Eventually, the whole thing will just be chalked up to another giant barrel of stinky pork.
FutureGen. It's one of the biggest scams to ever come out Washington.
Launched under the Bush administration as the poster child for “clean coal” technology, then continued by the Obama administration — despite the fact that it had turned into a money pit and was put out to pasture at the end of Bush's second term — this “clean coal” project has cost taxpayers about a billion dollars so far...
And we still have nothing to show for it.
My friends, clean coal (for lack of a better word) is stupid.
Here's the bottom line on clean coal: It takes a ridiculously cheap form of power generation (not including externalities, which are never really included anyway), and makes it three to five times more expensive.
With the rapid development of modern energy technologies and dirt-cheap natural gas, FutureGen is now about as useful as an atom smasher in Kim Kardashian's living room.
And those companies providing financing know it.
Clean Coal Can't Compete
Over the past few months, Caterpillar (NYSE: CAT) and Exelon Corporation (NYSE: EXC), which were both financially supporting the project, have bailed on FutureGen.
According to a Caterpillar spokesman, the company was involved as a financial supporter of the project, but when the scope of the project changed, it decided it no longer aligned with the company's core objectives.
As reported in the Chicago Business Journal, the company is also part of a group that's legally challenging the state of Illinois' decision to increase electric bills for consumers to cover $600 million of the project that the Department of Energy is not covering.
Basically, the whole project is costing more than the DOE planned, and now they're scrambling to scrape up another $600 million in financing. It's likely it'll end up coming from rate payers.
Meanwhile, natural gas is practically free and wind and solar costs continue to decline rapidly.
In fact, according to Bloomberg, increased development of wind power in parts of the Midwest has contributed to a 40% wholesale power price plunge. This has resulted in a surplus that's making it very difficult for nuclear and coal-fired power generators to sell their output into short-term markets.
There's no way a coal-fired power generator charging three to five times more for “clean” coal-fired power can compete.
So, what does this mean for the future of clean coal and the FutureGen project?
Don't Buy What They're Selling
I have little doubt we'll continue to throw more money into the FutureGen abyss for years to come.
It's a massive government project that's constantly getting a fresh coat of spin and shine from politicians that have been wetting their beaks on this one since 2008.
And while I've never been a fan of clean coal, there are still some who believe there's opportunity here...
Take Sinopec (NYSE: SHI) for instance. Last year Sinopec, which is the largest oil refiner by volume in Asia, announced it was planing to invest as much as $1 billion in a new Texas clean coal project in an attempt to use the captured carbon as a feedstock for injection into old oil fields in the Permian Basin.
Combining the power generating benefits of coal powered-generation with the oil enhancement benefits from a steady supply of CO2 sounds good in theory. And if it does pencil out, perhaps Sinopec will offer a glimmer of hope for clean coal supporters.
But right now clean coal seems to be a very sketchy endeavor, bolstered by a government that hasn't even been unable to put together a smart and rational energy policy that allows a proper free market to reward innovation and penalize complacency.
And this is why I continue to avoid any clean coal-related investments.
The risk is too great, and the reward — assuming there will ever be any — is decades away.
So for those seeking profits in the modern energy space, stick to what's working: natural gas and renewable energy technology.
This is the future of energy... not clean coal scams designed to boost bureaucratic egos and prime the pumps for a steady flow of special interest lucre.
Unless you hate money, don't buy what the clean coal jester merchants are selling.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the managing editor of Energy and Capital and contributing analyst for the Energy Investor, an independent investment research service focusing primarily on stocks in the oil & gas, modern energy and infrastructure markets. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.