COSTS AND BENEFITS OF DOE COSTS AND BENEFITS OF DOE INVESTMENTS IN CLEAN COAL INVESTMENTS IN CLEAN COAL TECHNOLOGY: IMPLICATIONSTECHNOLOGY: IMPLICATIONS

FOR CCSFOR CCS

Presented at theWashington Coal Club

Washington, D.C., July 20, 2010

Roger H. Bezdek, Ph.D., PresidentManagement Information Services, Inc.

Washington, D.C.rbezdek@misi-net.com

DOE’s CLEAN COAL TECHNOLOGY PROGRAMDOE’s CLEAN COAL TECHNOLOGY PROGRAM

• Govt.-industry partnership• Initiated in 1984• Develops innovative technologies that:

-- Meet strict environmental standards

-- Allow utilities & industries to cleanly use coal• Has wide range of technological successes

We estimate program’s economic & environmental benefits and derive implications for CCS

2

"Coal is an abundant resource in the world. It is imperative that we figure out a way to use coal as cleanly as possible." Dr. Steven Chu,

Secretary of Energy, at his Senate Confirmation Hearing, 1-13-09

3 MAJOR FEDERAL CCT PROGRAMS3 MAJOR FEDERAL CCT PROGRAMS

Clean Coal Power Initiative (CCPI): • Established 2001 to increase investment in CCT• Goal: Accelerate commercial deployment of advanced technologies• Final Funding Announcement August 2008

Power Plant Improvement Initiative (PPII):• Established 2000 to provide commercial-scale demonstrations• Includes existing & new electric generating facilities

Clean Coal Technology Demonstration Program (CCTDP):• Established 1985 as 1st major clean coal demonstration program• Vanguard of clean coal demo movement• Recently concluded: 33 successful demo projects

3

CCT TECHNOLOGIESCCT TECHNOLOGIES

4Source: U.S. Department of Energy

CCT DEMONSTRATIONSCCT DEMONSTRATIONS

5

CCT COSTS AND BENEFITSCCT COSTS AND BENEFITS

• Estimated total costs for government and industry

• Quantified benefits for:

-- Reduced capital costs of advanced technologies in new plants

-- Reduced capital & operating costs at existing plants to remain compliant with environmental regulations

-- Reduced fuel costs due to higher efficiencies

-- Avoided environmental costs

-- CCT technology export sales

-- Jobs created

6

HISTORICAL CCT COSTSHISTORICAL CCT COSTS(millions of 2008 dollars)

7

FY Funding FY Funding

1986 $171 1998 $(131) 1987 249 1999 (52) 1988 323 2000 (175) 1989 296 2001 11 1990 831 2002 10 1991 567 2003 (56) 1992 589 2004 (109) 1993 0 2005 (176) 1994 315 2006 (21) 1995 48 2007 (21) 1996 195 2008 0 1997 $(3) Total $2,978

Source: U.S. Department of Energy

SUMMARY OF CCT BENEFITS, 2000 – 2020SUMMARY OF CCT BENEFITS, 2000 – 2020

8

Benefits Category Benefits

(dollar figures in billions of 2008 dollars)

Capital and technology cost savings in new and existing plants

$39

Fuel cost savings $15 Avoided environmental costs $25 CCT exports $32 Total monetary benefits $111 Jobs (thousands) Total cumulative 1,200 Average annual 60

Source: Management Information Services, Inc.

CCT BENEFITS, 2000 - 2020CCT BENEFITS, 2000 - 2020

9

$0

$20

$40

$60

$80

$100

$120

Billi

on 2

008

Dol

lars

Source: Management Information Services, Inc.

CUMULATIVE CCT COSTS & BENEFITSCUMULATIVE CCT COSTS & BENEFITS

10

$0

$20

$40

$60

$80

$100

$120

2000 2005 2010 2015 2020

Bill

ion

20

08

Do

llars

Cumulative Benefits Total Costs DOE Costs

Source: Management Information Services, Inc.

CCT PROGRAM BENEFITS & COSTSCCT PROGRAM BENEFITS & COSTS

11

$0

$20

$40

$60

$80

$100

$120

2009 2012 2015 2020

Bill

ion

200

8 D

olla

rs

Cumulative Benefits DOE Costs

Source: Management Information Services, Inc.

CCT BENEFIT-COST RATIOSCCT BENEFIT-COST RATIOS(Total benefits & costs, 2000 – 2020, billion 2008 dollars)

12

$0

$20

$40

$60

$80

$100

$120Cumulative Benefits

TotalCosts DOE

Costs

Source: Management Information Services, Inc.

ROI VERY ATTRACTIVEROI VERY ATTRACTIVE

CCT program return on investment (ROI) to U.S. govt. is favorable and growing rapidly:

• 2009: Benefits $6B, DOE costs $3.5 billion, ROI of 1.7• 2012: Benefits > $12B, DOE costs $4.4B, ROI of ~ 3• 2015: Benefits $41B, DOE costs $5.7B, ROI > 7• 2020: Benefits $111B, DOE costs $8.5 billion, ROI > 13

13Source: Management Information Services, Inc.

CCT ANNUAL JOBS CREATEDCCT ANNUAL JOBS CREATED

14

0

20

40

60

80

100

120

2000 2005 2010 2015 2020

Jo

bs

(th

ou

sa

nd

s)

WHITE HOUSE NOW CONSIDERS CLEAN COAL JOBS TO BE “GREEN JOBS”

Total jobs created > 1.2 million; annual average ~ 60,000 jobs created

Source: Management Information Services, Inc.

CCT CREATES JOBSCCT CREATES JOBS

• CCT program has been successful in creating U.S. jobs• At present, program is creating ~ 30K jobs/yr.• By 2015 it will create > 60K jobs/yr.• By 2020 it will create > 100K jobs/yr.• Importantly, these are

predominately manufacturing-oriented,

well paying jobs – that are critically

important to U.S.

15

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SKILLED, WELL-PAYING JOBSSKILLED, WELL-PAYING JOBS

• CCT creates many jobs in two categories that states seek to attract and retain:

1. College-educated professional workers, many with advanced degrees

2. Highly skilled, technical workers, with advanced training & technical expertise, many of them in manufacturing

• Can thus generate jobs that are disproportionately for highly skilled, well-paid, tech & prof. workers, who provide foundation for entrepreneurship & economic growth. These are the high-skilled, high-wage, jobs that all states & regions seek

17

CCT HELPS MAINTAIN LOW-COSTCCT HELPS MAINTAIN LOW-COSTCOAL-BASED ELECTRICITYCOAL-BASED ELECTRICITY

VT

RI

CT

ME

NHNJ

CA

NY

ID

ORWA

LA

FL

PA

SD

MS

SC

AZ IL

VA

TXNV

MD

AR

NE

TN

MI

DE

NCGA

MTKS

WICO

MO

IA

NM OH

NDINUT

WVWY

KY

< 10.0 ¢ > 10.0 ¢Hydro

AL

MNOK

MA

Source: Energy Information Administration, March 2009.

In states with high coal use, average electricity cost is lowerBenefits of lower-priced electricity over next decade could total $500B - $1,000B & creation of ~ 1,000,000 jobs

OTHER CCT BENEFITS TO U.S.OTHER CCT BENEFITS TO U.S.

• National security benefits

-- Reduces oil imports & uses domestic coal

-- Co-produces power & environmentally attractive fuels, (FT liquids & hydrogen)

• Maintenance of diversity of energy resource options

-- Avoids over-reliance on natural gas for central station power

-- Encourages economical use of NG in other sectors

-- Reduces energy price volatility & supply uncertainty• Stimulation of domestic high-tech mfg industry & U.S. energy technology

leadership• Enhances economic growth & security• Facilitates international use of coal resources resulting in higher

standards of living & increased social/economic stability• Reduction in U.S. trade deficit

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OUR FINDINGS ARE CORROBORATEDOUR FINDINGS ARE CORROBORATED

• Previous studies by DOE, EPRI, CURC, & others• U.S. General Accountancy Office

(GAO) found CCT program to beexemplary & well managed

• National Academies of Science concluded:1) CCT program among DOE’s most successful R&D programs2) Has produced benefits farexceeding federal investments3) CCT program contributed disproportionately large portion oftotal return on entire DOE R&D program

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GAO: “CCT program serves as an example to other cost-share programs in demonstrating how the government and the private sector can work effectively together to develop and demonstrate new technologies.”

OUR ESTIMATES MAY OUR ESTIMATES MAY UNDERESTIMATE CCT BENEFITSUNDERESTIMATE CCT BENEFITS

• Did not include potential benefits of CO2 reductions in the CCT program benefits estimated here

• If we had, cumulative CCT benefits would have been $2 - $8 billion higher – depending on CO2 emissions price

• In a carbon-constrained future, these CO2-related benefits will become more important

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IMPLICATIONS FOR CCS PROGRAMSIMPLICATIONS FOR CCS PROGRAMS

• Findings have implications beyond CCT program• Based (in part) on success of CCT program, federal govt. is

initiating CCS programs to:

-- Reduce GHGs from coal power plants

-- Develop economic methods of sequestering CO2

21

IMPLICATIONS FOR CCS PROGRAMSIMPLICATIONS FOR CCS PROGRAMS

Key DOE CCS R&D Programs and Initiatives:• Carbon Sequestration Leadership Forum: International ministerial-

level panel that meets regularly to advance CCS RD&D• Regional Sequestration Partnerships: Network of federal, state &

private partnerships to facilitate CCS technologies, regs, & infrastructure

• Interagency Task Force on CCS: Task force, created by Obama, to develop federal strategy to speed CCT development & deployment

• FutureGen Project: Commercial scale CCS project, Mattoon, IL • Carbon Sequestration Core Program: Portfolio of technologies that

capture and permanently store GHGs

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IMPLICATIONS FOR CCS PROGRAMSIMPLICATIONS FOR CCS PROGRAMS

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$0$50

$100$150$200$250$300$350$400

Mill

ion

s

FY2010 FY 2011 Request

DOE Coal Technology Budget

IMPLICATIONS FOR CCS PROGRAMSIMPLICATIONS FOR CCS PROGRAMS

• Findings reported here for CCT program indicate that federal CCS investments will also produce significant benefits & repay costs many times over

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IMPLICATIONS FOR CCS PROGRAMSIMPLICATIONS FOR CCS PROGRAMS

"It's been said that the U.S. is the Saudi Arabia of coal, and that's because it's one of our most abundant energy resources. If we can develop the technology to capture the carbon pollution released by coal, it can create jobs and provide energy well into the future.“ President Obama, February 3, 2010

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RECALL: WHITE HOUSE CLASSIFIES

CCS JOBS AS “GREEN JOBS”

FINDING: CCT PROGRAM IS NOTABLE SUCCESSFINDING: CCT PROGRAM IS NOTABLE SUCCESS

• Benefits far exceed costs • Benefits increasing rapidly• ROIs to federal govt. &

private industry extremely high• Currently creating ~ 30K jobs & by

2020 will create > 100K jobs – many

well-paying, manufacturing jobs• Independent reviews find CCT

to be exemplary, well-

managed program that

provides substantial benefits• CCS will be a winner, tooCCS will be a winner, too

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COAL IS REQUIRED TO GENERATE THE COAL IS REQUIRED TO GENERATE THE ELECTRICITY THAT KEEPS THE LIGHTS ONELECTRICITY THAT KEEPS THE LIGHTS ON

U.S. at Night

CCS will help ensure future of coalCCS will help ensure future of coal