Clean Coal: DOE's Decision to Restructure FutureGen Should Be Based on a Comprehensive Analysis of Costs, Benefits, and Risks
Highlights
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.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Energy | 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, the Secretary of Energy should, before implementing significant changes to FutureGen or before obligating additional funds for such purposes, 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. |
DOE states that, at the direction of the Secretary, its Chief Financial Officer (CFO) and Office of Fossil Energy conducted independent reviews of the total cost estimate of FutureGen ($2 billion to $2.4 billion "as spent:). DOE determined that to reduce uncertainty, a site-specific, technology-specific preliminary design and cost estimate are necessary, and DOE also concluded that the FutureGen project could not be fully funded with DOE and industrial partner funds, as then defined; moreover, opportunities not considered before should be explored to reduce the project's financial and technical risk. On June 12, 2009, the Secretary of Energy announced an agreement with the industrial partners to complete the due diligence and other activities to make an informed opinion on project completion.
|
| Department of Energy | 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, the Secretary of Energy 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. |
In its response to GAO's report, DOE announced that it would no longer pursue the restructured FutureGen project, but instead would proceed by exercising due diligence on a new path based on an incremental approach. Specifically, on July 2, 2009, the Secretary announced he approved the Office of Fossil Energy's plan to implement DOE's decision to restart the FutureGen project by, among other things, negotiating and awarding a limited scope cooperative agreement with DOE's industrial partners to complete a preliminary design, including a revised total project cost estimate and funding plan, an alternative financial plan, and investments to close remaining funding gaps before proceeding with the next steps. DOE and the Alliance, armed with this knowledge, will make a more fully informed decision by January 31, 2010, on whether to complete the project.
|