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DOE spent nearly $700M on ill-fated coal carbon capture projects, GAO says

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NRG Energy's Petra Nova carbon capture project, suspended in 2020, received $195 million in Department of Energy funding.
Source: NRG Energy

The U.S. Department of Energy invested $684 million in unsuccessful carbon capture and storage demonstration projects at coal plants under the 2009 stimulus package, a U.S. Government Accountability Office audit found, as the agency prepares for another round of investments in large-scale carbon sequestration projects.

This time, the DOE has close to $1 billion from the 2021 infrastructure law earmarked for large-scale carbon capture pilot projects, as well as $2.5 billion for carbon capture demonstrations. How and where this new round of federal dollars will be invested could be subject to closer congressional scrutiny and more stringent DOE reviews going forward, likely dimming hopes for some carbon capture advocates.

The GAO report published Dec. 20 identified "significant risks" with how the DOE managed such projects under the 2009 American Recovery and Reinvestment Act, the Obama-era economic stimulus package. The federal watchdog office recommended Congress step up its monitoring to make sure federal tax dollars set to be invested in carbon capture ventures are viable and on budget.

In all, the bipartisan infrastructure bill signed into law Nov. 15 authorized more than $10 billion for the DOE to help develop emission reduction technologies, according to an agency fact sheet.

"We expect that they will use the conclusions of this GAO report to conduct a more air-tight demo selection as well as implement appropriate cost controls for power generation projects to ensure an even higher probability for success," said Matt Bright, carbon capture policy manager at the Clean Air Task Force, a group pushing for the technology. "Taxpayers need to be assured that carbon capture projects are developed on time and economically in order to help the U.S. achieve its [climate goals.]"

Bright also noted 56% of the $1.1 billion the DOE spent on carbon capture demonstrations under the 2009 stimulus package went to successful projects, according to the GAO. The GAO's tally of successes included the Petra Nova project that NRG Energy Inc. suspended in 2020. Nearly all DOE finance for carbon capture at industrial facilities, 97% of $438 million awarded, went to plants that still operate today, Bright observed.

The new DOE Office of Clean Energy Demonstrations, announced the day after the GAO report was published, has been tasked with steering tax dollars in the right direction. Congress authorized $20 billion for the new office under the infrastructure legislation to oversee projects nationwide, including those in the carbon capture arena.

The office will submit a formal response to the GAO and "develop an appropriate action plan to address the GAO recommendations," DOE Deputy CFO Christopher Johns wrote in comments included in the agency's report.

Projects rushed out

In its audit, the GAO said the DOE cut the time frame for selecting and negotiating funding agreements for coal projects from one year to three months as it sought to quickly get recovery funds out the door. As a result, the agency overlooked technical and financial risks. The DOE also did not follow its own cost-control mechanisms to limit financial exposure, resulting in $300 million in cost overruns.

Only one of the eight coal projects the agency selected for funding, the Petra Nova plant outside Houston, was completed. According to DOE, once the facility began operating in January 2017 it met its carbon capture efficiency target on the days it was operating. However, the facility failed to capture as much carbon annually as targeted because it ran for far fewer days than expected due to myriad system challenges. The facility ceased to operate altogether in May 2020 after low oil prices rendered the plant uneconomic.

"By managing future [carbon capture and storage] projects against established scopes, schedules and budgets, DOE would be better positioned to mitigate its financial exposure if projects struggle," the GAO wrote. "Additionally, absent a congressional mechanism to provide greater oversight and accountability — such as requiring regular DOE reporting on project status and funding — DOE may risk expending significant taxpayer funds on [carbon capture and storage] demonstrations that have little likelihood of success."

Congressional leaders from several coal-heavy states are pushing for technologies that would allow some of their coal plants to operate emissions-free for several more decades, although the economics for such projects have proven tough.

Adding to such challenges, efforts to boost and extend the federal 45Q tax credit for carbon capture projects appear to be in limbo after Sen. Joe Manchin, D-W.Va., said he would not support the Biden administration's signature Build Back Better spending bill. Expanded tax credits are seen as vital for attracting private investment to such projects.