Common Tragedies

Thoughts on Environmental Economics

How the DOE deflated FutureGen

Posted by Evan Herrnstadt on March 11, 2009

The NYTimes reports that the GAO released a report showing that in calling for the cancellation of FutureGen (the integrated IGCC, CCS, hydrogren demonstration plant), they compared the original estimated cost in constant dollars to a new estimate that was in current dollars.  Now to be fair, just last week I screwed up deflating some data.  To be reasonable, I was not determining the fate of a billion-dollar project:

According to the report, in calculating the costs of the project, the Energy Department mistakenly compared two numbers that should not have been used together. One cost estimate was made in so-called constant dollars, reflecting the purchasing power of a dollar in 2005, and the other in dollars as they would have been spent over the following few years, worth less each year because of inflation.

The Bush administration said the projected cost had nearly doubled, to $1.8 billion from $950 million; the auditors said it had gone to $1.3 billion, up 39 percent.

Ummm…this is not new.  I went to a hearing of the Energy and Water Appropriations Subcommittee back on May 8, 2008.  I never got around to writing a post, but looking through my old notes from that hearing, I can tell you with certainty that both Sens. Durbin and Dorgan directly asserted that the main source of cost overruns was due to inflation accounting.  Then-Secretary of Energy Bodman denied this, and kept claiming he didn’t know what the source of the overruns were, but that the other folks at DOE surely had the answer.

As it turned out, those in attendance only had to wait half an hour or so for the answer.  And it came from FutureGen chairman Paul Thompson.  To paraphrase, he said that the project cost was indeed $1.8 million — in nominal dollars.  That hearing was zeroing in on an answer.  Too bad Bodman left the hearing before Thompson gave his testimony.

Indeed FutureGen’s costs rose — as delays continued, it cost money to hold up construction, interest accrued, and so on.  But 50 percent of the overrun claimed by the DOE was due to a clerical error.  Competence and honesty points abound for the Bush administration.

3 Responses to “How the DOE deflated FutureGen”

  1. Carl Hon said

    “The War at DOE- Part 1:

    There is a war underway at DOE. For decades, DOE has been controlled by the Oil and Coal lobbies and insiders, enter the Obama administration. Programs and process which had previously been staged to make sure that alternative energy only achieves a 7% penetration, and no more, are in upheaval. The most powerful men in Washington have been entrenched in DOE but internal investigations and clear sky policies have shaken their empire to the very foundation.

    The world economy has been based around the trading of oil and coal since the Vikings first transacted exchanges for these products. Some of the deadliest wars, diseases and intolerance has been caused by the policies around who has access to these materials. These materials affect trillions of dollars of economic movement and certain people and companies will do anything to maintain control of that money and that power. These power brokers have maintained that control for over a hundred years until now! Something happened; a perfect storm of political, economic, science and social whimsies, that nobody could have predicted would occur at the same point in history, shockingly reached a nexus. Now, at a single point of opportunity, the entire tide is about to change, but not without a battle royale that has already begun to spill onto the streets.

    Steven Chu and lawyers from all of the energy and environmental committees, the major media, House, Senate and law enforcement groups have descended en masse in concurrent reviews of the connections of all of the players. Charts and graphics are starting to appear that show faces, boxes and lines drawn from individuals back to corporate interests much like the Elliot Ness mob charts that law enforcement used to present as they were about to bust up a Capone enclave. The Loan Guarantee Program, Section 136 funding and other efforts have clearly been halted in their tracks by oil and coal interests, in a highly visible set of delays as the battles move close to the public eye. Steven Chu, who’s past work has been funded by the US Government was all too familiar with the process but even his “revolutionary physicist” agenda could not have prepared him for what he found when he arrived at 1000 Independence Avenue in DC.

    The White House, Chu, House and Senate activists and a select team of outside consultants are busy reviewing every individual at DOE, their role, their connections and the power structure that exists. Multiple public secondary hearings have already been called by Senate committees and closed door meetings are underway constantly in one of the highest pressure, most intense, most revolutionary efforts to rebuild an agency ever attempted in the Capitol. The other side is not blind to this effort and, while their power has been diminished, they are hard at work to thwart the fix. Every tool of political pressure, manipulation and social massage is being brought to bear. The effort has gone public as the first barrage of prime time TV commercials from the oil and coal industry, in relatively incredible volumes, at incredible cost have started to roll across the television airwaves, nationally, pleading for a new “appreciation of oil and coal” and admonishing Americans that it “isn’t so bad, really…”

    More money is on the table, not only ready to be spent but already late and delayed, causing alternative energy companies to go out of business simply because they were promised the money , they ramped up to receive it and now they have higher than normal overheads, no money, and an even worse survival rate. So the plan of the opposing oil and coal industries is working, they are putting the alternative energy companies out of business simply by tactical logistics, but, if that money does come unstuck soon; the largest funding for alternative energy in world history will take place and then things could change. Hungry early-stage companies move light-years faster than old stodgy oil companies so it is possible, for the little new companies, even with less money and time, to supersede the old oil and coal giants. Will they, it is all up to Chu and his Watchmen… stay tuned…”
    ©2009 Washington Newscene. Reproduction authorized

  2. […] DOEs inability to accurately count the costs of the FutureGen clean-coal project in Illinois, a math error which led the DOE to scrap the program. Under President Bush, that […]

  3. […] DOE’s inability to accurately count the costs of the FutureGen clean-coal project in Illinois, a math error which led the DOE to scrap the program. Under President Bush, that […]

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