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The White House Walks Away From Clean Coal

The White House Walks Away From Clean Coal

By Matthew Phillips, Jim Snyder and Mark Drajem, Bloomberg News (TNS)

On the banks of the Illinois River, about 60 miles west of the state capital in Springfield, an old coal-fired power plant sits waiting for its future to arrive. First opened in 1948, it’s been dormant since 2011, when its owner, St. Louis-based Ameren, shut down the plant rather than retrofit it to meet federal standards. Last year workers came to give it a makeover. Using almost $1 billion in stimulus money, the project was supposed to become the poster child for clean-coal technology. Rather than spewing into the sky, the carbon dioxide produced as the plant burned coal would be captured into a pipeline buried below corn and soybean fields. It would run 30 miles east to Jacksonville, where the gas would be injected 4,000 feet underground. “It was like we were the phoenix rising,” says the plant’s director, Mike Long.

The resurrection was short-lived. On Feb.3, the Department of Energy announced it was withdrawing support. Environmentalists who want investment in renewable power technologies rather than fossil energy cheered the decision. “We don’t need it, and we can’t afford it,” Bruce Nilles, head of the Sierra Club’s Beyond Coal campaign, says of carbon-capture projects.

President Barack Obama has made addressing climate change a key part of his legacy. In November he struck a historic agreement with Chinese President Xi Jinping to reduce greenhouse gas emissions. The White House has backed solar and wind power projects and touted the benefits of the country’s surging production of natural gas, which burns about 50 percent cleaner than coal, still the largest source of electricity in the U.S. Last year the Environmental Protection Agency proposed tighter standards for existing power plants.

The Illinois project, called FutureGen, was supposed to be a model for coal’s climate-friendly future. It was backed by some of the world’s biggest coal mining companies, who created a nonprofit, the FutureGen Industrial Alliance, to oversee the plant’s conversion. The White House saw FutureGen as a way to show leaders in China and India, where coal fuels more than half of electricity generation, that they can address their own carbon emissions without compromising economic growth. About 40 percent of man-made carbon emissions come from power plants.

The White House says the decision to walk away from FutureGen doesn’t mean it’s abandoning carbon capture. Since 2009 the Department of Energy has invested $6 billion in clean coal, and Obama included about $2 billion in tax credits for carbon capture in his proposed 2016 budget. White House spokesman Eric Schultz said in a Feb. 6 briefing the decision is “absolutely not” a signal Obama is retreating. “The administration has shown unprecedented support for clean-coal technologies,” he said.

Yet Obama decided not to fight for FutureGen after Republicans in Congress refused in December to extend a September deadline for using the stimulus money allocated to the project in 2009. “It makes no sense to pull the plug on $1 billion committed to America’s signature near-zero emissions power project at such a critical time for these investments in technology,” said Gregory Boyce, chairman and chief executive officer of Peabody Energy, the world’s largest private-sector coal company and one of FutureGen’s backers.

SaskPower opened the world’s first full-scale clean-coal plant last October, in Canada’s Saskatchewan province. Known as Boundary Dam, the plant cost $1.2 billion, $190 million of which came from the Canadian government. Its emissions travel down a pipeline rather than up a smokestack. But Boundary Dam enjoys one key advantage over FutureGen: Rather than simply burying its emissions, it sells the CO2 to an oil company, which injects the compressed gas into old wells to coax more oil to the surface — a process known as “enhanced oil recovery.” That turns the CO2 into a marketable by-product, creating a steady revenue stream that offsets some of the costs of putting a lid on emissions.

A similar project is under way in Texas, where NRG Energy, a utility in Houston, is leading a $1 billion effort to build a clean-coal plant called Petra Nova.

The project got $167 million in federal funds. As part of the deal, NRG bought a stake in a nearby oil field. The idea is to inject Petra Nova’s CO2 emissions into the wells there, boosting production from 500 barrels a day to an estimated average of 15,000 barrels a day for 10 years. Selling that oil is “the only meaningful way for us to generate a return for shareholders,” says John Ragan, president of NRG’s Carbon360group.

Pairing carbon capture with the enhanced recovery of crude oil is hardly a vision for a perfect clean-energy solution. It’s another reason many environmentalists oppose clean-coal technology; it’s also why FutureGen was so important to clean coal. If it worked, it would have demonstrated that carbon capture makes economic sense without having to rely on revenue from oil sales. As oil prices fall, financing clean coal through crude production has started to look like an increasingly shaky business model. In early February, Schlumberger, the world’s largest oilfield services company, said in a statement that its carbon-capture unit has stopped taking on new business.

The four other clean-coal plants that are in the works in the U.S. are all designed to deliver their captured emissions to oil producers. With the exception of Petra Nova, they’re all either behind schedule, over budget, or both. The cost of building Southern Co.’s Kemper plant in Mississippi, which has received $270 million in federal funds, is now estimated at $6.2 billion, more than double its original price. The facility is scheduled to open in 2016.

In Texas, Summit Power is past its deadline to begin construction on a $1.7 billion coal plant that’s been awarded $450 million in federal funding as well as more than $600 million in tax credits. A plant in California that got about $400 million in federal money, the $4 billion Hydrogen Energy California project, is also behind schedule. Now that the Energy Department has pulled support for FutureGen, “I think both of those projects are likely dead,” says Jim Wood, who served as deputy assistant secretary of Energy from 2009 to 2012 and now heads the U.S.-China Clean Energy Research Center at West Virginia University. A Summit spokeswoman says the company is rushing to complete financing and begin construction. HECA didn’t respond to requests for comment.

The lack of viable clean-coal plants means the Obama administration will have to rely even more on boosting renewables and natural gas as a source of electricity to achieve its goals of cutting power plant CO2 emissions by 30 percent by 2030. It also highlights why its 2010 cap-and-trade proposal for regulating emissions by power generators was so crucial. Congress failed to pass a bill that would have provided an estimated $75 billion in incentives for coal plants using carbon-capture technology through 2030, and about $177 billion through 2050. Without it, the administration has less to offer the utilities to get them to invest in clean-coal technology.

The struggles of FutureGen and other clean-coal projects create another problem for the White House’s climate policy. The regulations the EPA is developing lower the amount of allowed emissions for coal plants to the point that it’s impossible to build one without using carbon capture. In the absence of commercially viable carbon-capture technology, utilities may have an opening to challenge the new regulations in court, says Jeff Holmstead, a former senior EPA official under George W. Bush who now works at lobbying powerhouse Bracewell & Giuliani. The EPA has already extended the time frame utilities would have for complying with new emissions standards. “I think there is a good chance they’ll finalize a rule with a higher emission rate,” Holmstead says.

Photo: Aaron Hockley via Flickr

Promise Of A ‘Clean Coal’ Future Far From Reality

Promise Of A ‘Clean Coal’ Future Far From Reality

By Hal Bernton, The Seattle Times

MEREDOSIA, Ill. — In 2003, President George W. Bush unveiled plans for the world’s first zero-emissions coal plant, a project that would serve as a global showcase of America’s ability to reduce carbon emissions from fossil fuels.

This FutureGen plant would be “one of the boldest steps our nation takes toward a pollution-free future,” declared Spencer Abraham, Bush’s energy secretary, in 2003. The knowledge we gain from the plant ” … will help turn coal from an environmentally challenging energy resource into an environmentally benign one.”

More than a decade later, there has yet to be a groundbreaking for FutureGen 2.0.

The project calls for overhauling an aging coal plant on the outskirts of this sleepy river town so that its carbon emissions can be captured and stored some 4,300 feet underground. But the effort has been beset by political infighting, design changes, and escalating costs that helped trigger a rebellion by the state’s largest utility.

FutureGen’ s tortured birthing process reflects broader problems in the global effort to spur development of “clean coal” plants and carbon-capture technology — considered key steps in the battle to slow climate change.

Even the Energy Department now has doubts about whether FutureGen will succeed. Last year the department designated the FutureGen alliance charged with building the project as a “high-risk” grant recipient that might not be able to meet a September 2015 deadline for spending $1 billion in federal stimulus dollars, according to a document reviewed by The Seattle Times.

The International Energy Agency has tagged carbon capture as a key part of the struggle to head off the most extreme impacts of climate change, and hopes it will be in wide use by midcentury or earlier.

But so far, no country has hammered hard enough with regulations, or created strong enough financial incentives to spur widespread conversions to the costly and still evolving technology.

Many renewable energy advocates don’t see carbon capture as a viable strategy to fight climate change. They are convinced solar, wind, hydroelectric, and perhaps nuclear power can be the mainstay of 21st-century global energy.

Supporters of carbon capture say such predictions drastically overstate how swiftly and broadly the world can shift away from the use of coal, oil, and natural gas. They forecast that carbon capture — even with construction and operating costs some 30 to 70 percent higher than traditional coal plants — will be a cheaper option than paying the costs associated with extremes of climate changes.

“If you want to continue to rely on fossil fuels, and reduce carbon emissions — not by a little, but by a lot — then this is the only game in town,” said Edward Rubin, a lead author of a carbon-capture report released by the Intergovernmental Panel on Climate Change.

In North America, the project furthest along is in Canada, where SaskPower later this year is scheduled to start up a 110-megawatt unit that will capture more than 1 million tons of carbon a year.

In the United States, Congress has appropriated some $6 billion since 2008 for research and other efforts to spur development of carbon capture. One Texas project, scheduled to kick off this year, plans to turn a profit by pumping carbon emissions from a coal plant into an aging oil field, where the injection is forecast to dramatically boost production.

But utilities and regulators often balk at carbon-capture costs. Some projects have been canceled. And concerns have been heightened by a carbon-capture plant under construction in Mississippi that is running $3 billion over budget.

The $1.65 billion FutureGen project in Meredosia is designed to be the first commercial-scale demonstration of a technology, known as oxy-combustion, that can capture and store more than 90 percent of a 168-megwatt plant’s carbon emissions.

About 40 percent of the cost is privately financed with the rest of the money coming from the federal grant.

“FutureGen is a prototype plant. … It’s not surprising its cost of electricity is higher. It’s just like the first solar plant ever built was a heck of a lot higher,” said Ken Humphreys, chief executive officer of FutureGen.

The coal companies that control FutureGen say carbon-capture technology holds promise for the future, but appear skeptical that it can be put into place anytime soon.

They are fighting an Environmental Protection Agency rule proposed last year that would require partial carbon capture in any new coal plant, as well as another proposed rule that calls for emission reductions in states with existing fossil fuel plants.

Carbon-capture technology “is simply not commercially available and not able to satisfy Americans’ need for low-cost energy,” declared Peabody Energy, a key member of the FutureGen Alliance, in a statement released last September.

“The way I look at carbon capture, it is sort of an orphan,” said John Thompson, of the Clean Air Task Force, a nonprofit that promotes the technology. “It doesn’t have a strong political constituency in Washington.”

At the turn of the new century, clean coal looked like an idea whose time had come.

In his 2000 presidential campaign, Republican candidate Bush declared that he would require power plants to reduce greenhouse gas emissions “within a reasonable period of time,” and place an overall cap on U.S. carbon emissions.

Three years later, the Bush administration launched FutureGen as a 10-year effort to build a carbon-capture plant.

But Bush cooled on tackling global warming and abandoned his call for capping emissions. Administration officials rewrote government reports to downplay concerns about climate change.

Support for FutureGen also ebbed, as Abraham’s successor, Samuel Bodman, scrapped the idea of building a new plant in favor of a series of smaller projects.

Some insiders at DOE protested, saying Bodman was undermining one of Bush’s signature programs, and that abandoning the original project could set back carbon-capture development by a decade or more, according to internal department emails.

Michael Mudd, then chief executive of FutureGen, said the alliance of coal companies was blindsided by the turnaround.

In December 2007, the FutureGen Alliance announced Mattoon, Ill., as the site of the new carbon-capture coal plant. Hours later, the Energy Department disclosed that the project would be restructured “due to escalating costs,” and Mattoon would not get its plant.

In 2009, the White House got a new occupant, a junior senator from Illinois who had been a loyal backer of a FutureGen project in his home state and whose campaign platform had called for federal assistance to build four commercial-scale carbon capture plants.

During his first few months in office, President Barack Obama worked with the state’s congressional delegation to get FutureGen back on track with a $1 billion earmark from Congress.

With new money came new design ideas.

Instead of a new plant in Mattoon, the plan called for the Meredosia plant owned by Ameren Energy Resources to be retrofitted with a specialized oxygen-rich boiler. This system concentrates carbon emissions so they can be readily captured once combustion has occurred.

The converted plant is expected to use about 20 percent more coal than traditional combustion technology, according to officials at Babcock & Wilcox, developers of the oxy-combustion system.
Despite that hurdle, the Energy Department was bullish when it announced FutureGen 2.0. in 2010.

The investment will “position the country as a leader in an important part of the global clean energy economy,” said then-Energy Secretary Steven Chu as he announced the siting.

Yet the revamped project soon suffered a major defection. In summer 2011, Ameren concluded that the conversion to carbon capture would cost $363 million more than initially forecast and decided to withdraw its participation, according to Energy Department documents.

The frayed FutureGen Alliance dwindled to five members and has scrambled to come up with the $650 million of private money to finance the project.

Most of that money will be borrowed, with the debt paid off through a 20-year power sale approved by the Illinois Commerce Commission that was more than five times the price of the state’s spot market prices in 2013.

The high cost of that electricity soured Exelon, parent company of the state’s largest utility, on the project.

In a 2013 letter, Exelon’s president, Christopher Crane, declared that “customers should not be forced to pay enormous above-market changes for electricity,” which he estimated at an extra $150 million annually, a figure that FutureGen disputes.

Exelon’s utility — Commonwealth Edison — then joined with state electricity suppliers to challenge the contract terms in a lawsuit.

The Illinois appellate court decided in favor of FutureGen last month, but one of the plaintiffs plans to appeal to the state Supreme Court.

While the case dragged on, FutureGen could not close a deal for private financing, according to Humphreys. Without that private money in hand, Energy Department officials would not release the federal grant funds required for construction.

Photo: vxla via Flickr

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