U.S. Government Accountability Office Warns CCS Demonstration Project a Significant Economic Risk

 

On December 20, 2021, The U.S. Government Accountability Office (GAO) released a report stating that the Department of Energy (DOE) faces the risk of wasting large sums of money by supporting carbon capture and storage (CCS) projects.

The report, titled “Carbon Capture and Storage: Actions Needed to Improve DOE Management of Demonstration Projects”, analyzes the results of DOE-supported CCS demonstration projects as well as the DOE’s management of CCS demonstration projects, identifying problems and making recommendations for improvement.

Since 2009, the DOE has attempted to establish CCS technology through various demonstration projects, and the 2021 Infrastructure Investment and Jobs Act allocates huge sums of money to new CCS demonstration projects. This study was conducted in accordance with a provision of the Energy Act of 2020 that requires the GAO to evaluate the results and challenges of DOE’s CCS demonstration projects. 

 

The key points of the report are as follows:

Coal-fired CCS projects have “little likelihood of success”

Since 2009, the DOE has invested $1.1 billion in 11 CCS demonstration projects, only three of which have become operational.

Of the 11 projects, 8 were coal-fired CCS demonstration projects with a total investment of $684 million, of which only 1 became operational. According to project documents and interviews with DOE and project stakeholders, economic factors such as falling gas prices and uncertainty in the carbon market likely affected the economics of coal-fired power generation and coal-fired CCS. Out of the other 7 projects, 3 were canceled, and the DOE withdrew its support for 4 before construction began. The lone operational project, Petra Nova, was halted in 2020 in response to factors impacting its economic viability. 

 

“Significant risks” in DOE’s management of coal CCS demonstration projects

The GAO report notes two significant risks in DOE’s management of coal-fired CCS demonstration projects.

The first is the DOE’s business selection and negotiation process; the DOE fully funds coal-fired projects from their early stages, and does not devote sufficient time to careful review as it does with industrial CCS projects. Furthermore, according to interviews with DOE officials, the DOE has shortened the negotiation period for coal-fired projects, with processes that normally take more than a year expedited to less than three months.

This rush is likely due to the DOE’s desire to quickly spend funds provided by the American Recovery and Reinvestment Act of 2009, but this has reduced the DOE’s ability to recognize and mitigate the technical and economic risks of its projects, and has increased the risk that the DOE will put money into projects that have no chance of success.

The second risk is the lack of cost management; according to DOE documents and interviews with officials, the DOE spent $472 million, about $300 million more than originally planned, on projects for facilities that were never built. The DOE continued to support projects even though they did not meet the necessary conditions at each stage.

 

Recommendation for Congress to oversee CCS demonstration projects

In the report, the GAO proposes that Congress oversee CCS demonstration projects to prevent the DOE from spending large sums of money on CCS demonstration projects that have little chance of success. The risk of wasting money can be reduced by establishing a congressional oversight mechanism, such as requiring DOE to regularly report to Congress on the progress of projects and the status of invested funds, the report said.

The DOE has neither supported nor opposed the GAO’s proposals. However, it has since established the Office of Clean Energy Demonstrations (OCED), which is charged with developing an action plan based on the GAO’s recommendations. This office will fund large-scale technology demonstration projects in areas such as clean hydrogen production, carbon capture, grid-scale energy storage, and small modular reactors.

 

References:

US Government Accountability Office: Carbon Capture and Storage: Actions Needed to Improve DOE Management of Demonstration Projects [PDF]

E&E News, Energy Wire: DOE risks wasting ‘significant funds’ on CCS — audit

US Dept. of Energy: DOE Establishes New Office of Clean Energy Demonstrations Under the Bipartisan Infrastructure Law