Energy Department shouldn’t waste $100M on ‘clean coal’

The Department of Energy has a new request for proposals (RFP) out for ideas on how to spend $100 million in federal money on “transformational coal technologies.”

There’s a hurry-up-and-apply quality to the RFP, which has a deadline of Oct. 19.

We think it is a transparent effort by Peabody Energy to get a federal subsidiary that would allow it to keep its endangered Kayenta Mine in Arizona on life support. The mine’s core customer is the nearby Navajo Generating Station, which is slated for closure in 2019 because the plant — like many coal-fired electricity generating facilities around the country — can no longer compete with electricity produced by natural gas and renewables.

{mosads}“Transformational coal technologies” is code for what is otherwise commonly pitched as “coal gasification,” a coal-industry experiment that has failed time and again at great expense to taxpayers, utility customers and investors. The record on such projects is dismal, and includes Southern Company’s Kemper plant in Mississippi, Duke Energy’s Edwardsport project in Indiana and the former FutureGen federal project in Illinois.

Peabody would benefit in this instance by getting Department of Energy dollars to fund a gasification retrofit of Navajo Generating Station. Its potential partners, which include the Hopi and Navajo Nations, would not fare so well (the RFP requires a partnership arrangement that would have 20 percent of the total cost of the project come from non-federal sources).

While the Department of Energy is in the business of funding speculative energy projects — that’s its job — this expenditure would be throwing away good money. “Clean coal” technology, as our research has shown, does not work.

The $100 million initiative being put forth here by the Department of Energy, if it proceeds, could end up supporting construction of a gasification plant that would ultimately cost something on the order of $8 billion. That means whoever gets talked into signing on as a partner would be on the hook for $1.6 billion. 

Coal companies, having emerged only recently from bankruptcy, are loath to invest in such experiments themselves, and no bank will loan on coal-gasification projects. Utilities aren’t going to take the bait either, considering how Southern Company and Duke Energy have been burned so badly on Edwardsport and Kemper, respectively. 

That leaves the coal industry looking to the federal government for support — the $100 million in question here would serve as an initial infusion that would presumably be followed by more — and to partnerships that, in the Arizona instance, stand to put tribal governments at huge risk.

These dollars would be far better invested in initiatives that Navajo and Hopi interests are advancing around a responsible energy transition that would support healthy economic growth once the Navajo Generation Station and Kayenta mine close. Earlier this summer, we published a blueprint for just such a transition.

In Arizona, that $100 million that the Department of Energy is putting forth — for a project that would be doomed from the start — would go a long way toward securing new jobs, offsetting revenue losses to the tribes from the closure of the plant and the mine, and spurring local and regional development beyond coal.

Wasting resources on “clean coal” schemes will only make it harder to move forward.

Tom Sanzillo is the director of finance for The Institute for Energy Economics and Financial Analysis (IEEFA).