Coal faces more uncertainty than any other base-load generating source. Two new factors, hitherto irrelevant to the U.S. industry, will shape future generation investment—imports of liquefied...
Death of a Turkey
DOE’s move to ‘restructure’ FutureGen clears the way for more rational R&D.
accident. As Bodman noted in a 2006 letter to the Carnegie Council’s journal Innovations, “We have to pick some winners. We are wasting no time here. Critically important work is underway, and new projects and partnerships are being forged.”
In the case of FutureGen, that criticality never translated into urgency in the development process. Predictably, as time dragged on, FutureGen ran into the same inflationary forces affecting virtually every aspect of building infrastructure in America. By early 2007, FutureGen’s expected cost rose from $950 million to $1.8 billion—setting off the money-pit alarm at DOE, according to Sell.
“When I saw the baseline increase that dramatically, that early in the project, I knew we were in for something that would not end well,” he said. “I have seen this movie before.”
Learning from Piñion Pine
Late last year, DOE and the FutureGen Alliance tried to negotiate a compromise. DOE offered to cover 50 percent of project costs exceeding $1.8 billion. But the deal fell apart when the alliance asked to finance part of its commitment with loans secured by the project assets.
In truth, DOE seemed to protest too much about FutureGen’s financing—given its history of funding projects that include bank debt, and the newly minted $38.5 billion loan guarantee program for climate-friendly energy projects. And the $1.8 billion price tag—which admittedly seems exorbitant—arguably is justifiable, given the new territory the project would chart. The FutureGen plan didn’t just involve CCS, but also a hydrogen-producing gasifier and a first-ever hydrogen-fueled turbine.
And perhaps there’s the rub. Maybe it wasn’t really the money that scared DOE off. Maybe it was the technology.
In November 2004, a longtime coal-technology researcher told Fortnightly, on condition of anonymity, “FutureGen is basically Piñion Pine II.”
Piñion Pine was a blown-air IGCC demonstration project that suffered technical problems and was mothballed in 2003. “DOE will never admit Piñion Pine was a $400 million failure, because the government kills the messenger who brings bad news,” said the researcher. “They can’t learn from their mistakes, they never kill the turkeys, and advanced technology is 10 years away forever.”
In the case of FutureGen, perhaps DOE learned the lessons of Piñion Pine, and decided to kill the turkey before it could gobble up any more of the agency’s budget.
Sell explained that FutureGen was planned before any coal-gasification projects seemed likely to get out of the starting gate in the United States. Five years later, FutureGen was one of many proposed IGCC projects, notably including a $2 billion, 630-MW project in Indiana, for which Duke Energy has secured rate-recovery support and environmental permits.
Additionally, the hydrogen-economy concept—which President Bush was touting heavily at the time he announced FutureGen—no longer commands the attention it did in 2003. And technical questions about CCS have become increasingly urgent, with projects dissolving in Wyoming, Florida and Washington. In short, the world changed in five years, and DOE decided FutureGen no longer made sense.
“We took note of the changes in the marketplace and in the technology,” Sell said. “We recognized the scope of the effort