Energy Secretary Steven Chu met with representatives of the FutureGen Alliance on Monday, strengthening the prospect that the group’s low-carbon coal-gasification project could be revived.

Plans to build a power plant featuring integrated gasification combined cycle (IGCC) technology and carbon capture and storage (CCS) hit a wall in January 2008 when the Bush administration withdrew support, citing cost overruns. Those concerns have since been exposed as an artifact of specious financial accounting that overestimated the cost of the plant by $500 million.

Those involved say that FutureGen may now be far more politically palatable and expedient. With five years of development already completed, they say that FutureGen is positioned to quickly advance two of the Obama administration’s top goals: economic stimulus and reduction of carbon emissions. “You have a project here that is shovel ready, and with the advancement of technology and importance of CCS, it’s very worthy of a large government infusion,” says Nick Akins, executive vice president for generation at utility giant American Electric Power (AEP), a member of the FutureGen Alliance.

Stephanie Mueller, press secretary for the U.S. Department of Energy, issued a statement after Monday’s meeting leaving no doubt about Chu’s interest. “Secretary Chu believes that the FutureGen proposal has real merit,” Mueller said. “In the coming weeks, the department will be working with the Alliance and members of Congress to strengthen the proposal and try to reach agreement on a path forward.”

If the project is revived, it will have plenty of company internationally. Three similar IGCC projects figure among a dozen schemes that European leaders last month deemed eligible to compete for €1 billion in stimulus funds set aside to support commercial-scale application of CCS in coal-fired power plants. Of those projects, six will be selected to receive funding. Meanwhile, a consortium of Chinese power generators has initiated construction of the GreenGen project, which was inspired by FutureGen.

FutureGen remains attractive because IGCC plants that capture and sequester CO₂ are expected to offer one of the cheapest ways to achieve carbon-neutral power generation by 2020. Generating a megawatt-hour of power with CCS-equipped IGCC would cost $99 to $119 in 2020, according to European Commission cost estimates released this winter. That beats their estimates for the price of power from conventional coal plants with CCS, natural-gas generators with added CCS, and solar thermal power. (The cost of generating power from offshore wind farms was harder to predict, with estimates ranging from $86 to $152 per megawatt-hour.)

The only problem is that generating power from coal plants without CCS could be cheaper still. For such plants, the European Commission economists added a $54 charge for every ton of CO₂ produced, to cover the cost of buying carbon credits under Europe’s cap and trade program. But the economists estimated that even after paying this added cost, conventional coal plants would still produce power more cheaply than plants burdened with the energy-intensive process for capturing CO₂ and piping it to an appropriate underground storage site.

FutureGen proposes to reduce costs further by better integrating carbon capture. Most IGCC plants proposed by utilities to date would gasify coal to generate hydrogen and carbon monoxide and then burn the mixed gases. For example, Duke Energy’s $2.3 billion project in Edwardsport, IN, which is the only IGCC plant currently under construction in the U.S. Carbon-capture equipment pulls CO₂ out of flue gases using compounds that absorb CO_2.. This is an easier job with IGCC plants, which have CO₂-rich exhaust fumes, than with conventional power plants.

FutureGen aims to push IGCC’s potential CCS advantage further by removing carbon from an even more concentrated mixture of hydrogen and carbon monoxide, and then burning the pure hydrogen left over in more efficient (but as yet unproven) ultrahigh-temperature turbines. “It not only involves the carbon storage piece but also the advancement of hydrogen technologies associated with turbine performance,” says Akins. Munich-based Siemens AG, which sells IGCC technology, estimates that such integration could improve efficiency by about one-sixth–a huge boost for a sector that normally celebrates single-digit increases in efficiency.

The financial crisis threatens to leave this advantage on the shelf, however, since power companies currently favor CCS projects that simply bolt CCS onto existing coal plants. This includes Akins’ own company, as well as seven of the companies involved in the EU’s proposed CCS demonstrations. As the European Commission data suggest, plants with bolt-on CCS will cost more to run than an IGCC plant, but they require less capital up-front. “Major corporations like ours are experiencing the same type of economic upheaval the rest of the country is facing. Access to capital has become constrained,” says Akins.

On the other hand, international politics may favor the rebirth of FutureGen. In particular, getting developing countries such as China and India to commit to carbon caps is a major goal for the U.S. in the global negotiations governments hope to conclude in Copenhagen this December to define a successor to the Kyoto Protocol on greenhouse-gas emissions. The Bush administration’s abrupt cancellation of FutureGen without notifying China, India, South Korea, and Australia–partners on the project–damaged relations with these countries, according to a report on FutureGen issued last month by Democrats serving on the House Science and Technology Committee. Worse still, the report cites a 2007 memo by Department of Energy staff arguing that cancelling FutureGen would disproportionately affect developing countries: “Without FutureGen, the availability of affordable coal-fueled CCS plants would be delayed at least 10 years.”

Tony Lodge, an energy analyst and fellow at the Centre for Policy Studies in London, calls the cancellation of FutureGen short-sighted. He is equally critical of a decision by the U.K. government to restrict the use of its own CCS demonstration to coal-station retrofits. “If leading coal-burning economies like the U.S. and the U.K. are to influence coal-hungry countries such as India and China, then they must match their words with action,” says Lodge. “Support and development of FutureGen would be a significant start.”