Washington (Platts)--11Aug2008

The US Department of Energy on Monday opened up competition for $340
million in grants to industry that are designed to commercialize clean coal
technologies with no less than 90% carbon dioxide capture and underground
storage.

The public-private cost-shared projects are part of the third phase of
the Bush administration's Clean Coal Power Initiative that has been in
operation since 2002. The grants will cover up to 50% of total project costs,
meaning companies will have to pay for the rest.

Previous phases of the initiative focused on new coal-fired power
generation with greater efficiencies and reduced air pollution. This round,
however, revolves entirely around reducing greenhouse gas emissions, which are
blamed for global climate change.

Coal accounts for half of American electricity production and about 30%
of US GHGs come from coal-fired power plants, the Energy Information
Administration said.

DOE spokesman John Grasser said that $255 million for fiscal 2009 is in
the bank and available right now, in accordance with White House solicitation
rules from the Office of Management and Budget. The department has requested
an addition $85 million for fiscal 2009 from Congress. A possible spending
showdown between the White House and Congress could leave DOE with flat
funding compared with the current fiscal year, possibly complicating the
breadth of the program.

"How many projects there will be depends on the proposals that come in,"
Grasser said. "If there are three projects that are equal and the rest of the
proposals are not, it might be three projects. If there are 10 projects that
are all equal, each might get a lesser amount."

In addition to the aggressive 90% CO2 capture requirements, the projects
must meet several other baselines. At least 300,000 metric tons of CO2 have to
be either sequestered or used for a beneficial commercial purpose. The project
cannot raise power costs more than 10%, at least half of the energy produced
from projects has to be electricity and three quarters of the coal input must
be domestic.

Applications for the Funding Opportunity Announcement are due to DOE on
January 15. DOE anticipates it will be final selections in July 2009.

--Alexander Duncan, alexander_duncan@platts.com