, we
interviewed DOE officials from the Office of Fossil Energy's (FE)
National Energy Technology Laboratory (NETL) and Office of Clean Coal.
Finally, we conducted semi-structured interviews with knowledgeable
stakeholders from the electric power and coal industries, nonprofit
research organizations, and academia, among others. During the
interviews, we discussed the goals, approaches, and anticipated results
of the original and restructured FutureGen programs. Our method for
conducting these interviews, including how we selected the
knowledgeable stakeholders, appears in the next paragraph.
We conducted semi-structured interviews with 14 knowledgeable
stakeholders from the electric power and coal industries, nonprofit
research organizations, and academia, among others. We selected a
nonprobability sample of stakeholders and stakeholder organizations
using a "snowball sampling" technique, whereby each stakeholder we
interviewed identified additional stakeholders and stakeholder
organizations for us to contact.[Footnote 29] Specifically, we
identified the first three stakeholders to interview from previous,
related GAO work and a group of contributors toward key scientific
assessments of climate change and clean coal technology.[Footnote 30]
We then used feedback from these interviews to identify additional
stakeholders to interview, and so on, being certain to interview every
stakeholder or a knowledgeable official from every stakeholder
organization identified by at least two other stakeholders. We also
ensured that we selected stakeholders from electric power companies
both within and outside the Alliance to obtain a range of industry
perspectives. Over the course of our work, we conducted semi-structured
interviews with knowledgeable stakeholders from the following
organizations: American Electric Power, Carnegie Mellon University, the
Coal Utilization Research Council, Duke Energy, Duke University, the
Electric Power Research Institute, the Massachusetts Institute of
Technology, the National Association of Regulatory Utility
Commissioners, the National Mining Association, Resources for the
Future, and Southern Company. We used a semi-structured interview guide
to interview these stakeholders and facilitate analysis of what they
identified as the key similarities, benefits, and differences between
the original and restructured FutureGen programs, in addition to DOE's
other carbon capture and storage (CCS) programs. These semi-structured
interviews allowed us to obtain information addressing all three of our
objectives.
To examine the similarities and differences between the restructured
FutureGen and other DOE CCS programs, we reviewed agency documents,
including budget justifications from fiscal years 2005 through 2009;
DOE's Carbon Sequestration Technology Roadmap and Program Plan; the
program plan for FutureGen that DOE submitted to Congress in 2004;
DOE's draft strategic planning documents and funding announcement for
the restructured program; and relevant laws. We met with and discussed
these programs with officials from NETL and FE's Office of Clean Coal.
We also conducted semi-structured interviews with knowledgeable
stakeholders from the electric power and coal industries, nonprofit
research organizations, and academia, among others. During these
interviews, we discussed the relationship between the restructured
FutureGen and DOE's other CCS programs. Finally, we reviewed public
responses to DOE's request for information about the restructured
FutureGen and DOE's funding announcements for the restructured
FutureGen and Round III of the Clean Coal Power Initiative.
To examine the extent to which DOE used sufficient information to
support its decision to restructure the FutureGen program, we reviewed
documents from DOE and the Alliance, including cost estimates; the
cooperative agreement and subsequent updates to it; letters,
presentations, and proposals documenting the renegotiation of terms for
the cooperative agreement; proposed incremental changes for controlling
costs; and the draft strategic planning documents and funding
announcement for the restructured program. We also reviewed
congressional testimony about FutureGen and related topics by officials
from the Alliance; DOE, including the Secretary of Energy; and other
knowledgeable stakeholders, such as academic and industry researchers.
We met with and discussed the information used to support the decision
to restructure FutureGen with officials from NETL and FE's Office of
Clean Coal. In addition, we discussed and reviewed analyses of the
costs for building coal-fired, electric power plants with officials and
researchers from industry, academia, and government, including DOE's
Energy Information Administration. Moreover, we discussed these costs
during semi-structured interviews with knowledgeable stakeholders from
the electric power and coal industries, nonprofit research
organizations, and academia, among others. We also reviewed public
responses to DOE's request for information about the restructured
FutureGen and its funding announcement. Finally, we reviewed our recent
work and guidance on best practices for cost estimation, program
management, and programmatic decision making, as well as guidance from
DOE and the Office of Management and Budget.
We conducted this performance audit from June 2008 to February 2009, in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: Budget Authority and Obligations for FutureGen:
Table 4: DOE Budget Authority and Obligations for FutureGen, Fiscal
Years 2004 through 2008:
Fiscal year: 2004;
DOE budget authority for FutureGen: $9 million;
Adjusted: DOE budgetary: resources: $8.64 million;
DOE obligations for its cooperative agreement with the FutureGen
Industrial Alliance: [Empty];
Remaining budgetary resources: [Empty].
Fiscal year: 2005;
DOE budget authority for FutureGen: $18 million;
Adjusted: DOE budgetary: resources: $17.26 million;
DOE obligations for its cooperative agreement with the FutureGen
Industrial Alliance: [Empty];
Remaining budgetary resources: [Empty].
Fiscal year: 2006;
DOE budget authority for FutureGen: $18 million;
Adjusted: DOE budgetary: resources: $17.33 million;
DOE obligations for its cooperative agreement with the FutureGen
Industrial Alliance: [Empty];
Remaining budgetary resources: [Empty].
Fiscal year: 2007;
DOE budget authority for FutureGen: $54 million;
Adjusted: DOE budgetary: resources: $52.50 million;
DOE obligations for its cooperative agreement with the FutureGen
Industrial Alliance: [Empty];
Remaining budgetary resources: [Empty].
Fiscal year: 2008;
DOE budget authority for FutureGen: $75 million;
Adjusted: DOE budgetary: resources: $74.32 million;
DOE obligations for its cooperative agreement with the FutureGen
Industrial Alliance: [Empty];
Remaining budgetary resources: [Empty].
Total:
DOE budget authority for FutureGen: $174 million[A];
Adjusted: DOE budgetary: resources: $170.05 million[B];
DOE obligations for its cooperative agreement with the FutureGen
Industrial Alliance: $39.11 million[C];
Remaining budgetary resources: $130.94 million[D,E].
Source: DOE.
[A] All FutureGen budget authority was no-year authority, which means
the authority is available for obligation for an indefinite time
period. DOE has requested $156 million for FutureGen in its budget
justification for fiscal year 2009.
[B] According to DOE, the department adjusted its program budget for
several factors. In fiscal years 2004 through 2008, the program's
budget authority was adjusted for the Small Business Innovation
Research program and/or the Small Business Technology Transfer program.
Moreover, the FutureGen budget for fiscal years 2004 and 2005 also
included the Interior and Omnibus reduction, and in fiscal years 2004
and 2006, FutureGen's budget authority included a general rescission.
[C] According to DOE, the agency has spent over $22 million on
obligations for the original FutureGen, via its cooperative agreement
with the FutureGen Industrial Alliance. In addition, DOE anticipates
reserving an additional $2.5 million for final close-out costs related
to these obligations pending invoicing from the Alliance. Depending on
the actual amount of these final close-out costs, DOE estimates that it
could deobligate approximately $14.5 million of its obligations for the
original FutureGen, after which time these funds would be available for
the restructured FutureGen.
[D] According to DOE, the agency has additional obligations and
expenditures for support contracts related to FutureGen that fall
outside the scope of its cooperative agreement with the Alliance. The
expenditures and remaining obligations for these contracts total
approximately $7.8 million.
[E] DOE officials told us that, after accounting for all anticipated
expenditures on the original FutureGen, they expect the agency to have
approximately $293 million available for the restructured FutureGen in
unobligated balances of unexpired budget authority, brought forward
from prior years (i.e., carryover), including the $156 million budget
request for fiscal year 2009.
[End of table]
[End of section]
Appendix III: Comments from the Department of Energy:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
Department of Energy:
Washington, DC 20585:
February 4, 2009:
Mr. Mark E. Gaffigan:
Director:
Natural Resources and Environment Team:
U.S. Government Accountability Office:
441 G Street, NW, Mail 2T23A:
Washington, DC 20548:
Dear Mr. Gaffigan:
Thank you for the opportunity to review the Government Accountability
Office (GAO) draft report entitled, "DOE's Decision to Restructure
FutureGen Should Be Based on a Comprehensive Analysis of Costs,
Benefits, and Risks" (GAO-09-248). Enclosed please find the U.S.
Department of Energy's comments on the draft report.
If you have any questions or comments please contact Mr. Jarad Daniels
of my staff at (202) 485-7355.
Sincerely,
Signed by:
Victor K. Der:
Acting Assistant Secretary:
Office of Fossil Energy:
Enclosure: DOE Comments on Draft GAO Report:
[End of letter]
Department of Enemy Comments on GAO "DOE's Decision to Restructure
FutureGen Should be Based on a Comprehensive Analysis of Costs,
Benefits and Risks" (GAO-09-248) (GAO Draft Report):
This responds to your request for comments by the Department of Energy
on the above-referenced GAO Draft Report.
1. The draft report uses inconsistent terminology to characterize the
13 options for incremental changes developed by the Office of Fossil
Energy. The summary page, page 9, and the discussion on page 27 make it
appear that all 13 options were viable without jeopardizing the project
objective. In reality, some of the 13 options were not considered
viable or recommended by Fossil Energy and were rejected by the
Department as a whole. [See comment 1. Now on pp.8 and 24.]
At each of these locations (the summary page, last sentence of the
third paragraph; page 9, the first full sentence; and page 27 second to
last sentence of the first paragraph), DOE recommends GAO delete the
number "13." Not all of the 13 options would have preserved the
original project objectives nor were all recommended. Additionally on
page 27, the last sentence of the first paragraph is incorrect and
should either be deleted or the sentence should start with "Some of
these options."
The discussion on page 33 is more accurate in that it states that DOE
considered some of the potential changes within the list of I3 to have
a detrimental impact on the original project objectives and pursued the
remaining changes during negotiations with the Alliance. To the extent
GAO believes discussion of the FE options is appropriate, DOE
recommends that the report consistently present the options as they are
characterized on page 33.
2. On page two, suggest that the last sentence of the carryover
paragraph be changed to reflect that only Round III of the CCPI focused
on carbon capture and sequestration and that selections have not yet
been made. Suggested revision would read:
For example, DOE's Clean Coal Power Initiative (CCPI) Round III Funding
Opportunity Announcement will result in cost-shared partnerships with
industry for projects that demonstrate carbon capture from coal-fired
plants with sequestration or beneficial reuse. [See comment 2. Now on
pp. 2, 17, and 18.]
3. On page 3, in the first full paragraph, the draft report states:
In December 2007, after DOE finished conducting the extensive
environmental analyses required by the National Environmental Policy
Act of 1969... of four potential sites that took over a year, the
Alliance announced that it had selected Mattoon, Illinois, for the
location of FutureGen. [See comment 3. Now on pp. 3 and 26]
In order to accurately depict the context of activities at the time,
the report text should be revised. The above-quoted sentence implies
that DOE completed its NEPA responsibilities prior to the Alliance
announcement of the Mattoon site, and that is not the case. For
projects requiring an environmental impact statement, an agency's NEPA
review culminates with a Record of Decision. DOE had not issued a
Record of Decision at the time the Alliance, over the Department's
objection, chose to announce its site selection. The chronology of
activities set out in the Cooperative Agreement clearly provided for
the issuance of a Record of Decision first. This context should be
provided for in the text of the GAO report.
4. On page 4, DOE recommends changing footnote 4 to read:
In addition, for original FutureGen, costs for the initial planning and
research stages were subject to a 20 percent nonfederal cost-share.
[See comment 4. Now footnote 5.]
As drafted by GAO, the footnote sentence applies to both the original
and restructured approaches, but should only apply to the original
FutureGen. For Restructured FutureGen, DOE mandated not less than 50
percent private sector cost-share for all stages.
Since Fiscal Year 2005, the requirements for cost sharing of the
original FutureGen has been set out in statute:
Provided further, That the initial planning and research stages of the
FutureGen project shall include a matching requirement from non-
Federal sources of at least 20 percent of the costs: Provided further,
That any demonstration component of such project shall require a
matching requirement from non-Federal sources of at least 50 percent of
the costs of the component....
See, e.g., Pub. L. No. I08-447.
5. On pages 6 and 18, the draft report suggests that the technology
transfer potential was greater under the original FutureGen because the
non-profit Alliance would own new inventions and was willing to share
its knowledge industry-wide. GAO contrasts the original FutureGen with
the Restructured program where GAO believes for-profit recipients would
be more reluctant to disseminate information. In fact, the intellectual
property policies and provisions for each effort are essentially the
same. For both the original and Restructured program, most new
inventions would likely be generated by for-profit subcontractor/
vendors supplying technology to the project. Ownership of these
inventions would be granted to the subcontractors/vendors either by law
for small businesses or nonprofits, or through a DOE patent waiver for
large businesses. Inventions by the Alliance were far less likely since
they were to have subcontracted for most technology development
efforts. Furthermore, as with original FutureGen, DOE will require
Restructured FutureGen recipients to disseminate the results of the
project. Accordingly, the underlying assumptions for GAO's conclusions
and comparisons about technology transfer potential are in part faulty.
Please see DOE's comments on GAO's draft statement of facts. [See
comment 5]
In the same section on page 6, and in the first line on page 19, the
draft reports states that the Alliance was comprised of utilities,
mining companies, and "others. " To the best of DOE's knowledge, the
Alliance was comprised only of utilities and mining companies both
domestic and foreign.
6. In the first line on page 8, CO2 should have a subscript rather than
a superscript. [See comment 6]
7. On page 13 in the first paragraph, the draft report states:
On January 30, 2008, about a month after the Alliance announced that it
had selected Mattoon, Illinois, for the site of the FutureGen plant,
DOE announced that it had decided to take the FutureGen program in a
different direction. [See comment 7. Now on pp. 3 and 26]
We believe the statement set out above needs to be put in context.
Prior to the announcement and without knowledge of the Alliance's
choice of site, DOE asked the Alliance not to go forward with an
announcement and further advised the Alliance that an announcement at
that time was inadvisable in light of the ongoing DOE-Alliance
discussions.
By mid-2007, in part because of an overall climate of cost escalations
for building power plants around the world, DOE managers had become
increasingly concerned about actual and potential escalating costs for
FutureGen, and DOE had signaled to the FutureGen Alliance that DOE had
serious concerns about the sustainability of the project. During
September 2007, DOE began negotiating with the Alliance to develop a
mutually acceptable cost-sharing formula to deal with the prospect of
further cost-growth.
In December 2007, after analyzing four potential sites for the original
FutureGen, the FutureGen Alliance announced that it had selected
Mattoon, Illinois, for the location of the original FutureGen. The
Alliance announced the site in advance to DOE's issuance of a record of
decision (ROD) to complete DOE's review under the National
Environmental Policy Act (NEPA) and contrary to DOE's advice.
Announcement of the Alliance's selection of a site prior to the ROD was
inconsistent with the schedule set out in the Cooperative Agreement.
Only after months of unsuccessful negotiations with the FutureGen
Alliance regarding cost sharing for cost growth did DOE announce, on
January 30, 2008, that it would not proceed beyond the then current
budget period with the FutureGen Alliance, and that it planned to take
a different approach to FutureGen. DOE's rationale for this decision
was based on DOE's interest in maximizing the role of private sector
innovation, providing a ceiling on federal contributions, and
accelerating and increasing the use of clean energy technologies to
help meet the growing demand for energy while also mitigating
greenhouse gas emissions. The selected location of the site had no
bearing on DOE's determination.
8. On page 16, the first sentence of the first full paragraph states:
Both the original and restructured programs would operate plants at
commercial size (about 300 megawatts). [See comment 8. Now on p. 14.]
Under the restructured program, IGCC plants were expected to have a
nominal capacity of 300 megawatts, but, as set out in the Funding
Opportunity Announcement, non-IGCC projects needed only to be at a
scale sufficient to prove commercial viability and be designed to
produce and capture I million tons of C02 per year.
9. On page 17, in Table 2, under original FutureGen, the word
"includes" should be deleted in the first row since the original
program was exclusively focused on IGCC. [See comment 9. Now on p. 15.]
10. On page I9, DOE recommends GAO strike the words "in new inventions
it would likely own" from the last sentence of the first paragraph.
Inclusion of this phrase would actually limit the scope which can also
more broadly include non-patentable technical data. [See comment 10]
11. On page 21, the words "Round III" should be added after "Clean Coal
Power Initiative" in the underlined heading since only the third round
of CCPI has focused on carbon sequestration. [See comment 11. See
comment 2. Now on pp. 2, 17, and 18]
12. On page 25, change footnote "d" to read "DOE cost sharing is
generally capped at 80 percent." Alternately, delete the first sentence
of the footnote. [See comment 12. Now on p. 23.]
13. On page 28, DOE recommends that GAO revise the first sentence of
the last paragraph to read:
Following this presentation, senior DOE officials directed FE to
negotiate with the Alliance new cost sharing arrangements under the
cooperative agreement, which was subject to a continuation decision in
June 2008. [See comment 13. Now on p. 25.]
14. On page 29, in the fourth to last sentence of the first full
paragraph, DOE recommends that GAO replace the word "renewing" with
"continuing" for technical accuracy. [See comment 14]
15. On page 29, the second to last sentence of the first full
paragraph, as currently drafted, erroneously suggests that DOE
officials disapproved of the selection of Mattoon for the project site.
The sentence implies that DOE's determination was influenced by the
Alliance's selection of the Mattoon site, and that is not the case.
Prior to the announcement and without knowledge of the Alliance's
choice of site, DOE asked the Alliance not to go forward with an
announcement and further advised the Alliance that an announcement was
inadvisable. The selected location of the site had no bearing on DOE's
determination to restructure the program. [See comment 15. Now on p.
26.]
DOE recommends that the second to last sentence of the first full
paragraph be revised into two sentences as follows:
DOE officials also stated that they disapproved of the Alliance's
decision to announce the selection of a project site. Prior to the
announcement and without knowledge of the Alliance's choice of site,
DOE asked the Alliance not to go forward with an announcement and
further advised the Alliance that an announcement was inadvisable. DOE
had not issued its NEPA Record of Decision and was continuing its
attempts to negotiate with the Alliance.
16. On page 29, the sentence at the end of the first paragraph should
be modified to make it clear that DOE lost confidence in the ability of
the Alliance to fund its share of the project cost, rather than
confidence in the Alliance member companies or their representatives.
[See comment 16. Now on p. 26.]
17. On page 32, the third to last sentence of the first paragraph
suggests that the draft strategic planning document was developed in
July 2008, and that is not correct. The document was transmitted to
Congress in response to a document request in July of 2008. In
addition, we would also like to clarify a point regarding DOE's
position on the role of CCS, including IGCC with CCS, in reducing CO2
in the future. Therefore the sentence should be changed to read as
follows:
However, according to DOE, plants with CCS, including those with IGCC
integrated with CCS, are important options for reducing C02 emissions
in the future, and DOE's press release announcing the restructured
program and the draft strategic planning document that DOE provided to
Congress in July 2008 indicated that the restructured program would
include IGCC. [See comment 17. Now on p. 29.]
18. On page 32, footnote 30 and on page 40, table II.2 footnotes b and
c, the draft report states: "DOE had not yet provided" the information
or response that GAO had requested. As of the date of these comments,
DOE understands that it has either already provided the relevant
documentation, and has referred GAO back to those documents, or has
since provided the documentation. DOE understands that all information
has been provided. [See comment 18. Now on pp. 28, 29, and 38.]
19. On page 40, we noticed several errors in the Tables contained in
Appendix II. Table II.1. [See comment 19. Now on p. 38.]
The correct FutureGen appropriations for Fiscal Year 2004 through 2008
are as follows:
2004: $9,000,000:
2005: $18,000,000:
2006: $18,000,000:
2007: $54,000,000:
Total: $174,000,000:
These above-stated amounts are not yet adjusted for rescissions or the
SBIR/STTR offset. Hence, the actual amount available to DOE for
FutureGen, as depicted in Table II.2, is less than $174,000,000. Under
the "Appropriated" column in Table II.1, the Fiscal Year 2007 amount
should be changed from $18,000,000 to $54,000,000. The total should be
changed accordingly. Under the heading "Directed" in Table II.1, the
Fiscal Year 2007 amount of $257,000,000 should be deleted as this was
deferred budget authority under the Clean Coal Technology Program that
was not made available to the Department for FutureGen. The last column
should be updated to reflect the changes in the first two columns.
Table II.2:
The calculations for the Fiscal Year 2006 Budget are as follows:
Appropriation Act: $18,000,000:
General Rescission 1%: (180,000):
SBIR Assessment: (441,000):
STTR Assessment: (53,000):
FY-2006 Available: $17,326,000.
The Fiscal Year 2006 amount in Table II.2 should be changed from
$17,820,000 to $I7,326,000 and the Total changed to $170,045,000.
The following are GAO's comments on the Department of Energy's letter
dated February 4, 2009.
GAO's Comments:
1. We modified our report to address DOE's concerns about our
discussion of the 13 options for incremental changes.
2. We modified our report to add clarifying information on Round III of
the Clean Coal Power Initiative.
3. We added clarifying information about the timing of the site
selection announcement and the release of DOE's NEPA Record of
Decision.
4. We revised the footnote to state that, according to DOE, not less
than a 50 percent nonfederal cost share will be required for all of the
restructured FutureGen's stages.
5. We have revised the report to remove the referenced discussion.
6. We made DOE's editorial correction.
7. The report does not state or imply that the location of the site was
the reason for the program's restructuring, but rather states that
DOE's restructuring decision was based on a desire to contain costs in
a time of increasing cost pressures. However, we revised the report to
clarify that the Alliance announced its site selection decision before
DOE's Record of Decision was released--which has not happened, as of
the date of this report.
8. DOE clarifies that under the restructured program, IGCC plants are
expected to have a nominal capacity of 300 megawatts, but non-IGCC
projects need only be at a scale sufficient to prove commercial
viability and be designed to produce and capture 1 million tons of CO2
per year. We revised the report to reflect this information.
9. As suggested by DOE, we revised table 2 to reflect that the original
FutureGen program focused exclusively on IGCC.
10. As indicated in our response to comment 5, we have revised the
report to remove the referenced text.
11. We made appropriate revisions to the report to reflect that Round
III of the Clean Coal Power Initiative focuses on carbon sequestration.
12. We revised table note "d" to table 3, to state that DOE's cost
sharing is generally capped at 80 percent.
13. We revised the report to clarify that senior DOE officials directed
FE to negotiate new cost sharing arrangements under the cooperative
agreement with the Alliance.
14. We revised the report to use the word "continue" in place of
"renew" wherever it would more accurately reflect the various stages of
the cooperative agreement.
15. Our draft report did not insinuate or state that DOE did not favor
the Mattoon, Illinois, site or that DOE's restructuring decision was
based on a disapproval of the Alliance's site selection announcement.
Rather, our report states that DOE's decision was based on a desire to
limit its exposure to increased costs. However, as suggested by DOE, we
clarified the report by adding that DOE had instructed the Alliance to
not announce the site selection before DOE could release the Record of
Decision.
16. We agree with DOE and revised the report to clarify that DOE lost
confidence in the ability of the Alliance to fund its share of the
project cost, rather than that DOE lost confidence in the Alliance
members or their representatives.
17. We revised the report to clarify that both DOE's press release
announcing the restructured program and the updated draft strategic
document, dated July 1, 2008, that DOE provided Congress indicated that
the restructured program would include IGCC.
18. DOE provided information regarding the official basis for
restructuring the FutureGen program and its budget authority,
obligations, and expenditures that we incorporated into our report,
including table 4 and its table notes. We also included in the report
an additional assessment of documents, to which DOE referred as
providing the basis for its decision to restructure FutureGen.
19. Regarding the tables in appendix II of the draft report, DOE
provided updated FutureGen appropriations information for fiscal years
2004 and 2007 and certain calculations for the fiscal year 2006
FutureGen budget. In response, we merged tables 4 and 5 from the draft
to create one table in the final report, and we adjusted the figures
and calculations for the data that DOE provided.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Mark Gaffigan, (202) 512-3841 or gaffiganm@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Ernie Hazera (Assistant
Director), Nancy Crothers, Cindy Gilbert, Chad M. Gorman, Angela Miles,
Karen Richey, Michael Sagalow, and Jeanette M. Soares made key
contributions to this report. Harold Brumm, Jr., and Timothy Persons
also made important contributions.
[End of section]
Footnotes:
[1] Currently, only two IGCC plants operate at commercial scale in the
United States. In service since 1997, the Polk Station, near Mulberry,
Florida, can provide 250 megawatts to the electric grid. The Wabash
River Coal Gasification Repowering Project is the first full-size
commercial gasification-combined cycle plant built in the United
States, having begun operations in November 1995. The plant, located
outside West Terre Haute, Indiana, can provide 262 megawatts to the
electric grid.
[2] Pub. L. No. 91-190 (1970). Under the act, federal agencies must
evaluate the likely environmental effects of their activities using an
environmental assessment or, if the activity likely would significantly
affect the environment, a more detailed environmental impact statement.
[3] The cooperative agreement originally scheduled the final site
announcement to take place on September 4, 2007, contingent upon DOE's
August 1, 2007, publication of the Record of Decision. On November 9,
2007, DOE issued a press release announcing the completion of its final
environmental impact statement for FutureGen and that DOE anticipated
site selection would be made later that year.
[4] Pub. L. No. 109-58 (2005), codified at 42 U.S.C. § 16352.
[5] In addition, beginning in fiscal year 2005, costs for the initial
planning and research stages were subject to a 20 percent nonfederal
cost share. According to DOE, for the restructured FutureGen, not less
than a 50 percent nonfederal cost-share for all stages will be
required.
[6] DOE has identified certain details regarding the negotiations for
both the original and the restructured FutureGen as sensitive or
proprietary information. Due to the ongoing nature of these
negotiations for the restructured FutureGen and the fact that
disclosure of sensitive/proprietary information could adversely affect
negotiations of these projects and related future projects, our
discussion of some aspects of these negotiations is necessarily
general.
[7] GAO, Defense Acquisition: Termination Costs Are Generally Not a
Compelling Reason to Continue Programs or Contracts That Otherwise
Warrant Ending, [hyperlink, http://www.gao.gov/products/GAO-08-379]
(Washington, D.C.: Mar. 14, 2008); Cost Assessment Guide: Best
Practices for Estimating and Managing Program Costs--Exposure Draft,
[hyperlink, http://www.gao.gov/products/GAO-07-1134SP] (Washington,
D.C.: July 2, 2007); Standards for Internal Control in the Federal
Government, [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: Nov. 1, 1999); and Executive Guide: Leading
Practices in Capital Decision-Making, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-99-32] (Washington, D.C.: Dec. 1,
1998).
[8] The International Energy Agency identifies CCS and other clean coal
technologies as one of the most promising routes for mitigating
emissions and notes that, "CCS could reconcile continued coal burning
with the need to cut emissions in the longer term." Similarly, the IPCC
notes that CCS would help preserve existing energy infrastructure,
thereby restraining the cost of emissions reductions.
[9] Regardless of the approach used to generate electricity and capture
CO2, additional electricity, often referred to as the energy penalty or
parasitic power, is required for capture and compression.
[10] ICGG plants can be either air-blown or oxygen-blown, referring to
the way in which oxygen is introduced into the gasifier. The syngas
produced in an air-blown gasifier consists primarily of inert nitrogen,
along with hydrogen, carbon monoxide, low levels of CO2, and water
vapor. In oxygen-blown gasification, the syngas is comprised of the
same primary components, but has very little nitrogen and is,
therefore, more concentrated in respect to the other components.
[11] GAO, Climate Change: Federal Actions Will Greatly Affect the
Viability of Carbon Capture and Storage As a Key Mitigation Option,
[hyperlink, http://www.gao.gov/products/GAO-08-1080] (Washington, D.C.:
Sept. 30, 2008).
[12] The Alliance is currently comprised of the following 11 companies
that produce coal or generate coal-fueled power on six continents:
American Electric Power, Anglo American LLC, BHP Billiton, China
Huaneng Group, CONSOL Energy Inc., E.ON U.S., Foundation Coal
Corporation, Peabody Energy, Rio Tinto Energy America, Southern
Company, and Xstrata Coal Pty Limited. The Alliance membership
continues to be open to U.S. and international companies that produce
coal or electricity from coal as a significant business activity.
[13] In 2006 and 2007, DOE received funding contributions for FutureGen
from the governments of India and South Korea.
[14] According to DOE, if a non-IGCC plant is selected under the
restructured FutureGen, it is only required to be at a scale sufficient
to prove commercial viability and be designed to produce and capture 1
million tons of CO2 per year. IGCC plants would be required to produce
at least 300 megawatts of gross electricity output.
[15] [hyperlink, http://www.gao.gov/products/GAO-08-1080].
[16] While the first two rounds of CCPI did not focus on CCS, Round III
does so through projects that capture and store CO2 or put CO2 to
beneficial reuse. Round I was broadly focused on advancing technologies
in coal-fired power generation that would result in efficiency, as well
as environmental and economic improvements. Round II was focused on
gasification technology and mercury control.
[17] According to DOE, most oil is produced in three distinct phases:
primary, secondary, and tertiary, or enhanced oil recovery (EOR). The
definition of tertiary or EOR is that a substance, such as CO2, is
added to the reservoir after secondary recovery in order to increase
production. The purpose of EOR is to increase oil production, primarily
through an increase in temperature, pressure, or an enhancement of the
oil's ability to flow through the reservoir.
[18] We reported in [hyperlink,
http://www.gao.gov/products/GAO-08-1080] that the regional partnerships
program appears to be placing more emphasis on demonstrations of CO2
capture at coal-fired power plants. Specifically, a DOE official
identified three projects being planned to capture CO2 from coal-fired
power plants, including possibly capturing 500,000 metric tons of CO2
from a coal- fired power plant in North Dakota. Program shifts were
also evident in the Innovations for Existing Plants and CCPI programs.
We recommended that DOE continue its recent budgetary practice of
helping to ensure that greater emphasis is placed on supporting
technologies that can reduce greenhouse gas emissions at existing coal-
fired power plants.
[19] Phase I of the regional partnerships, the Characterization Phase
(2003-2005), focused on describing the potential for CO2 storage in
deep oil-, gas-, coal-, and saline-bearing formations. Phase II, the
Validation Phase (2005-2009), is implementing 25 small-scale geologic
storage tests. Phase III, the Deployment Phase (2008-2017), is a
continuation of the Phase II small-scale tests, but at a much larger
scale.
[20] In response to language in the Explanatory Statement accompanying
its fiscal year 2008 appropriation, DOE has shifted the focus of the
Innovations for Existing Plants program to research and development on
CO2 capture technologies that can be retrofitted to existing pulverized
coal-fired power plants.
[21] Federal loan guarantee programs help borrowers obtain access to
credit with more favorable terms than they may otherwise obtain in
private lending markets because the federal government guarantees to
pay lenders if the borrowers default, which makes extending credit more
attractive to lenders.
[22] GAO, Department of Energy: New Loan Guarantee Program Should
Complete Activities Necessary for Effective and Accountable Program
Management, [hyperlink, http://www.gao.gov/products/GAO-08-750]
(Washington, D.C.: July 7, 2008).
[23] The Alliance estimate was $1.785 billion, in current dollars, from
2005 through 2017.
[24] We selected constant fiscal year 2005 dollars for illustrative
purposes. However, our review of DOE's documentation pertaining to its
$950 million cost estimate for the original FutureGen shows that DOE
considered base year constant dollars for the estimate from several
years, ranging from late quarter 2003 dollars, to fiscal year 2004
dollars, and fiscal year 2005 dollars. We asked DOE to confirm the base
year for its cost estimate, and department officials responded that
several versions of the estimate had been prepared using fiscal year
2003 and fiscal year 2004 dollars. When we pointed out the existence of
an additional estimate in fiscal year 2005 dollars, DOE officials
informed us that they would clarify which constant year dollars DOE had
used. However, as of January, 2009, DOE had not yet fully clarified
this information for us.
[25] The Alliance has decided to continue preparing the preliminary
cost estimate, and it anticipates completing and releasing the estimate
by early 2009.
[26] The cooperative agreement also stated that DOE and the Alliance
agreed in principle to, ultimately, cap DOE's share of costs at $700
million in constant 2004 dollars--approximately 74 percent of DOE's
cost estimate--and it required the Alliance to develop, by June 2008, a
proposal for the terms of such a cap. The cap was to be adjusted for
unanticipated cost escalation upon each scheduled renewal or
continuation of the cooperative agreement, based on a suitable index of
actual costs negotiated by DOE and the Alliance.
[27] U.S. Senate. Committee on Appropriations, Testimony of Samuel W.
Bodman, Secretary of Energy, U.S. Department of Energy, before the
Subcommittee on Energy and Water Development, May 8, 2008.
[28] These findings are for building power plants, in general, and do
not specifically address FutureGen.
[29] The information gathered from these semi-structured interviews
cannot be used to generalize findings to, or make inferences about, the
entire population of knowledgeable stakeholders on FutureGen and clean
coal technology. Although the sample provides some variety, it is
unlikely to capture the full variability of knowledgeable stakeholders
and it cannot provide comprehensive insight into the views of any one
group of knowledgeable stakeholders. This is because, in a
nonprobability sample, some elements of the population being
interviewed have no chance, or an unknown chance, of being selected as
part of the sample. However, the information gathered during these semi-
structured interviews allows us to discuss various stakeholder views on
FutureGen and clean coal technology, and it provides important context
overall. It also helps us interpret the documentation and testimonial
evidence we have collected.
[30] Massachusetts Institute of Technology, The Future of Coal: Options
for a Carbon-Constrained World (Cambridge, MA, 2007) and IPCC, IPCC
Special Report on Carbon Dioxide Capture and Storage (Montreal, Canada,
Sept. 2005).
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Phone:
The price of each GAO publication reflects GAO‘s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO‘s Web site,
[hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
