FutureGen costs almost doubled since 2004; funding under scrutiny

Washington (Platts)--12Apr2007

Overall cost estimates for the 275-MW FutureGen power plant have almost
doubled since 2004 when the project was first proposed. Originally estimated
to cost roughly $950 million, now the FutureGen Alliance says the project will
cost about $1.5 billion and the Department of Energy puts the cost at around
$1.7 billion by project completion.

The scope and the size of the project have remained the same, but building
materials, equipment, labor and other heavy construction expenses have risen
dramatically, driving up the FutureGen price, according to DOE and the
alliance.

"Given this vast increase in projected costs, both DOE and the FutureGen
Alliance will review progress and expenses before committing to funding for
subsequent phases of the project," DOE said in a statement on Tuesday.

In phase one of the project, the DOE and alliance are sharing costs of $42.5
million. Under the new future cost estimates by the alliance, the DOE share
would be roughly $1 billion, and the alliance would spend about $400 million.
Costs would be offset by approximately $300 million in sales of power.

But the growing cost of the facility isn't deterring the alliance from its
goal of building the nation's first near-zero coal-fired power plant,
according to alliance CEO Mike Mudd.

Speaking at the Washington Coal Club on Wednesday, Mudd said the industry has
to articulate to congressional leaders the difference between inflation and
scope growth.

It is "market forces that are driving up the price of power plants, not the
scope of what we're trying to do, which is develop a new type of coal-fired
power plant," he said.

The alliance is currently going through the National Environmental Policy Act
process to evaluate four potential sites -- two in Texas and two in Illinois.
The record of decision from the environmental impact statement will be
available later this year, Mudd said.

In other FutureGen news, an energy committee in the Texas House of
Representatives voted to approve a FutureGen package of four bills aimed at
strengthening Texas' best-value offering. Those bills would protect the
alliance from carbon dioxide sequestration liability, authorize the governor
to sign contractual agreements for building and operating the plant, assign
CO2 monitoring responsibilities to a state agency and give FutureGen power
buyers a 10% margin tax credit for electricity purchases.

The bills go to the full House next. Identical bills are in the Texas Senate.