Common Tragedies

Thoughts on Environmental Economics

The joys of public finance – FutureGen edition

Posted by Rich Sweeney on January 31, 2008

Just when it seemed that both parties were hopping on the public clean energy promotion bandwagon, the FutureGen project reminds us just how bad the government is at doing this sort of thing. The Bush-sponsored clean coal project once described by Andrew Revkin as being in “perpetual creep mode” now appears to have completely halted. Whereas the initial plan (and working assumption for the past 4 years) was that the government would pick up almost 75% of the pilot CCS plant’s costs, the DOE announced yesterday that it was “restructuring” its approach, which is government speak for backing out.

Just last month the FutureGen Alliance announced its selection of Mattoon, IL as the site of the the pilot plant. This was the culmination of an enormous amount of planning, research, and negotiation. The DOE’s explanation for it’s decision back out is twofold. First, it says that cost projections for the site were ballooning out of control (shocking). However, Durbin and the industry alliance answered this complaint by offering to to pay 50% of any further cost overruns upfront, and use revenue from the facility to pay back the DOE’s 50% later. Then the DOE announced that it was more than just the cost overruns. Unlike the original plans, which called for the sponsorship of an entire clean coal plant, the government feels that it should only really support the CCS component of the power plant, not the whole thing. This will allow the DOE to take all its eggs out of the Mattoon basket, and sponsor multiple CCS pilots at the same time.

So what the hell happened here? Well it depends on your perspective:

DOE: “This restructured approach allows DOE to maximize the role of private sector innovation, provide a ceiling on federal contributions, and accelerate the Administration’s goal of increasing the use of clean energy technologies to help meet the steadily growing demand for energy while also mitigating greenhouse gas emissions. “

FutureGen Alliance: “We wuz robbed. Everyone’s teaming up to kill coal in America.”

Dick Durbin: “When the city of Mattoon, Illinois, was chosen over possible locations in Texas, the secretary of Energy set out to kill FutureGen.”

Texas: Werd.

Optimist’s View: The government made a rational decision to spend its money more wisely and to diversify its risks.

Cynic’s view: How do you promote CCS without spending government money? Tell a group of investors that you’ll match any money they’ve spent 3 to 1, and then pull out when the project is too far along to simply abandon.

Regardless of which story you buy, the story continues to be “Too much future, too little gen.”

Thanks to Shalini for the pointer and background info.

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2 Responses to “The joys of public finance – FutureGen edition”

  1. Mike said

    I like your blog. You might be interested in this paper on SSRN, about how enviro legislation gets bogged down in the legislative process, and how to fix the problem.

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1084537

  2. [...] Get the entire post from here. [...]

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