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Utility Wanted: Loss of Coal Giants Ups Pressure On FutureGen, DOE

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So much for the “rapid restart” that Department of Energy Chief Steven Chu had in mind for the FutureGen project, a controversial public-private initiative to test experimental carbon capture and storage technology at a new 275 MW coal plant. Less than two weeks after Chu announced plans to contribute more than $1 billion to the project, which had stalled since the Bush administration pulled funding last year, two coal-burning utility partners have backed out of the deal — signaling a still-cloudy future for the project and increasing pressure for private-sector partners to expand their ranks.


Secretary Chu — who envisioned FutureGen as a vehicle for the $1 billion allocated in the stimulus package for “fossil energy research and development” and part of a larger collaboration with foreign energy ministers to create an international surge of research into carbon-management technologies — now sees high hurdles ahead for FutureGen. Late yesterday at the Edison Electric Institute’s conference in San Francisco, he said that while the DOE has put FutureGen “back on the table,” the Alliance still has to get a partner or two, especially a utility partner. “I’m hopeful that they can do this, but it’s not a guarantee,” he said, emphasizing that his agency’s support for the project was conditional to begin with.

Coal-burning utility giants American Electric Power (s AEP) and Southern Co. (s SO) announced yesterday that they are leaving the so-called FutureGen Alliance — a group of coal and utility companies that the DOE said earlier this month would be expected to contribute a total of $400-$600 million for the project. Ohio-based AEP tells Business First of Columbus that the move is “strictly a financial decision.”

Chu went on to say at the conference yesterday that there’s a “new wrinkle” in the project, which is that after construction and testing at the facility, if the experimental technology pans out, the Obama administration “would like a utility to come in and take it over.” After all, the idea is to build a plant that will produce power for at least a half century. Without that utility partner, FutureGen could once again lose government support. “It’s not a done deal,” Chu sad. “But it’s alive.”

Alive, maybe, but not exactly kicking. Last month the DOE detailed a series of benchmarks that partners will need to hit by early 2010 as part of the conditions for federal funds to come through, and said it wants the FutureGen Alliance to pursue “additional non-federal funds needed to build and operate the facility.”

Today, the fact that two of the 12 companies involved with the project have backed out at a time when the group is trying to expand (the DOE said earlier this month that it expected the FutureGen Alliance to bring in a total of 20 member companies) does not bode well for a jumpstart of the project. The fact that they’re two of the country’s largest utilities with a significant stake in carbon capture technology (Southern Co. and AEP say they now plan to focus on its own “cleaner coal”  initiatives) puts the project on even shakier ground.

FutureGen concept rendering credit FutureGen Alliance