DOE APPROVES PHASE II FEED WORK FOR FUTUREGEN 2.0

$1.65 Billion CCS Project Moves into 16-Month Engineering, Design Period

Tamar Hallerman
GHG Monitor
2/8/13

The Department of Energy approved a second phase for FutureGen 2.0 earlier this week, allowing the developers of the government’s flagship carbon capture and storage project to move forward with $130 million worth of engineering and design work. DOE’s Office of Fossil Energy (FE) said Feb. 4 that it signed a new cooperative agreement with the FutureGen Alliance for 16 months of Phase II front-end engineering and design (FEED) work, providing a key path forward for the $1.65 billion project. In an interview this week, FutureGen Alliance CEO Ken Humphreys said being able to move into Phase II “makes the path forward stronger for the project. We’re pretty optimistic looking ahead.” The cooperative agreement runs through June 2014, allowing for a potential final investment decision toward the end of that period.

FE’s Phase II approval now enables project partners Babcock & Wilcox and Air Liquide to kick off power plant design and cost-estimate work—B&W is providing the plant’s boiler and air quality control system, and Air Liquide the air separation and cryogenic purification units. URS Corp. can also immediately begin its work as the owners’ engineer for the project, according to Humphreys. The Alliance will also move forward on many permitting issues related to the project’s western Illinois storage site and CO2 pipeline route, he added. “In the short term, you can expect to see us submit our Class VI Underground Injection Control (UIC) permit application to EPA Region Five. We’ll also submit the pipeline permit application to the Illinois Commerce Commission,” Humphreys said.

Outgoing Energy Secretary Steven Chu lauded the project’s role in advancing DOE’s CCS portfolio in a statement this week. “We believe FutureGen 2.0 is an important step in making economic, commercial scale CCS a reality,” he said. “The project is important part of a portfolio of approaches we are pursuing to reduce carbon emissions from existing coal-fired power plants and perhaps other large, localized CO2 emitters.”

ICC Hearings Continue

In the coming weeks, the Alliance will focus on the second phase of hearings with Illinois state regulators regarding the details of the project’s power purchase agreement, according to Humphreys. “The things we need to pay attention to going forward are the schedule, keeping on track with all the milestones and working toward financial close, which is the last big hurdle before construction,” he said. The Alliance must also begin to assess the post-closure monitoring methods the group would like to take as part of its Class VI UIC application with the regional EPA office. Humphreys said the industry coalition will likely pursue a path that includes the establishment of a project trust fund, as well as some form of commercial insurance.

Accompanying Agreements

By signing a new cooperative agreement exclusively with the Alliance, DOE also de-facto approved the industry coalition’s novation request for the project, which puts all related contracts with the Department in the name of the Alliance exclusively. The industry consortium sought novation after Ameren Energy Resources backed away from its role as the project’s utility lead in fall 2011. Similarly, the industry consortium also sought—and was effectively granted this week—DOE’s approval of a binding option for the Alliance to purchase portions of Ameren’s now shuttered Meredosia Energy Center to be the project’s capture site in western Illinois. “We’ve signed an option to buy those portions of the Meredosia Energy Center that are necessary for FutureGen 2.0 to go forward. Generally they include one of the steam turbine units, the coal handling infrastructure, the permits, the access to the grid, etc.,” Humphreys said. “That’s now a done deal.”

DOE Spent Months Reviewing Applications

FE had been reviewing the Alliance’s Phase II applications for the carbon capture, transport and storage aspects of the 200 MW project since last summer. The Office had held off on making its determinations until Illinois regulators ruled on a power purchase agreement for the project, which the Illinois Commerce Commission approved in December. Illinois utilities ComEd and Ameren must now purchase all 166 MW of net electricity generated at the facility for 20 years beginning in 2017, when the facility is expected to come online.

DOE’s determination provides a path forward for the oxyfuel combustion retrofit, which spent the bulk of the last 18 months in a state of transition. After Ameren walked back its role in the project, the Alliance moved forward on its novation request and the option to buy portions of Meredosia. Meanwhile, Phase I pre-FEED work in 2011 revealed that project costs were more than $350 million above those initially estimated. The Alliance said it identified up to $260 million in potential cost savings, including front-loading some aspects of construction.

The cost concerns have been the latest challenge for a demo that has, at several points, faced significant hurdles over the last nine years. With roots in the first George W. Bush Administration, DOE officials had initially pitched FutureGen in 2003 as a new-build 275 MW integrated gasification combined cycle plant with pre-combustion capture in east-central Illinois, but after years of delays and spiraling costs, Bush moved to kill the project in 2008. At the urging of several political figures, most prominently Sen. Dick Durbin (D-Ill.), the Obama Administration revamped the program using $1 billion in 2009 American Recovery and Reinvestment Act funding and a new project design—an oxy-combustion retrofit on a 200 MW oil-fired unit at Ameren’s Meredosia plant that would capture more than 90 percent of emissions, or about one million tons of CO2 annually, with transport to a saline aquifer in Morgan County. 

Illinois officials cheered DOE’s decision. “This is an important step forward, a milestone in energy research, and thank goodness it’s happening right here in our state of Illinois,” Sen. Durbin said in a Feb. 5 video statement on his website. In a separate statement, he said he remains “committed” to bringing the project onstream. “We have shown time and again that FutureGen is welcome, and the project will succeed in Illinois,” Illinois Gov. Pat Quinn (D) said in a statement.

Timing Remains Key Going Forward

Timing will remain critical for the venture given that project developers are months behind their initial schedule. As with all projects funded under the stimulus bill, the Alliance must spend its stimulus dollars before Sept. 30, 2015, when all unused funds must be returned to the Treasury. But the Alliance must still adhere to all of DOE’s benchmarks while planning construction timelines. Project officials have so far maintained that they are optimistic that they can spend that money in time.

Despite previous remarks all but linking the project’s future to receiving DOE Phase II approval by the end of 2012, Humprheys said this week that FutureGen could still work moving forward. “We’ve still got a cushion between now and the ARRA deadline, but time is of the essence. Every month matters,” he said.