FutureGen to Move Forward Without Ameren's Participation

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Ameren Corporation (NYSE:AEE) (St. Louis, Missouri) will withdraw from the FutureGen 2.0 project at the end of the year, but the remaining members of the FutureGen Alliance (Jacksonville, Illinois) insist that they can move the advanced clean-coal project forward without the Missouri utility's participation.

In late November, Ameren announced it was closing its Meredosia Power Station, which was scheduled to be the site of the FutureGen 2.0 project. In announcing the closure, Ameren cited the high cost to bring Meredosia, a 63-year-old generator, into compliance with the recently finalized Cross-State Air Pollution Rule (CSAPR). For more on the announcement, see October 7, 2011, article - Announced Closures, Lawsuits Continue in Wake of CSAPR.

That announcement set off a scramble by the FutureGen Alliance, a coalition of mining companies, equipment suppliers and utilities, to keep the project alive. The top priority is to transfer $750 million in U.S. Department of Energy (DoE) (Washington, D.C.) stimulus funding from Ameren to the alliance.

The FutureGen project has gone through several twists and turns since it was selected to receive government funding in 2003. FutureGen's original plan was to build a greenfield, 275-megawatt (MW) integrated gasification combined-cycle (IGCC) generator with a carbon capture and storage (CCS) system in Mattoon, Illinois. Cancelled in 2008 because of projected cost overruns, FutureGen 2.0 was resurrected last year as a 210-MW oxy-combustion repowering of Unit 4 of the Meredosia Power Station, an oil-fired generator in Meredosia, Illinois. The project would capture approximately 90% of the carbon dioxide emissions, about 1.3 million tons per year, and transport the CO2 via a 30-mile pipeline for underground injection. For more on FutureGen's reincarnation, see August 10, 2010, article - FutureGen Version 2.0 Receives $1 Billion in DoE Funding.

The FutureGen Alliance is trying to purchase Meredosia Unit 4 from Ameren. Then the alliance will have to convince DoE to transfer the $1 billion in grant funds to it from Ameren. The group is seeking ways to lower the project's costs. It also must persuade the DoE that it can move the project forward and meet its stated operating date of 2016. Exactly how much time the FutureGen Alliance has to accomplish all this is not clear.

But the FutureGen Alliance faces a different setting in Washington, D.C. Back in the summer of 2010, when $1 billion in government stimulus funding was announced, the Democrats controlled the White House, the House of Representatives and the Senate, leading to smoother approval of government initiatives and appropriation of funds. But now, with Republicans leading the House of Representatives, cooperation between the parties is the exception, not the rule. And Republicans are being particularly vigilant about government funding for energy projects since the collapse of Solyndra this summer. For additional information, see September 19, 2011, article - Solyndra Bankruptcy Creates Political Problems for Obama Administration.

Although DoE clean coal projects typically draw broad, bipartisan support on Capitol Hill, these days nothing is certain in Washington, D.C. "This is a project that's worth supporting, but any time you have to go back to Washington to have them approve something, you should be worried," Tom Wolf, executive director of the Energy Council at the Illinois Chamber of Commerce, told The Chicago Tribune.

The project's preliminary estimated $1.65 billion costs include $1.1 to repower Meredosia Unit 4 and $550 million to build the CO2 pipeline and storage site.

To make its project more financially and politically palatable, the FutureGen Alliance said it identified "several hundred million dollars in potential cost reduction opportunities" that will be studied in the coming months. "We have an opportunity to lead the entire program, build on potential cost savings, and bring the power plant on-line in 2016 as planned," Ken Humphreys, the alliance's chief executive, said in a statement.

One way to lower the risks and increase the financial viability of the FutureGen 2.0 project would be to negotiate a long-term power purchase agreement (PPA) for the plant's output with the Illinois Power Agency (IPA) (Chicago, Illinois), the state agency that procures electricity for Illinois residents and businesses. "As we look ahead, the State and the project will work together on a power-purchase agreement," Humphreys said.

With Ameren's departure, FutureGen Alliance's members include:

• Alpha Natural Resources Incorporated (NYSE:ANR) (Abingdon, Virginia)
• Anglo American plc (PINK:AAUKY) (London, England)
• Consol Energy Incorporated (NYSE:CNX) (Canonsburg, Pennsylvania)
• Joy Global Incorporated (NASDAQ:JOYG) (Milwaukee, Wisconsin)
• Kentucky Utilities Company (Lexington, Kentucky) and Louisville Gas & Electric Company (Louisville, Kentucky), utility units of PPL Corporation (NYSE:PPL) (Allentown, Pennsylvania)
• Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri)
• Rio Tinto plc (NYSE:RIO) (London)
• Xstrata Coal Pty Limited (LSE:XTA) (Zug, Switzerland)

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