Clean Coal
DOE Should Prepare a Comprehensive Analysis of the Relative Costs, Benefits, and Risks of a Range of Options for FutureGen
Gao ID: GAO-09-465T March 11, 2009
This testimony discusses our recent report on the Department of Energy's (DOE) decision to restructure the FutureGen program. The original FutureGen plant was to capture and store underground about 90 percent of its CO2 emissions. DOE's cost share was to be 74 percent, and industry partners agreed to fund the rest. Concerned about escalating costs, DOE announced in January 2008 that it had decided to restructure FutureGen. In October 2008, DOE received a small number of applications for the restructured FutureGen; however, some of these applications were for proposals outside the restructured FutureGen's scope. As we reported, DOE is currently assessing proposals received and stated it expected to announce a selection of projects by December 2008; however, as of the beginning of March 2009, it had made no decision. DOE requested supplemental information from restructured FutureGen applicants, which will be reviewed before any selection decision. As Congress may know, the recently enacted American Recovery and Reinvestment Act of 2009, known as the stimulus law, provides DOE an additional $3.4 billion for "Fossil Energy Research and Development." Such a substantial amount of funding could significantly impact DOE's decisions about how to move forward with programs such as FutureGen.
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 have different approaches for achieving their goals, which could have different impacts on the commercial advancement of CCS and, therefore, result in two largely distinct programs. First, the original program focused on researching and developing the integration of IGCC and CCS at a new, commercial-scale, coal-fired power plant, while the restructured FutureGen aims at demonstrating the use of CCS technology at one or more new or existing commercial coal-fired power plants. As a result, the restructured program could provide opportunities to learn about CCS at different plants, including those that use IGCC and conventional ones that use pulverized coal generating technology. However, under the restructured program, learning about the integration of IGCC and CCS would be possible only if DOE received applications proposing IGCC and selected one for funding. Second, it is unclear which of the two programs would advance the broader roll out of CCS across industry more quickly. The original FutureGen would have served as an operating laboratory host facility for (1) emerging technologies aimed at the goal of near-zero emissions (such as hydrogen fuel cells and advanced gasification) and (2) 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. DOE manages a portfolio of clean coal programs that research and develop CCS technology or demonstrate its application. The restructured FutureGen differs in important ways from most of DOE's other CCS programs, with the exception of one program--Round III of the Clean Coal Power Initiative (CCPI). Both the restructured FutureGen and CCPI (1) fund the commercial demonstration of CCS at new or existing coal-fired power plants and (2) require industry participants to bear at least 50 percent of costs. We reported that the restructured FutureGen targets a higher amount of CO2 to be captured and stored (at least 1 million metric tons stored annually, per plant) than CCPI does (300,000 metric tons of CO2 stored or put to use annually, such as to enhance oil recovery, per plant). However, CCPI's goals may be more achievable for industry partners than those of the restructured FutureGen and, therefore, lead to more industry participation. 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 based its decision largely on its conclusion that costs for the original FutureGen had doubled and would escalate substantially. However, this conclusion was problematic because it was derived from a comparison of two cost estimates for the original FutureGen that were not comparable; DOE's $950 million estimate was in constant 2004 dollars, while the $1.8 billion estimate of DOE's industry partners was inflated through 2017. As a result, DOE has no assurance that the restructured FutureGen is the best option to advance CCS. In contrast, DOE's Office of Fossil Energy had identified and analyzed 13 other options for incremental, cost-saving changes to the original program, such as reducing the CO2 capture requirement.
GAO-09-465T, Clean Coal: DOE Should Prepare a Comprehensive Analysis of the Relative Costs, Benefits, and Risks of a Range of Options for FutureGen
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Testimony:
Before the Subcommittee on Energy and Environment, Committee on Science
and Technology, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Wednesday, March 11, 2009:
Clean Coal:
DOE Should Prepare a Comprehensive Analysis of the Relative Costs,
Benefits, and Risks of a Range of Options for FutureGen:
Statement of Mark Gaffigan, Director:
Natural Resources and Environment:
GAO-09-465T:
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to discuss our recent report on the
Department of Energy's (DOE) decision to restructure the FutureGen
program.[Footnote 1] As requested, my remarks will focus on that
report, which examined (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.
As you know, Mr. Chairman, coal is currently the world's leading source
of electricity. Coal-fired power plants generate about one-half of the
electricity used in the United States, as well as about one-third of
the nation's carbon dioxide (CO2) emissions, which contribute to
climate change. In 2003, DOE initiated FutureGen--a program to design,
build, and operate a commercial-scale, coal-fired power plant that
incorporated carbon capture and storage (CCS) with integrated
gasification combined cycle (IGCC), an advanced technology for
generating electricity that has been deployed on a commercial scale at
only two coal-fired power plants in the United States.[Footnote 2] In
IGCC power plants, coal is gasified to produce a synthesis gas,
consisting primarily of hydrogen, carbon monoxide, and CO2. Then, in a
process called precombustion CCS, the CO2 is removed and separated from
the synthesis gas before the synthesis 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.
The original FutureGen plant was to capture and store underground about
90 percent of its CO2 emissions. DOE's cost share was to be 74 percent,
and industry partners agreed to fund the rest. Concerned about
escalating costs, DOE announced in January 2008 that it had decided to
restructure FutureGen. In October 2008, DOE received a small number of
applications for the restructured FutureGen; however, some of these
applications were for proposals outside the restructured FutureGen's
scope. As we reported, DOE is currently assessing proposals received
and stated it expected to announce a selection of projects by December
2008; however, as of the beginning of March 2009, it had made no
decision. DOE requested supplemental information from restructured
FutureGen applicants, which will be reviewed before any selection
decision.[Footnote 3] As you know, the recently enacted American
Recovery and Reinvestment Act of 2009, known as the stimulus law,
provides DOE an additional $3.4 billion for "Fossil Energy Research and
Development."[Footnote 4] Such a substantial amount of funding could
significantly impact DOE's decisions about how to move forward with
programs such as FutureGen.
Our report provides detailed information about our findings. In
summary, we found the following:
* 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 have different approaches for achieving their goals, which
could have different impacts on the commercial advancement of CCS and,
therefore, result in two largely distinct programs. First, the original
program focused on researching and developing the integration of IGCC
and CCS at a new, commercial-scale, coal-fired power plant, while the
restructured FutureGen aims at demonstrating the use of CCS technology
at one or more new or existing commercial coal-fired power plants. As a
result, the restructured program could provide opportunities to learn
about CCS at different plants, including those that use IGCC and
conventional ones that use pulverized coal generating technology.
However, under the restructured program, learning about the integration
of IGCC and CCS would be possible only if DOE received applications
proposing IGCC and selected one for funding. Second, it is unclear
which of the two programs would advance the broader roll out of CCS
across industry more quickly. In particular, the original program was
to be operated by a nonprofit consortium of some of the largest coal
producers and electric power companies in the world at one plant, while
the restructured program called for CCS projects at multiple commercial
plants. DOE officials told us that the original program would likely
have improved the global advancement of CCS more quickly than the
restructured program because of its various international partnerships
and that DOE is developing an approach to recoup the loss of
international involvement that resulted from restructuring FutureGen.
Finally, the original FutureGen would have served as an operating
laboratory host facility for (1) emerging technologies aimed at the
goal of near-zero emissions (such as hydrogen fuel cells and advanced
gasification) and (2) 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.
* DOE manages a portfolio of clean coal programs that research and
develop CCS technology or demonstrate its application. The restructured
FutureGen differs in important ways from most of DOE's other CCS
programs, with the exception of one program--Round III of the Clean
Coal Power Initiative (CCPI). Both the restructured FutureGen and CCPI
(1) fund the commercial demonstration of CCS at new or existing coal-
fired power plants and (2) require industry participants to bear at
least 50 percent of costs. We reported that the restructured FutureGen
targets a higher amount of CO2 to be captured and stored (at least 1
million metric tons stored annually, per plant) than CCPI does (300,000
metric tons of CO2 stored or put to use annually, such as to enhance
oil recovery, per plant). However, CCPI's goals may be more achievable
for industry partners than those of the restructured FutureGen and,
therefore, lead to 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.
* 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 based its decision
largely on its conclusion that costs for the original FutureGen had
doubled and would escalate substantially. However, this conclusion was
problematic because it was derived from a comparison of two cost
estimates for the original FutureGen that were not comparable; DOE's
$950 million estimate was in constant 2004 dollars, while the $1.8
billion estimate of DOE's industry partners was inflated through 2017.
As a result, DOE has no assurance that the restructured FutureGen is
the best option to advance CCS. In contrast, DOE's Office of Fossil
Energy had identified and analyzed 13 other 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.
Conclusions:
According to various energy experts, for the foreseeable future,
because coal is abundant and relatively inexpensive, it will remain a
significant fuel for the generation of electric power in the United
States and the world. However, coal-fired power plants are a
significant source of CO2 and other emissions responsible for climate
change. Hence, for at least the near-term, any government policies that
address climate change will need to have a goal of significantly
reducing CO2 and other emissions from coal-fired power plants. While
CCS is still in its infancy, it may be a promising technology to
achieve these purposes. By integrating IGCC and CCS technology at an
operating laboratory host facility, DOE's original FutureGen program
was intended to address significant technological, cost, and regulatory
issues associated with the implementation of CCS at a new plant.
Alternatively, 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, DOE's decision to
restructure FutureGen and remove the program's emphasis on integrating
IGCC and CCS technology was not well documented or explained, in light
of the fact that DOE already had existing programs to address CCS at
existing coal-fired power plants.
Given the magnitude of the current fiscal and economic challenges
facing our nation, along with the urgent need to secure an adequate and
sustainable energy supply that does not contribute to climate change,
much rides on the success of clean coal programs, such as FutureGen. To
ensure the best uses of billions of federal dollars, informed and
thoughtful approaches should be taken when making decisions about these
programs, including the restructuring of FutureGen. Such informed
decision making has become even more critical with the important
opportunity that over $3 billion in additional funding for fossil
energy research and development in the recently enacted stimulus law
provides DOE for promoting cleaner forms of power generation.
Along these lines, to help DOE make more fully informed decisions on
how best to move forward with FutureGen, our February 2009 report
recommended that DOE conduct a comprehensive analysis of different
options. Specifically, to help ensure the widespread commercial
advancement of CCS while protecting taxpayer interests, we recommended
that, before implementing significant changes to FutureGen or
obligating additional funds for such purposes, the Secretary of Energy
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. We also recommended that
the Secretary 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 the
options evaluated. In reviewing a draft of our report, DOE did not
comment on the report's recommendations.
In performing our work, we reviewed best practices for making
programmatic decisions, FutureGen plans and budgets, and documents on
the restructuring of FutureGen. We also contacted DOE, industry
partners, and experts. 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.
Mr. Chairman, this completes my prepared statement. I would be happy to
respond to any questions you or other Members of the Subcommittee may
have at this time.
Contacts and Acknowledgments:
For further information about this testimony, please contact me at
(202) 512-3841 or by e-mail at gaffiganm@gao.gov. Ernie Hazera
(Assistant Director), Nancy Crothers, and Chad M. Gorman made key
contributions to this testimony. Harold Brumm, Jr., Cindy Gilbert,
Angela Miles, Timothy Persons, Karen Richey, Michael Sagalow, and
Jeanette M. Soares also made important contributions.
[End of section]
Footnotes:
[1] GAO, Clean Coal: DOE's Decision to Restructure FutureGen Should Be
Based on a Comprehensive Analysis of Costs, Benefits, and Risks,
[hyperlink, http://www.gao.gov/products/GAO-09-248] (Washington, D.C.:
Feb. 13, 2009).
[2] 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.
[3] 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.
[4] Pub. L. No. 111-5, tit. IV, 123 Stat. 115, 139 (2009).
[End of section]
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