Funding for Fossil Energy Research and Development under the American Recovery and Reinvestment Act of 2009 (ARRA)
Overview
The US CCS research development and demonstration (RD&D) strategy is managed by the Department Of Energy's (DOE) Office of Fossil Fuels, in collaboration with industry, and implemented by the National Energy Technology Laboratory (NETL). It encompasses a series of programmes aimed at accelerating CCS demonstration and commercialisation.
Nearly US$400 million a year have been appropriated for DOE activities in RD&D on CCS in fiscal years 2009, 2010 and 2011. In addition to these funds, some US$3.4 billion is being made available for CCS projects under the American Recovery and Reinvestment Act (ARRA) of 2009 What is it?
These funds will be disbursed in the following way:
US$1.52 billion for a competition for industrial carbon capture ('ICCS programme');
US$1 billion for fossil energy research and development programmes, mainly intended to be awarded to FutureGen;
US$800 million for the Clean Coal Power Initiative (CCPI) Round 3 solicitation;
US$50 million for a competitive solicitation for site characterisation activities, which will complement the work being undertaken under the Regional Carbon Sequestration Partnerships What is it?
US$20 million for geologic sequestration training and research; and
US$10 million as programme direction funding.
The following is a more detailed illustration of those key CCS Research, Development and Demonstration (RD&D) programmes supported by this funding.
Industrial Carbon Capture and Sequestration (ICCS)
The Energy Independence and Security Act (EISA) of 2007 contains a title called 'Carbon Capture and Sequestration Research, Development and Demonstration' (ss 701-708). Among other things, it requires the Secretary of Energy to carry out a programme to demonstrate technologies for the large-scale capture of carbon dioxide from industrial sources in conjunction with large-scale sequestration tests. In order to pursue this goal, the NETL is implementing cost-share collaboration between government and industry called 'Carbon Capture and Sequestration from Industrial Sources and Innovative Concepts for Beneficial CO2 Use' aimed at increasing investments in CCS projects at industrial installations. In order to pursue this goal, this programme is structured in two technology areas:
Large-scale industrial CCS projects from industrial sources What is it?
Innovative concepts for beneficial CO2 use. What is it?
Government funding under this programme is awarded on a cost-share basis following competitive solicitation, with applicants contributing at least 20 percent of the cost (s.988 Energy Policy Act 2005). However, DOE hopes that for commercial demonstration projects applicants would be able to share at least 50 percent of those costs. The EISA authorises funding of US$200 million per year between 2009 and 2013 to carry out this programme which is additional to ARRA funding.
Useful information is also provided at the NETL and DOE dedicated pages.
Clean Coal Power Initiative (CCPI)
Since 1985 the DOE has launched several demonstration programmes on Clean Coal Technologies: the Clean Coal Technologies Demonstration (1986-2006); the Power Plants Improvement Initiative (2000) and the Clean Coal Power Initiative (2002).
The CCPI's objective is to demonstrate advanced coal-based power generation technologies. It is a government-industry partnership under which projects are funded on the basis of a competitive selection process. Currently it is in its third round (CCPI-3) of solicitation which is exclusively dedicated to 'capture and sequestration or beneficial re-use of CO2 emissions from coal-fueled electricity production'
, with a view to complying with the coal technology performance levels specified in the Energy Policy Act 2005 (Title IV).
Types of project developers excluded from accessing this funding include: other federal agencies, federally funded Research and Development Centre contractors, and non-profit organisations. Following amendments made by ARRA, eligible projects must:
capture, sequester or reuse at least 300,000 tonnes of CO2 per year (or preferably more)
ensure a CO2 capture efficiency of at least 50 percent pursuing a target of 90 percent (the original requirement was a mandatory minimum of 90 percent CO2 capture efficiency);
limit the increase in cost of electricity to between 10 and 35 percent, depending on the technology used.
They will also need to: provide at least 50 percent of their energy output in the form of electricity; use at least 75 percent coal and/or refuse coal; be designed and operated in the US; and identify the storage site or alternative sites.
An important characteristic of the US funding approach is the reliance on cost sharing, which is a 'cooperative funding arrangement between the participant and the federal government'. Generally speaking, the Federal Government can only finance up to 50 percent of the total cost of the project, and consequently the applicant is required to finance at least 50 percent of the cost, which cannot include any other federal funding unless specifically allowed by law. In addition, the financial contribution from the project participant is needed throughout all phases of the project, from design to operation. Under the cost sharing approach, the government is not obliged to share any cost overruns (i.e. costs incurred during the demonstration that are more than those estimated at the date of award). However, it may share increases in the cost of the projects up to 25 percent of the initially negotiated share. The participant's cost sharing cannot be offset or delayed and has to be paid as soon as the expenses occur. Items that cannot be covered by the cost-sharing include investment in existing facilities or equipment, previously expended R&D funds, day-to-day operating costs and expenses for acquisition of any fuel other than coal. With regard to project management, it is the participants that are responsible, while the federal government has a monitoring role and can provide technical advice and assess progress by means of a periodic review. The government is also entitled to participate in the decision-making process for essential decisions.
Particularly interesting are the repayment provisions. In previous solicitations the recipient had to repay the funding received within 20 years of the end of the demonstration project. This provision no longer applies for the recent awards. This excludes the project developer's repayment obligations under this round.
As of April 2010, a total of 6 pre-combustion and post-combustion CO2 capture demonstration projects had been selected, but one withdrew. (For a list of the industrial capture projects, see DOE webpage)
FutureGen
FutureGen is a 10-year demonstration project launched in 2003 by the Bush Administration. It is a cost-shared partnership between a group of energy companies (the Future Gen Industrial Alliance) and the DOE to build and operate a 'first-of-its-kind coal-fuelled, near-zero emissions power plant' in Illinois.
This was originally intended to be a newly-constructed 275 MW integrated gasification and combined cycle (IGCC) power plant equipped with CCS technologies which would have captured and stored at least 1 million tonnes of CO2 per year in a deep-saline formation. Both the generation unit and the storage site were to be located in or near the town of Mattoon. However FutureGen has suffered from delays and increasing costs, which has led to a number of modifications in the project, most recently dubbed "FutureGen 2.0", announced in August 2010.
FutureGen 2.0 will repower an existing 200 MW coal-fired power plant in another location (Meredosia, Illinois) with advanced oxy-fuel technology, rather than build a new IGCC power plant. While the generation facility was moved to Meredosia, the proposal retains the original storage site in Mattoon.
US$1 billion from ARRA has been allocated to Future Gen 2.0. The project funding recipients will be: FutureGen Alliance (the original FutureGen consortium), with the, Ameren Energy Resources, (the existing power plant owner), Babcock & Wilcox and Air Liquid Process and Construction Inc (the oxygen supplier).
Various hurdles remain to be overcome, including the announcement from the local authorities of the town of Mattoon (site of the designated storage location) that they will withdraw from this newly project, apparently in light of the decision to move the generation facility away from the town.
Key legal issues concerning CCS:
ARRA's funding constitutes the largest fund ever set up by Congress for CCS RD&D. However, all these funding opportunities are cost-sharing programmes, which entail that private developers must commit significant amounts of their funds to the projects in order to receive government financial support. In practice, this can lead to a project being abandoned even with the commitment of very large government funds if a developer lacks confidence in their ability to succeed.
Property rights with respect to CCS projects are often referred to as one of the legal uncertainties associated with CCS commercial deployment in the US. It has been noted that the DOE is not currently allowed to grant property rights to project recipients. This is seen as a disincentive for applicants to submit proposals under this mechanism. The Office of Fossil Energy has acknowledged that 'negotiations with selected applicants will likely be delayed or unsuccessful due to property issues [...]'. (See 'US Department of Energy, Office for Fossil Energy Recovery Act Program Plan, 2009' below).
Various regulatory actions, for example environmental assessment under the National Environmental Policy Act (NEPA), are a pre-condition to proceeding with the projects and there is considerable potential for delays or for the imposition of conditions that will cause a project sponsor to terminate the project.
There is also a question whether the available funds may ultimately be sufficient to support the projects selected.