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

COSTS AND BENEFITS OF DOE INVESTMENTS IN CLEAN COAL TECHNOLOGY: IMPLICATIONS FOR CCS Presented at the Washington Coal Club Washington, D.C., July 20, 2010 Roger H. Bezdek, Ph.D., President Management Information Services, Inc. Washington, D.C. rbezdek@misi-net.com

DOE’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 "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 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

CCT TECHNOLOGIES Source: U.S. Department of Energy

CCT DEMONSTRATIONS

CCT 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

HISTORICAL CCT COSTS(millions of 2008 dollars) Source: U.S. Department of Energy

SUMMARY OF CCT BENEFITS, 2000 – 2020 Source: Management Information Services, Inc.

CCT BENEFITS, 2000 - 2020 Source: Management Information Services, Inc.

CUMULATIVE CCT COSTS & BENEFITS Source: Management Information Services, Inc.

CCT PROGRAM BENEFITS & COSTS Source: Management Information Services, Inc.

CCT BENEFIT-COST RATIOS(Total benefits & costs, 2000 – 2020, billion 2008 dollars) Source: Management Information Services, Inc.

ROI 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 Source: Management Information Services, Inc.

CCT ANNUAL JOBS CREATED Total jobs created > 1.2 million; annual average ~ 60,000 jobs created Source: Management Information Services, Inc. WHITE HOUSE NOW CONSIDERS CLEAN COAL JOBS TO BE “GREEN JOBS”

CCT 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.

SKILLED, 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

< 10.0 ¢ Hydro > 10.0 ¢ CCT HELPS MAINTAIN LOW-COSTCOAL-BASED ELECTRICITY In states with high coal use, average electricity cost is lower Benefits of lower-priced electricity over next decade could total $500B - $1,000B & creation of ~ 1,000,000 jobs CT MA NY NH RI NJ ME MD CA VT DE FL TX NV PA IL MI AZ WI MS GA AL CO OH VA OK NM NC TN SC MN AR LA KS OR MT SD IN IA UT WA ND NE KY MO ID WY WV Source: Energy Information Administration, March 2009.

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

OUR FINDINGS ARE CORROBORATED • Previous studies by DOE, EPRI, CURC, & others • U.S. General Accountancy Office (GAO) found CCT program to be exemplary & well managed • National Academies of Science concluded: 1) CCT program among DOE’s most successful R&D programs 2) Has produced benefits far exceeding federal investments 3) CCT program contributed disproportionately large portion of total return on entire DOE R&D program 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 UNDERESTIMATE 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

IMPLICATIONS 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

IMPLICATIONS 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

IMPLICATIONS FOR CCS PROGRAMS DOE Coal Technology Budget

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

IMPLICATIONS 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 RECALL: WHITE HOUSE CLASSIFIES CCS JOBS AS “GREEN JOBS”

FINDING: 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, too

COAL IS REQUIRED TO GENERATE THE ELECTRICITY THAT KEEPS THE LIGHTS ON U.S. at Night CCS will help ensure future of coal

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