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Artist Concept of the FutureGen Power Plant

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Climate change is one of the most pressing environmental concerns, and it is clear that Congress intends to develop policies to address the concern. Irrespective of which specific climate policy is ultimately adopted by the U.S., the success of that policy and our economic future, will hinge on the availability of affordable low-carbon technology. Nuclear, renewables, biomass, and efficiency will all be part of the low-carbon technology solution. However, given that coal is used to generate over 50% of the electricity in the U.S. and is projected to remain the backbone of the U.S. electricity system for most of this century, the availability of affordable, near-zero emission coal technology, incorporating carbon capture and sequestration (CCS), is essential to our future.

The Federal government has a pivotal role to play in fostering the development and deployment of near-zero emission coal technology. It is important that, as a nation, we invest at the scale required to develop, prove, and deploy CCS technologies to the marketplace. While estimates vary, the required investment is certainly in excess of $10B over the coming decade. This investment in our nation's future must be supported by the development and demonstration of near-zero emission coal technologies and CCS in a variety of applications.

The U.S. Department of Energy is to be commended for its vocal support of near-zero emission coal technology, including CCS. Its support of this technology was recognized in its initial support of the FutureGen project as originally envisioned, but the Department's proposal to restructure FutureGen fails to recognize the scale of the challenge that this nation, and indeed the world, is facing. It delays technology development and integrated demonstration of commercial scale CCS by five years or more. It backs away from a non-profit partnership that has been created to act in the public benefit and broadly share its technical results throughout the world. It rebuffs the participation of international companies (and countries) that are critical to the ultimate deployment of clean coal technology around the world; and it undermines the reliability of the U.S. Department of Energy as a partner.

Therefore, regardless of what other projects that the DOE proposes, it is essential that the Department reaffirms the agency's position as a global leader in near-zero emission coal technology and CCS development by maintaining its historical position that FutureGen at Mattoon is the top priority project in advancing CCS technologies.

FutureGen at Mattoon

The FutureGen Industrial Alliance has pledged approximately $400 million dollars under its current cooperative agreement with DOE. This level of non-profit financial donation, by the coal and coal-fueled utility industry, to a DOE program, and without any opportunity for financial return on its donation, is unprecedented. We hope that the administration and the Congress will view this fact as proof of the importance of FutureGen at Mattoon. The Alliance urges the Department to continue the FutureGen at Mattoon project with the non-profit Alliance.

• FutureGen at Mattoon offers DOE an opportunity to beat its proposed timeline. DOE's Request for Information (RFI) suggests an on line date of 2015. The FutureGen Alliance has delivered five years of progress, including contract negotiations, an enthusiastic and committed local community, a site that is technically and legally ready to go, a design and cost estimate, a final environmental impact statement, vendor relationships, and a team of fifty engineers and scientists. No fully integrated, near-zero emission power-plant project in the world can compete with FutureGen in terms of its ability to move forward with urgency on the required technology development and demonstration.
• FutureGen at Mattoon will meet or exceed all DOE emissions and CO₂ capture goals. All emissions and CO₂ capture criteria included in the FutureGen Report to Congress and DOE's current Request for Information (RFI) will be met by FutureGen at Mattoon, including 90% CO₂ capture.
• FutureGen at Mattoon is fully integrated and commercial scale. FutureGen at Mattoon incorporates a commercial-scale gasifier and commercial-scale "Frame 7" turbine. As configured, and with the commitment to share lessons learned widely, it gives industry a chance to learn about the cost, performance, and operating strategies for an integrated system with CCS.
• Public benefit and information sharing is a hallmark of FutureGen at Mattoon. As a nonprofit enterprise, the FutureGen Alliance will broadly share information from the project, facilitating the deployment of commercial, near-zero emission power plants throughout the world. Alternative for-profit approaches may be complements, but they will feature protection of technological know-how and IP within individual companies rather than sharing it for broad benefit.
• International involvement is essential to success and FutureGen at Mattoon includes it at an unprecedented level. Thirteen companies with operations on six continents are participating. Climate technologies must be globally acceptable and globally deployed, or they will not be effective. International participation has been exceptionally well-managed and has added to the performance of the project. No other project can replicate FutureGen at Mattoon's level of international involvement.
• FutureGen at Mattoon provides a platform for testing advanced technologies, which accelerates technology development and saves the taxpayer money. Once built, and power generation, carbon capture, and sequestration operations are underway, FutureGen at Mattoon can serve as a test bed for advanced technologies emerging from DOE's Fossil Energy R&D program and industry R&D efforts. Such testing will not interfere with the primary mission of the facility and provides a cost-effective approach to advance technology. Alternative testing approaches will be far more expensive. Areas where DOE expects advancements to occur include oxygen production, gasifier improvements, gas clean-up, H2 and CO₂ separation, H2 turbine advancements and fuel cells. By proposing to end its support of FutureGen at Mattoon, DOE will be increasing the cost and difficulty of testing the very advanced technologies that its program managers seek to develop and deploy.
• FutureGen at Mattoon's costs are manageable. As with all global energy infrastructure projects, costs have increased since 2003. However, between the approximately $400 million in cash the Alliance is contributing and plant revenue that is being returned to DOE, the costs are manageable and a good national investment. Alternative projects that truly deliver the same results will not be cheaper. Further, the Alliance's offer to sit down with DOE and discuss cost containment strategies remains an open offer.

Additional Projects and DOE's Proposed Restructuring

The Alliance believes that it is in the national interest to complement FutureGen at Mattoon with additional projects in a variety of engineered applications and a variety of geologies. However, complementary projects must not come at the expense or delay of the #1 priority, FutureGen at Mattoon. Currently, DOE's proposed restructuring leaves many unanswered programmatic questions. Further, a number of technical issues associated with the restructuring are of concern. Specific concerns about the DOE proposed restructuring include:

• DOE's schedule under the restructuring proposal is unrealistic. DOE has an important obligation to the taxpayer to follow comprehensive contracting processes, conduct technology reviews, and prepare an environmental impact statement on any new project. The schedule in the RFI (i.e., a proposed on-line date of 2015) is not realistic for a project that meets 100% of the stated goals. Many potential industrial partners are unfamiliar with DOE's required practices, and it is important that the DOE inform them of a reasonable schedule so that they can properly conduct the project and deal with their third-party investors. Overly optimistic schedules are a disservice to Congress, industry, and the public. For DOE to identify an alternative, fully integrated project that meets all the performance goals DOE has stated are critical, the following schedule would be more realistic:
  • 2009+: project selection and cooperative agreement negotiation
  • 2012: completion of preliminary design, environmental impact assessment and record of decision
  • 2013: completion of detailed design and procurement of major technology components
  • 2017: completion of construction
  • 2018: initial operation
  • 2022: completion of test period
• DOE's restructured approach has problematic business parameters. DOE's proposal implies that 90% capture simply involves the addition of new technology to an existing IGCC. It does not. The complex integration of CCS into a commercial IGCC plant will entail significant modifications to many other systems, including commercial systems inside the base plant. It would also largely require a restart of design work done to date on the base commercial plant. Thus, the government, its procurement rules, and its oversight practices could easily extend into the commercial, for-profit power plant. Further, applying FutureGen funds to a project with anything appreciably less than capturing 90% of the total CO₂ emissions from the entire plant would fall short of what is needed to rapidly develop near-zero coal plants.
• DOE's restructured approach does not address the increased marginal cost of electricity. The modified plant that DOE proposes that industry build will cost substantially more to operate than a traditional plant. DOE's RFI is largely silent on operating costs. Because power plants dispatch electricity to the grid based on their marginal operating cost, the approach DOE proposes could result in a plant that is too expensive for industry to operate.
  
  For example, a Midwest utility commission which recently evaluated an IGCC project concluded it needed to approve more than a 15% increase in the cost of electricity to ratepayers in order for the project to move forward. DOE's proposal to add 90% capture to any commercial IGCC project, would increase the cost of electricity further, likely by another 20% or more. Who will pay this added incremental cost in the restructuring proposal? DOE? The industrial partner? The ratepayers?
• Increased appropriations will be required to offset Federal taxation. DOE is proposing moving away from its non-profit partnership with the Alliance. While it is appropriate for DOE to work with for-profit and non-profit entities, the precedent in the clean coal power initiative is that DOE grants awarded to for-profit entities can be subject to taxation by the IRS, if determined to be income. Thus, whereas 100% of the funding going to FutureGen at Mattoon goes to on-the-ground technology and operations, under DOE's new program, DOE will need increased appropriations if it intends to make the same ultimate on-the-ground investment in technology and operations. This could result in either: 1) hundreds of millions of dollars of additional appropriations to offset taxes or 2) a major dilution of DOE's program investment through taxation.
• Uncertainties created by the annual appropriations process must be mitigated. DOE is seeking new commercial projects. Commercial projects cannot easily proceed with certainty and garner commercial financing if DOE is going to make its project funding subject to annual appropriations. If DOE wants its new approach to succeed, it must have 100% advance appropriations for each project or find some other mechanism to guarantee funding.
• DOE's restructured proposal must include some guaranteed mechanism for reliable DOE participation. By restructuring FutureGen and ceasing to cooperate on FutureGen at Mattoon, DOE has indicated that it is willing to walkaway from public-private partnerships and international participation even though DOE has signed an agreement with the private partner. New industry partners must receive assurance that the same thing will not happen on future projects, which would make the industry investment a stranded asset.
• DOE needs to clarify the rules for information sharing in any solicitation. Sharing technology performance and operating strategies is important to replicate the technology worldwide and at lower costs. DOE's plan limits information sharing as the proposal is designed to entice for-profit participation in commercial projects, which is not conducive to sharing IP and other information with non- participants.
• DOE needs to clarify how 90% capture will be measured. DOE's proposal is not specific about how the 90 percent CO₂ capture rate is measured within the plant. It must be measured as the percentage of the total CO₂ that could be generated by the entire plant, not just a portion of the total CO₂ or 90% of a slipstream. It would be a serious mistake if this target level is relaxed. Ninety percent is a technical goal designed to ensure a sustainable future for coal. Today's commercial projects cannot technically or economically handle this goal.
• DOE should clarify how liability protection be handled for injected CO₂ and trace constituents. DOE has provided no mechanism to protect companies from the liability associated with injected CO₂. It took the states of Texas and Illinois several years to address these issues through legislation specifically for the project developed by the FutureGen Alliance. Without this protection, projects will face delays making it difficult for companies to take on these liabilities.
• Third-party financing is essential to projects and DOE must allow it. DOE rejected minimal third-party financing (e.g., <20% of the total project cost) for FutureGen at Mattoon. Many, if not all projects that come forward in response to DOE's RFI and subsequent solicitations will require third-party financing. It is common for commercial projects to be 50-80% financed. DOE must allow for this flexibility if it wants its restructured approach to be successful.
• Title transfer to industry is a prerequisite. DOE originally intended to provide industry with the title for the FutureGen at Mattoon project; however, it changed its position part of the way through the project, instead electing for federal ownership. Under the restructured effort, DOE must provide 100% title for the entire project to industry as commercial projects typically require title rights to secure third-party financing. Further, because capture is intertwined with the base plant, the industrial partner cannot accept government ownership of part of its commercial enterprise.
• 100% of revenue must go to the industry partner. Unlike FutureGen at Mattoon, in which DOE shared in the project revenues substantially offsetting Federal investment, for projects conducted under DOE's new approach, DOE would need to agree that the plant revenues go 100% to the industrial partner so that participants can generate a commercial return on a commercial project.
• Contractual streamlining is a prerequisite for project success. Incorporating CCS technology into a power plant will require significant changes in the design and operation of the base commercial plant. DOE cost sharing must not lead to a requirement that government accounting practices and procurement rules apply to the base plant, even though it is being modified to suit the government's purposes. Attaching such strings to a commercial project would have significant cost and schedule impacts on a commercial project.

In its 2004 report "FutureGen Integrated Hydrogen and Electric Power Production and Carbon Sequestration Research Initiative", DOE acknowledged the necessity for the type and level of risk sharing associated with FutureGen at Mattoon, if technology is to advance at the required pace. In its report, DOE said:

"FutureGen's integration of concepts and components is key to providing technical and operational viability to the generally conservative, risk-adverse coal and utility industries. Integration issues such as the dynamics between upstream and downstream subsystems (e.g., between interdependent subsystems such as the coal conversion and power and hydrogen production systems and carbon separation and sequestration systems) can only be addressed by a large-scale integrated facility operation. Unless the production of hydrogen and electricity from coal integrated with sequestrating carbon dioxide can be shown to be feasible and cost competitive, the coal industry will not make the investments necessary to fully realize the potential energy security and economic benefits of this plentiful domestic energy resource."

Technology advancements and market changes in the last five years have not changed this need for a full scale demonstration envisioned in DOE's report and FutureGen at Mattoon.

There is no project in the world that can move near-zero emission power and CCS further or faster than FutureGen at Mattoon. It is non-profit, includes unprecedented international involvement and information sharing, and has a site that is technically and legally ready-to-go. Alternatives will cost the country five years or more of delay and/or deliver less in terms of results. As Congress and the administration debate the appropriate structure for the FutureGen program, we urge that: these factors be taken into account; FutureGen at Mattoon be maintained as a global flagship project that is the nation's top priority for advancing near-zero emission coal technology; and complementary projects be added to the program as the budget allows.