1:--- Ilnil,etl States General Account,ing Office ; (-‘&QO Report to the Honorable I Phil.ip 12.Sharp, Chairman, Subcommittee on Energy and Power, Committcse on Energy and Commerce, House of’ Representatives I - FOSSIL FUELS Pace and Focus of the Clean Coal Technology Program Need to Be Assessed i; I I#- 140907 -- (;A(:)/It(:EI)-9o-(i7 Resources, Community, and Economic Development Division I%230504 ( March 19,199O The Honorable Philip R. Sharp Chairman, Subcommittee on Energy and Power Committee on Energy and Commerce House of Representatives Dear Mr. Chairman: As you requested, this report discusses the Department of Energy’s (DUE) evaluation and selection of project proposals under the second round of the Clean Coal Technology program. The preliminary results of our review were presented in our Statement for the Record (GAO/ T-WED-90-3) submitted for your Subcommittee’s October 18, 1989, hearing on acid rain control provisions of the administration’s proposal to amend the Clean Air Act. As arranged with your office, we plan to distribute copies of this report to the Secretary of Energy and make copies available to other interested parties upon their request. This work was done under the direction of the former Director of Energy Issues, Keith 0. Fultz. Please call Mr. Victor S. Rezendes, the current Director of Energy Issues at (202) 275- 1441 if you have any questions about this report. Major contributors are listed in appendix VII. Sincerely yours, J. Dexter Peach Assistant Comptroller General , I$cecutive Summary Coal, one of the nation’s most abundant energy resources, provides *rpose about 26 percent of the nation’s energy needs. At the same time, how- ever, emissions resulting from the burning of coal are major contributors to air pollution problems, particularly acid rain. The Department of Energy’s (DOE) Clean Coal Technology (CCT) program was established in 1984 to provide financial assistance to industry-up to 60 percent of a project’s cost-in demonstrating the commercial applications of emerg- ing clean coal technologies that would enhance the use of coal, but in both a more efficient and environmentally acceptable manner. The Congress has appropriated $2.75 billion for the CCT program. To date, DOEhas requested project proposals from industry through three separate solicitations (or rounds) and has selected 39 projects. About $1.55 billion has been committed to the first three rounds. Concerned about the implementation of the program, the Chairman, Subcommittee on Energy and Power, House Committee on Energy and Commerce requested GAOto review DOE'Scriteria and process for evaluating and selecting round-two projects. As of December 1989, DOEhad completed cooperative financial assis- Bbckground tance agreements with sponsors of 13 of the 26 round-one and -two projects in the CCT program. DOEexpects to complete cooperative agree- ments for the remaining round-one and -two projects by July 1990. DOE selected 13 additional projects for the program in December 1989 under the third round and expects to complete negotiations for their funding by December 1990. Public Law 101-121 directs DOEto solicit project pro- posals for the fourth round by June I,1990 and the fifth round in 1991. The CCT program is especially important in view of the administration’s July 1989 legislative proposal to amend the Clean Air Act, which includes requirements to reduce annual sulfur dioxide emissions from fossil-fueled generators by approximately 10 million tons below 1980 levels and annual nitrogen oxide emissions by 2 million tons below pro- jected 2000 levels by December 31,200O. DOEdeveloped an elaborate process for evaluating, ranking, and select- Results in Brief ing round-two project proposals. The criteria used to evaluate and select proposals for funding generally conformed to congressional and other program guidance. Also, the evaluation and selection process provided reasonable assurance that proposals were consistently and thoroughly evaluated and that projects were selected using the applicable criteria. Page 2 GAO/RcED9067 Clean Coal Technology Executive Summary GAO’Sanalysis of the evaluation and selection process showed that DOE picked the highest-ranked proposals submitted for the various mix of technologies that it was interested in seeing demonstrated. Of the 16 projects DOEselected in round two, 12 were rated weak in meeting certain of the evaluation criteria. Nine of the projects were rated weak in meeting the criterion that a project’s technology has the potential to reduce nationwide emissions that cause acid rain. Although emphasis was to be focused on coal-burning projects nationwide to reduce emissions that cause acid rain, it still was only one of many crite- ria to be considered in evaluating proposals. If DOEhad picked more projects with greater potential to reduce nationwide emissions from coal-fired facilities, it would have resulted in (1) the selection of lower- ranked projects demonstrating technologies similar to the projects that were selected, and (2) projects selected which may not be successfully demonstrated or commercialized because of weaknesses in other criteria. GAOalso noted that half of the 48 proposals that were evaluated in round-two fared poorly against 3 or more of the evaluation criteria. This could indicate that DOEmay have problems in identifying and funding additional promising clean coal technology projects in future rounds. Furthermore, GAO'Spast work has shown that problems have delayed finalizing project cooperative agreements, delayed completion of various project phases, and extended the estimated completion dates for some projects in round-one. As of December 31, 1989, only three projects were in the demonstration or operation phase and none had been fully demon- strated. Rather than move into rounds four and five of the program as currently scheduled, it may be beneficial to wait until DOEhas more information on actual project demonstration results, This would allow DOEto make more informed decisions regarding the identification, selec- tion, and funding of the more promising technologies in future rounds of the program and would help to ensure that the funds allocated to this program are effectively and efficiently spent. Principal Findings Evaluation Criteria WE appointed a project selection official who formed a Board for devel- Development ’ oping proposal evaluation and selection criteria and for evaluating the proposed projects. To evaluate project proposals, the Board developed 6 Page 3 GAO/RCED-PO-67 Clean Coal Technology Ekecutlve Summary qualification, 3 preliminary evaluation, and 11 comprehensive evalua- tion criteria. The qualification and preliminary evaluation criteria were intended to ensure that proposals met general program qualification requirements and contained sufficient information for undergoing com- prehensive evaluation. The comprehensive evaluation criteria were used to assess the proposals’ technical, business and management, and cost aspects. In addition, LIOEdeveloped four program policy factors to be considered in selecting projects. GAO'Sreview of DOE'Scriteria, congres- sional legislation and accompanying reports, DOEregulations, and other program guidance showed that the evaluation criteria were developed in accordance with the guidance provided. Evaluation and Selection The Board used teams of experts within DOEto assist in evaluating the P+cess 65 proposals submitted. Seven were rejected because they did not meet either the qualification or the preliminary evaluation criteria. The remaining 48 proposals were judged against the comprehensive evalua- tion criteria, which included a detailed assessment of each proposal’s I strengths and weaknesses. Using the teams’ evaluations, in conjunction with its review of the proposals, the Board also evaluated and rated each proposal against the comprehensive criteria and developed an overall ranking of the proposals. GAO’S review of the evaluation plan and procedures and randomly selected evaluation files disclosed that the Board’s evaluation process provided reasonable assurance that the evaluations were based on the criteria, and that the evaluation teams consistently applied the criteria. Using the Board’s evaluation results and four additional program policy selection factors, DOE'Sselection official picked 16 projects, representing a broad spectrum of technologies, that were consistent with the Board’s overall ranking of the proposals and represented the highest-ranked proposals for the range of technologies included in the round-two selections. SelectedProjects’ Although the selected projects represented the highest-ranked proposals Weaknesses for the technologies DOEwas interested in seeing demonstrated, the Board’s evaluations disclosed that 12 of the 16 selected projects were rated weak in meeting 1 or more of the comprehensive evaluation crite- ” ria. The technologies to be demonstrated by 9 of these 12 projects were rated weak in their potential to reduce nationwide emissions of sulfur Page 4 GAO/RCED-90-67 Clean Coal Technology Executive Summary dioxide and/or nitrogen oxides when used on existing coal-burning facil- ities, although they are expected to reduce emissions in those applica- tions where they can be used. For example, DOEselected two projects to demonstrate technologies for use in the steel and cement industries. While beneficial in these industries, according to the evaluation results, the application of these technologies on a widespread basis is limited; therefore, their potential to reduce nationwide emissions is limited. Five of the 12 projects, including 2 of the above 9 projects, were also rated weak in other criteria relating to the technical readiness of the technology for demonstration; the adequacy of the technical and man- agement approach to design, construct, and operate the project; the ade- quacy of the project’s financing plan; and/or the adequacy of the project’s commercialization plan. However, these five projects were rated stronger against a number of other comprehensive evaluation cri- teria and were the highest ranked for the mix of technologies that DOE wanted to see demonstrated. Non$elected Projects With GAO’S review of DOE’S evaluation records showed that 14 of the 32 pro- Stroag Emission Reduction posals that were not selected were rated to have better potential for reducing nationwide emissions that cause acid rain than the 9 selected Potehtial projects that were rated weak in meeting this criterion. However, 6 of these 14 nonselected proposals were rated weak in meeting 4 or more of the other comprehensive evaluation criteria. Thus, while they were stronger on the emissions reduction criterion, their chances of successful demonstration and commercialization may be weakened by shortfalls in other areas. Picking the other nonselected proposals would have resulted in the selection of lower-ranked projects demonstrating technol- ogies similar to the projects that were selected. Given the current status of projects in the CCT program and in view of Matters for the nation’s current budget constraints, the Congress may want to con- Consideration by the sider amending the clean coal technology provision of Public Law lOl- Congress 121 to direct DOEto delay requesting proposals and selecting projects for rounds four and five of the program until it obtains additional demon- stration results from projects already in the program. GAOobtained and incorporated the views of DOEofficials on the factual Agency Cotients information presented. However, as requested by the Chairman’s office, GAO did not obtain official agency comments on a draft of this report. Page 6 GAO/RCED-90437 Clean Coal Technology C&dents Executive Summary 2 Coal, Energy, and the Environment 8 The Clean Coal Technology Program 8 Objectives, Scope, and Methodology 10 Chbpter 2 12 DOE’s Criteria and Round-Two CCT Program Objective Selection Official and Board 12 12 Prdcessfor Evaluating Evaluation and Selection Criteria 13 am/iSelecting Projects Evaluation Process and Results 14 Selection Official Process for Choosing Projects 18 Conclusions 19 Chkpter 3 20 Be& Projects Were Evaluation Criteria in Which Projects Were Rated Weak Many Round-Two Proposals Were Rated Weak in Meeting 20 25 Selkted but Many Several Criteria Habe Limitations in Funding of Future Rounds 25 Mekting DOE’s Conclusions 26 Matters for Consideration by the Congress 27 Evhluation Criteria Appendixes Appendix I: List of Projects Selected Under the Clean Coal 28 Technology Program’s Second Round Appendix II: Description of Clean Coal Technologies 29 Appendix III: Chronology of Major Events Related to the 30 CCT Program’s Second Round Appendix IV: Criteria Used to Evaluate and Select 31 Projects Appendix V: Summary of Guidance Used in Developing 33 Evaluation and Selection Criteria Appendix VI: Comparison of Guidance Used in 36 Developing Qualification, Preliminary, and Comprehensive Evaluation and Selection Criteria Appendix VII: Major Contributors to This Report 38 Tables Table 2.1: Evaluation Phases Used in Selecting Round- 13 Two Projects Page 0 GAO/RCED-90-67 Clean Coal Technology Contents Table 3.1: Nationwide Emission Reduction Potential for 21 the 16 Selected Projects’ Proposed Technologies Table 3.2: Project Proposals Rated Weak in Meeting 25 Certain Evaluation Criteria Figjre Figure 2.1: Comprehensive Evaluation Organization Chart 16 Abbreviations CCT Clean Coal Technology DOE Department of Energy GAO General Accounting Office NO, nitrogen oxides f% sulfur dioxide Page 7 GAO/RCED-90-67 Clean Coal Technology Chapter 1 ,i I&roduction I I Coal is one of our most abundant energy resources. It represents about Co/A,Energy, and the 80 percent of our fossil fuel resources and provides about 26 percent of Erj-vironment the nation’s energy needs. Coal-fired power plants produce more than 65 I percent of the electricity in the United States. Although coal is consid- ered an important resource in meeting present and future energy needs, coal combustion produces emissions that contribute to acid rain, Acid rain-which has been linked to a number of environmental problems, including forest damage in the United States and Canada-is formed when sulfur dioxide (so,) and nitrogen oxides (NO,) emitted into the atmosphere return to earth as acid components in rain or snow. Coal- burning power plants are the principle source of so, emissions and a major source of NO, emissions. Because of coal’s importance in meeting the nation’s future energy needs, several initiatives have been undertaken in recent years by both industry and the government to seek new technologies that will allow coal to be burned in an environmentally acceptable and efficient man- ner. About 20 million tons of SO,and 20 million tons of NO, are emitted annually in the United States. Electric utilities and industrial plants account for about 95 percent of so, emissions and about 50 percent of NO, emissions. On July 27, 1989, the administration proposed amend- ments to the Clean Air Act, including requirements to reduce annual so, emissions from fossil-fueled generators by approximately 10 million tons below 1980 levels and annual NO, emissions by 2 million tons below projected 2000 levels by December 31,200O. This proposal underscores the importance-and urgency-of industry and government efforts to develop new coal-burning technologies that will allow coal to continue to be used as a major energy source in future years. In 1984, under Public Law 98-473, the Congress set aside $750 million in The Clean Coal the Energy Security Reserve Fund to establish the Department of Technology Program Energy’s (DOE) Clean Coal Technology (CCT) program. The purpose of this government-industry, co-funded program is to assist industry in accelerating the commercialization of new coal technologies by demon- strating that they burn coal more cleanly, efficiently, and cost-effec- tively than current technologies. In December 1985, the Congress passed Public Law 99-190 authorizing DOEto use $400 million of the $750 mil- lion from the Energy Security Reserve Fund for the first solicitation, or round-one, of the CCT program. Under the program, DOEcan fund up to 60 percent of each project’s cost. Industry and other nonfederal sources are expected to fund the balance. Page 8 GAO/RCED-90-67 Clean Coal Technology Chapter 1 Introduction M)E issued the program’s first solicitation for project proposals in Febru- ary 1986. As of December 1989, DOE had cooperative financial assistance agreements with seven round-one project sponsors and was in the pro- cess of negotiating agreements with the sponsors of the remaining four round-one projects. DOE expects these negotiations to be completed by July 1990. Of the 7 funded round-one projects, 4 are in the design or construction phases and 3 are in the demonstration (operation) phase. We have issued two reports1 and testified twice2 on DOE’S first solicitation. In March 1987, the administration announced plans for expanding the CCT program. This expansion was based on a January 1986 report by U.S. and Canadian envoys that made several recommendations to reduce environmental problems associated with acid rain3 Among other things, the report recommended that the United States implement a 5-year pro- gram to demonstrate clean coal technologies that would be needed for a future acid rain control program and that the U.S. government and industry each provide $2.5 billion for the program. The administration accepted the recommendation of the special envoys and requested $2.5 billion over a 5-year period to demonstrate new clean coal technologies capable of being used in existing coal-burning plants. The administration also announced that future clean coal technology demonstration projects would be selected, where possible, to reduce emissions that cause acid rain. In December 1987, the Congress provided $575 million for the program’s second-round solicitation for project proposals. In February 1988, DOE solicited round-two proposals, and in September 1988, selected 16 projects from the 55 proposals received. As of December 31, 1989, one of the 16 selected round-two projects, which are listed in appendix I, had been withdrawn from the program and cooperative financial assis- tance agreements had been completed for 6 of these projects. DOE expects to complete the cooperative agreements for the remaining round-two projects by July 1990. ‘Fossil Fuels: Commercializing Clean Coal Technologies (GAO/RCED-89-80, Mar. 29, 1989) and Fossil Fuels: Status of DOEFunded Clean Coal Technology Projects as of March 16, 1989 (GAO/RCEDT 166FS, June 29,1989). 2Views on DOE’s Clean Coal Technology Program (GAO/T-RCED-88-47, June 22, 1988) and Status of 90/T-RCED-89-26, DOE Apr. 13, 1989). 3Joint Report of the Special Envoys on Acid Rain (Jan. 1986). Page 9 GAO/RCED90-67 Clean Coal Technology Chapter 1 Introduction In September 1988, the Congress provided an additional $575 million for a third round of the CCT program. In May 1989, DOEsolicited round- three proposals and in December 1989, DOEselected 13 projects from 48 proposals submitted. M)E expects to complete the negotiations for the round-three projects by December 1990. As of December 31,1989,39 projects were in the CCT program. DOEwas in the process of negotiating agreements with the sponsors of 26 of these projects, and of the 13 projects that had been funded, 3 were in the demonstration (operation) phase and none had been fully demonstrated. In October 1989, under Public Law 101-121, the Congress appropriated $1.2 billion for funding rounds four and five of the CCT program, of which $600 million is to be made available for round-four and $600 mil- lion for round-five. Thus, the Congress has appropriated a total of $2.75 billion for the program ($1.55 billion for the first three rounds and $1.2 billion for rounds four and five). Of the total $2.75 billion, $2.5 billion is for funding the program over a 5-year period from fiscal year 1988 through 1992. DOEplans to solicit project proposals for the fourth round in June 1990 and the fifth round in 1991. On March 9,1988, the Chairman, Subcommittee on Energy and Power, Objectives, Scope,and House Committee on Energy and Commerce, asked us to review DOE'S Methodology implementation of the CCT Program. Specifically, the Chairman requested information on the criteria and process used by DOEto select the program’s second round of projects. To respond to the Chairman’s request, we reviewed DOE'Sevaluation and selection criteria and the pro- cess DOEused to (1) develop the criteria, (2) evaluate proposals, and (3) select projects to determine if the selection of round-two projects was accomplished in accordance with the program’s objective and guidance. To determine the CCT program objective and related guidance, we reviewed the program’s legislation, applicable DOEregulations, and con- gressional reports pertaining to the program. We also reviewed the Joint Report of the Special Envoys on Acid Rain, the Innovative Control Tech- nology Advisory Panel Report that provided guidance for DOEto con- sider in developing evaluation and selection criteria, and the Vice President’s Task Force on Regulatory Relief recommendation that DOE consider selecting projects in states providing incentives to encourage the use of clean coal technologies. In addition, we reviewed public com- ments on the solicitation and DOEstudies or analyses prepared for the Page 10 GAO/RCED-90-67 Clean Coal Technology Chapter 1 Introduction I program. We reviewed DOE'Scriteria to ascertain if they were developed generally in agreement with the program’s objective and guidance. To review DOE'Sprocess for developing its project evaluation and selec- tion criteria, we interviewed three of the program’s Source Evaluation Board’s seven voting members, including its Chairman. We also inter- viewed its executive secretary and legal advisors assisting in the round- two process. In addition, we reviewed minutes of the Board’s meetings, other documents, and applicable DOEregulations. To review the process the Board used for evaluating proposals, we inter- viewed its Chairman and two of its members. We also reviewed the Board’s evaluation plan, written instructions provided to its evaluation teams, and the Board’s evaluation report. We randomly selected and reviewed ll(20 percent) of the 55 proposals received in response to the round-two solicitation to determine (1) if the evaluation teams’ and Board’s evaluations were done in accordance with the Board’s plan and procedures, and (2) whether the Board and evaluation teams consist- ently applied and evaluated the proposals in accordance with the pro- ject evaluation criteria. To determine how the final projects were selected for funding, we inter- viewed DOE'sproject selection official and reviewed his selection report to see how he applied the program’s selection criteria in choosing projects. We also compared the projects selected with the Board’s over- all ranking of the proposals. We also reviewed DOE'SFinancial Integrity Act reports to determine whether DOEhad identified any management control weaknesses regard- ing the process for developing the solicitation and evaluating the pro- posals We conducted our review from June 1988 through September 1989 in accordance with generally accepted governmental auditing stan- dards. In accordance with the Subcommittee Chairman’s request, we did not obtain official agency comments on a draft of this report. However, we did discuss the information in this report with DOEprogram officials and have included their comments in the report where appropriate. Page 11 GAO/RCED-90-W Clean Coal Technology DOE’s Criteria and Processfor Evaluating and !!3&xthg Projects DOEdeveloped an elaborate process for evaluating and selecting round- two clean coal technology projects. The criteria used to evaluate project proposals generally conformed to legislative and regulatory require- ments and other program guidance. Also, the criteria appeared to be consistently applied during the evaluation process. 1 The objective of the round-two CCT program was to select and cost- Ro$md-TwoCCT share projects that would demonstrate innovative clean coal technolo- Prdgram Objective gies that are (1) capable of being commercialized in the 199Os, (2) more cost-effective than current technologies, and (3) capable of achieving significant reductions of SO, and NO, emissions from existing coal-burn- ing facilities, particularly those that contribute to transboundary (cross- ing the border to Canada) and interstate pollution. The emphasis on a technology’s emissions reduction potential was linked to the recommen- dations contained in the special envoys’ report on acid rain, as discussed in chapter 1, and represents a major shift in program focus from the round-one project solicitation. The first solicitation was directed at dem- onstrating a broad slate of technologies to enhance the use of coal for all market applications and did not focus on the technologies’ potential for controlling emissions from coal combustion. (App. II provides a descrip- tion of the types of clean coal technologies.) DOE'Sregulations establish uniform policies and procedures for all DOE Selkction Official and financial assistance awards. For awards with expected values of over Board $10 million, the regulations require that a Source Evaluation Board be established to solicit and evaluate proposals and a Source Selection Offi- cial be appointed to select projects. On December 7, 1987, the Under Sec- retary of Energy appointed the Principal Deputy Assistant Secretary, Office of Fossil Energy, as the selection official. He was responsible for (1) appointing the Board, (2) reviewing the Board’s project evaluation and selection criteria, and (3) selecting projects. The selection official appointed the Board on December 8, 1987, to pre- pare evaluation and selection criteria and to evaluate proposals, The Board consisted of seven voting members, including the Chairman, two legal advisors, and an executive secretary. Eight of the 10 members were from DOEheadquarters, and 2 were from DOE'Stechnology centers. (App. III provides a chronology of events leading to the selection of the program’s second-round projects.) Page 12 GAO/RCED-90-67 Clean Coal Technology , Chapter2 DOE’s Criteria and Process for Evaluating and Selecting Projects / I DOEemployed a four-phase evaluation process for evaluating and select- Evz#luationand ing projects from the 66 proposals submitted in response to the round- Sel&tion Criteria two solicitation. As shown in table 2.1, a total of 24 criteria were used during the four phases to evaluate and select projects. Table 4.1: Evaluation Phases Used in Select(ng Round-Two Projects Phases Purpose Qualification (6 criteria) Prescribe basic program qualifications that proposed , projects must meet to be considered for preliminary evaluation, e. projects must use U.S. coal and be located in the United F tates. Preliminary evaluation (3 Prescribe standards by which proposals will be evaluated to criteria) assure that they address program objectives and contain sufficient technical, cost, and other information to undergo comprehensive evaluation. Comprehensive evaluation (11 Prescribe specific technical, business and management, criteria) and cost criteria on which proposals will be evaluated. Selection (4 criteria) Prescribe four program policy factors to consider in selecting projectsa aDOE’s round-two solicitation identified three program policy factors and one other factor to consider in selecting projects. We refer to these four factors as program policy factors. (App. IV provides more detailed information on the criteria used in eval- uating and selecting projects.) According to members of the Board that we interviewed, the process used to develop its evaluation and selection criteria was an informal process within DOE.The process was also systematic, according to DOE officials. Our analysis of the 24 criteria used to evaluate and select projects showed that, although developed in an informal manner, the criteria generally conformed to DOE'Sregulations and specific legislative and program guidance. For example, congressional legislation concern- ing the CCT program requires that at least 50 percent of a project’s cost be provided from nonfederal sources. Other congressional guidance pro- vided that the projects be located in the United States and use US. coal. These requirements were included in the qualification criteria. Also, the Congress, the special envoys’ report, and the Innovative Con- trol Technology Advisory Panel report recommended that the potential for reducing nationwide emissions and the cost-effectiveness of control- ling emissions be used as program criteria. These elements were included as two of the comprehensive evaluation criteria. Furthermore, all three of the preliminary evaluation criteria were developed in Page 13 GAO/RCED-90-67 Clean Coal Technology Chapter 2 DOE’8 Criteria and Process for Evaluating and Selecting Projecta accordance with program regulations, and all four program policy fac- tors that were to be considered in selecting projects followed guidance provided by the Congress, the special envoys’ report, the advisory panel, and the Vice President’s Task Force on Regulatory Relief. (App. V provides additional information on the guidance that DOEused in devel- oping its proposal evaluation criteria. App. VI lists each of the evalua- tion and selection criteria and identifies the sources used in developing the criteria.) 1 The Board developed an evaluation plan and established teams of Edduation Process experts to assist it in evaluating project proposals. The evaluation plan and Results described the procedures for the qualification and preliminary reviews as well as for the comprehensive evaluations. Qudlification Review The plan required each proposal to be reviewed initially to ensure that it met the six qualification criteria. To satisfy this requirement, the Phqse Board’s procurement member and at least two other Board members reviewed the proposals to determine if they met all six criteria. Propos- als found deficient were reviewed by the Board, who then voted whether to recommend to the selection official that the proposal be dis- qualified. This process resulted in 6 of the 66 project proposals being disqualified from further consideration. For example, five of the propos- als did not meet the qualification criterion which required that the spon- sor agree to provide at least 50 percent of the project’s cost for each phase of the demonstration. Also, five proposals did not contain a plan to repay the government’s investment in the project should the project’s technology be commercialized. As mentioned in chapter 1, we tested 11 proposals to determine whether the evaluations were done in accordance with the Board’s plans and pro- cedures and whether the evaluation criteria were consistently applied to the proposals. Our review disclosed that 9 of the 11 proposals met the qualification criteria, while 2 did not. These two proposals were included in the six proposals that the selection official disqualified. Prelimi nary Evaluation The Board used evaluation teams to assist it in the preliminary evalua- tion phase of its review of the remaining proposals. For this phase, the Phase J teams reviewed each proposal to determine if it contained sufficient information to undergo a comprehensive evaluation. When a team found that a proposal lacked sufficient information for further evaluation, two Page 14 GAO/RCED-90-W Clean Coal Technology Chapter 2 DOE% Criteria and Process for Evaluating and Selecting Projects Board members reviewed the team’s findings. If the members confirmed the team’s findings, the Board reviewed the proposal and voted on whether they should recommend to the selection official that the propo- sal be disqualified from further consideration. This process resulted in one additional proposal being disqualified. Co ‘prehensive Evaluation The 48 proposals that met the qualification and preliminary evaluation Pha, criteria underwent comprehensive evaluation. This phase of the evalua- 7 e tion process was the most detailed because it addressed the technical merits of each proposal, the business and management structure and I plan for conducting the demonstration and commercializing the technol- ogy, and the reasonableness of the estimated project costs. As shown in figure 2.1, the Board established seven teams of experts consisting of about 100 DOEstaff in technical, environmental, procure- ment, and other areas to evaluate the proposals. This approach was used in this phase because of the degree of expertise needed to review each proposal. Also, through legislation appropriating funding for the CCT program, the Congress mandated that DOEcomplete its evaluation and selection of projects within 160 days after the solicitation’s closing date. The teams were instructed to describe each proposal’s strengths and weaknesses and to rate the proposal for each criterion assigned to the team. The instructions contained work sheets that included a section for describing the proposal’s strengths and weaknesses, a summary state- ment of the strengths and weaknesses, and a rating. The instructions also described what justifies certain ratings. For example, an excellent rating was justified when the proposal’s strengths were substantially greater than its weaknesses, which were of minor or little importance. Our review of the nine randomly selected proposals that were compre- hensively evaluated showed that the team evaluations were done in accordance with the Board’s written procedures for evaluating propos- als. The results of the team evaluations were submitted to the Board for its evaluation. Board’s Evaluation and Using the team evaluations in conjunction with its own review of the Rabking u proposal, the Board also evaluated and rated each proposal against the comprehensive criteria. These evaluations were first done individually Page 16 GAO/RCED-90-W Clean Coal Technology Chapter 2 DOE’s Criteria and Process for Evaluating and Selecting Projects Figur/t 2.1: Comprehensive Evaluation Organkation Chart t t L t Demonstration ~Team Business and Business and @members) Commercialization Management Management Team Environment Team 1 cost Team Team 2 ethnical (10 members) (4 members) (4 members) Evaluation (8 members) 4 oadiness Team Nationwide Financial Commercialization (2 members) Nationwide Condition, Plan, Adequacy, Emission Plan Appropriateness, Emission and Capability Projects Reduction Reduction and belevance of Potential Sponsor’s Estimated Demonstration Potential Sponsor’s cost Credentials, Cost- Commitment to Experience, and Tephnical and Effectiveness EHSS= Project and Resources Commercialization . Technical Evaluation Team (65 members) Technical Readiness Adequacy, Appropriateness, and Relevance of Demonstration Technical and Management Approach aEnvironmental, health, safety, socioeconomic, and other site-related aspects by each Board member. The Board then discussed the individual evalua- tions and reached a consensus on each proposal’s strengths and weak- nesses for each of the criterion. The identified strengths and weaknesses Page 16 GAO/RCED-90-67 Clean Coal Technology Chapter 2 DOE’s Criteria and Prows for Evaluating and Selecting Projects found by the Board members were consistent with the evaluation teams’ assessments for the nine randomly selected proposals we reviewed. The Board used a quantitative scale to rate the technical merits of each proposal and a qualitative scale to rate the business and management criteria. The six technical criteria were rated on a scale of 0 to 100, in accordance with the evaluation plan. Scores of 39 or less meant that the proposal was considered to be weak in meeting the particular criterion. After discussing the proposal’s strengths and weaknesses for each of the applicable technical criterion, the Board developed a consensus of the proposal’s strengths and weaknesses and developed a final score by cri- terion Next, the weights contained in the plan for each of the six crite- ria were applied to the final scores to arrive at a weighted technical score for each proposal. The Board used a rating scale ranging from unsatisfactory to excellent to rate each of the four business and management criteria. (The scale consisted of eight categories: unsatisfactory, poor, fair, good minus, good, good plus, excellent minus, and excellent.) The Board considered a proposal to be weak in meeting a criterion if it was rated unsatisfactory or poor. When the Board developed its consensus strengths and weak- nesses, it also developed a consensus rating for each proposal for each of the four criteria. Finally, the Board applied the weights contained in its plan to the criteria rating to arrive at an overall consensus business and management rating for each proposal. The Board also considered the reasonableness, allocability, and allowa- bility of each project’s proposed cost but did not assign either a numeri- cal or qualitative rating to this criterion as it did with the technical and business and management criteria. DOE’S financial assistance regulations provide that project costs are not to be rated. After completing its evaluations, the Board developed a consensus rank- ing of the proposals. In developing this overall ranking, the Board used its numerical technical scores, the adjective business and management rating, and the relative importance of the technical, business and man- agement, and cost criteria, as stated in the solicitation. According to the solicitation, the technical criteria are of somewhat greater importance than the business and management criteria. Cost was viewed to be of minimal importance relative to the other criteria except when every- thing else was equal, in which case cost became a deciding factor. Page 17 GAO/RCED-90437 Clean Coal Technology Chapter 2 DOE’s Criteria and Process for Evaluating and Selecting Projects These results were presented in a report to the selection official. Among other things, the report contains the Board’s ranking of the proposals and information on each proposal, including its strengths, weaknesses, and rating for each criterion except cost. After the 48 round-two project proposals were evaluated, DOE’sselection Sel/xtion Official official chose 16 projects for funding under the CCT program. In choos- Processfor Choosing ing the projects, the selection official first considered the Board’s techni- Prqjects cal criteria evaluations since they were of somewhat greater importance than the other criteria, and then the Board’s business and management , and cost criteria evaluations. He also considered other information, such as the potential environmental impact of the proposed projects, and applied the selection criteria to select projects from the submitted pro- posals that would best satisfy the program’s goals and objectives. The criteria used to select projects consisted of four program policy fac- tors. Three of the factors were to ensure that the selected projects, taken collectively, complied with the program’s objectives, and included the desirability of selecting projects l for retrofitting and/or repowering existing coal-fired facilities that col- lectively represent a diversity of methods, technical approaches, and applications (including both industrial and utility); l that collectively produce some near-term reduction of transboundary transport of emitted so, and NOx; and . that collectively represent an economic approach applicable to a combi- nation of existing facilities that contribute significantly to trans- boundary and interstate transport of so, and NO, emissions in terms of facility types, sizes, and coal types. In addition to these three factors, the selecting official was to consider giving preference to projects in states where the state’s rate-making bodies treat clean coal technologies the same as pollution-control projects or technologies. In applying the above criteria, the selection official told us that he attempted to pick projects that represented a number of different tech- nical approaches and methods. In each case, he picked the proposal that, in his judgment, represented the best overall project within the technol- ogy option, according to his review of the proposals and his knowledge of proposed technologies. Page 18 GAO/RCED-SO-67 Clean Coal Technology Chapter2 DOE% Critmla and Procere for Evaluating and Selecting Projecta In addition, the selection official concluded that in no case was a non- selected project considered to be a better alternative to a selected project within the same technological grouping. Our review of the evaluation and selection results disclosed that the selecting official picked the high- est-ranked project for each technology selected for funding. No non- selected project with the same technical approach or method received a higher ranking than a selected project. We also found the selecting official’s selections to be consistent with the Board’s overall rankings. Nine of the 16 projects that were selected were the top 9 projects in the overall ranking by the Board. However, seven lower-ranked projects were selected to satisfy the program policy goal that projects representing a mix of technologies be included in the pro- gram. These seven projects represented different technologies and were the highest ranked within their technologies, although five of the seven were ranked below the 16th highest-ranked proposal. I The criteria that DOEdeveloped for evaluating round-two project propos- Co$clusions I als adequately considered congressional and other program guidance, and the comprehensive evaluation process that DOEestablished resulted in project proposals being consistently and thoroughly evaluated. DOE used the evaluation results, together with several broad program policy project selection considerations, to pick the highest-ranked projects for a variety of different technologies that it wanted to see demonstrated. Page 19 GAO/RCED-90-67 Clean Coal Technology Best Projects Were Selectedbut Many Have Limitations in Meeting DOE’S Ekhation Criteria As discussed in chapter 2, the major emphasis of round two of the CCT program was to demonstrate technologies that can significantly reduce nationwide emissions contributing to acid rain, Our review of DOE'S doc- umented evaluation and selection results showed that the selecting offi- cial picked the highest-ranked projects for the mix of technologies that DOE wanted to see demonstrated. However, many of the technologies may have limited potential to significantly reduce nationwide acid rain- causing emissions from coal-burning facilities. Also, some of the selected projects were rated weak in meeting other evaluation criteria. In fact, half of the 48 project proposals fared poorly against 3 or more of the evaluation criteria. I Of the 16 proposals that were selected for cost-sharing assistance, DOE Ev$luation Criteria in determined that 12 were weak in meeting 1 or more of its comprehen- Which Projects Were sive evaluation criteria. The technologies to be demonstrated by nine of Rat/cdWeak the selected projects were determined to have limited potential for reducing nationwide emissions from coal-burning facilities, three 1, / projects were rated weak in meeting the commercialization criterion, / and two in meeting the technical readiness for demonstration criterion. I Also, two projects were rated weak concerning their technical and man- agement approach, and one concerning its financing plan. SomeSelected Projects’ In assessing the emission reduction potential of a proposed project’s Technologies Have Limi ted technology, DOE considered the extent to which the technology, when used at existing coal-fired facilities, could (1) reduce nationwide emis- Nationwide Emission sions of so, and NON and (2) reduce transboundary and interstate air Reduction Potential pollution. DOE determined that the particular applications (design concepts and features) of the technologies to be demonstrated at 9 of the 16 selected projects had limited potential for reducing emissions on a nationwide basis. These nine projects are to receive about $281.4 million in federal funds. As shown in table 3.1, the technologies’ nationwide emission reduction potential for the nine projects with limited potential ranged from 0.2 million tons per year to 2.2 million tons per year. In compari- son, the technologies’ nationwide emission reduction potential for the seven projects with greater potential ranged from 6.5 million tons per year to 16.8 million tons per year. Page 20 GAO/RCED-W-67 Clean Coal Technology Chapter 9 Rest Pro.jecta Were Selectedbut Many Have Limitationa in Meeting DOE’s Evaluation Criteria Table $1: Nationwide Emission Reduc on Potential for the 16 Selected Million tons per year -- Projec 9”8’ Proposed Technologies Sulfur Nitro en dioxide oxs de Total Projecta emissions emissions emissions Stronger reduction potential A 12.6 4.2 16.8 ii-- 12.1 0.0 12.1 l C --- 12.1 0.0 12.1 D -____--- 9.4 0.0 9.4 I E 7.2 1.9 9.1 F -.--~ 5.4 3.7 9.1 G 4.7 1.8 6.5 Limited reduction potential ----- H -. 0.0 2.2 2.2 I --.~-_- 1.2 0.3 1.5 J..-- .-_I_-- 0.0 0.9 0.9 K 0.0 0.9 0.9 L ______I. 0.5 0.2 0.7 M ..--- --- 0.4 0.0 0.4 N .__-.-- - .____- 0.0 0.3 0.3 0___.-__.- 0.2 0.0 0.2 P 0.2 0.0 0.2 aWe did not identify the selected projects in this table by their title or sponsor because DOE is still in the process of negotiating cooperative financial assistance agreements with the project sponsors. We have therefore used an alphabetic letter. As previously mentioned, the administration’s July 1989 legislative pro- posal to amend the Clean Air Act calls for an annual nationwide reduc- tion of approximately 10 million tons in so, emissions below 1980 levels and 2 million tons in NO, emissions below projected 2000 levels by December 3 1,200O. DOE’s Basis for Selecting Projects In both rounds-one and -two, DOE'Spolicy has been to select projects rep- With Limited Nationwide resenting as many different clean coal technologies as possible. Accord- Emission Reduction Potential ing to DOEofficials, the nine projects with technologies having limited potential for nationwide emission reduction were selected to provide technological diversity within the program. As discussed in chapter 2, our analysis of DOE'Sevaluation records showed that each of the nine projects was the highest-ranked proposal submitted for the particular Y technology. The nine projects are to demonstrate various applications of the following technologies or processes: flue gas cleanup to control NO, Page 21 GAO/RCED-90-67 Clean Cod Technology Chapter 3 Rest Projecte Were Selected but Many Have Llmltblona lu Meetiug DOE’s Evaluation Criterla emissions; coal preparation to reduce sulfur; atmospheric and pres- surized fluidized-bed combustion to reduce so, and NO, emissions; and industrial processes for reducing SO,emissions. Several of the nine projects were selected to demonstrate technologies that could be used to reduce NO, emissions on different types of boilers in the utility industry-or to demonstrate technologies for use in other markets, such as steel and cement industries. While these technologies have the potential to reduce emissions in the specific areas where they can be used, their application is limited in significantly reducing nation- wide emissions that cause acid rain. For example, according to the Board Chairman, so, emissions account for about 80 percent of the total acid rain-causing emissions from coal-fired power generating plants, and NO, emissions account for about 20 percent. Therefore, technologies that would only reduce NO, emissions were rated lower on the emission reduction criterion than technologies that would reduce SO,emissions or both so, and NO, emissions. According to the Board Chairman, the atmospheric and pressurized flu- idized-bed combustion technologies are expected to reduce emissions and result in dollar savings per ton of emissions removed (compared to scrubbers), should they be used at existing coal-fired facilities to meet an increase in the demand for electricity. However, if increased generat- ing capacity is not needed, these technologies would probably not be used, and their application would be limited in reducing nationwide emissions. The other seven projects whose technologies were rated stronger in meeting the nationwide emission reduction criterion are to demonstrate various applications of the following technologies: advanced slagging combustion; flue gas cleanup to reduce both SO,and NO, emissions, or only so, emissions; and integrated gasification combined-cycle technology. Nonselected Projects With Our review of DOE'sevaluation records showed that 14 of the 32 project Strbnger Nationwide proposals that were not selected for funding were rated to have better potential for reducing nationwide acid rain-causing emissions than the 9 Err&ion Reduction selected projects that were rated weak in meeting this criterion. How- Pot;ential ever, 6 of these 14 nonselected proposals were rated weak in meeting * four or more of the other comprehensive evaluation criteria. Thus, while they were stronger on the emissions reduction criterion, their chances of Page 22 GAO/RCED-90-67 Clean Coal Technology Chapter 3 Rest Projects Were Selected but Many Have Limitations in Meeting DOE’s Evaluation Criteria successful demonstration and commercialization were apparently weak- ened by shortfalls in other areas. I Of the other eight nonselected proposals: . Two were to demonstrate a technology for flue gas cleanup to reduce so,. Our analysis showed that DOEselected another flue gas cleanup pro- ject for funding that was ranked higher and had greater nationwide emission reduction potential than these two nonselected proposals. . Two were to demonstrate the integrated gasification combined-cycle technology. These two proposals were also lower ranked and had less potential for reducing nationwide emissions than the project DOE selected to demonstrate this technology. . One was to demonstrate an atmospheric fluidized-bed combustion tech- nology and another was to demonstrate a pressurized fluidized-bed com- bustion technology. Although these two nonselected proposals had greater nationwide emission reduction potential than the two projects that were selected to demonstrate these technologies, the selected projects were among the four highest-ranked project proposals and were rated stronger in meeting the other comprehensive evaluation criteria. . One was to demonstrate a particular technology application for NO, emission reduction, This proposal was ranked lower than the project that was selected to demonstrate a similar technology application, and it also was rated weak in meeting three of the evaluation criteria. The selected project was one of the nine highest-ranked proposals and was rated stronger in meeting the other evaluation criteria. . One proposal was to demonstrate coal-cleaning processes combined with post-combustion emissions control. This proposal was rated weak in meeting three of the evaluation criteria. DOEdid not select any proposal to demonstrate this technology. As indicated above, if DOEhad picked more projects with greater poten- tial to reduce nationwide emissions from coal-fired facilities, it would have resulted in the selection of lower-ranked projects to demonstrate technologies similar to those that were selected. Other Weaknesses Three of the 16 selected projects were rated weak in meeting DOE'Scom- mercialization criterion. (Two of these three projects were also rated weak regarding the emission reduction criterion.) The commercialization * criterion was used to evaluate the adequacy of the sponsor’s plan for Page 23 GAO/RCED-90-67 Clean Coal Technology Chapter 3 Best Projects Were Selected but Many Have LJmitations in Meeting DOE’s Evaluation Criteria bringing the technology from the demonstration to widespread commer- cial application in the 1990s. Part of the round-two CCT program objec- tive was to demonstrate technologies that were capable of being commercialized in the 1990s. The quality of the commercialization plan, along with other factors, such as demonstration results, affect the tech- nologies’ potential for commercialization. In evaluating projects’ commercialization plans, DOE considered the strategy proposed by sponsors for financing, licensing, manufacturing, and marketing the technology. DOE also considered the market potential for the technology, the role of project participants in the commercializa- tion process, and other factors affecting commercialization. Three of the 16 selected projects were also rated weak in meeting one or more of the following evaluation criteria: (1) the technical readiness of the technology for demonstration; (2) the adequacy and reasonableness of the technical and management approach to design, construct, and operate the project; and (3) the adequacy and completeness of the pro- ject’s financing plan. These criteria, along with others, relate to the pro- ject’s potential for a successful demonstration. Project financing, one of the criterion in which a project was rated weak, has been a problem in the CCT program, as we reported in March 1989.’ Our report discussed DOE’S delays in completing the round-one project cooperative agreements, which occurred primarily because of the time it took to resolve sponsors’ problems with project financing and other bus- iness arrangements. Delays have also occurred in completing cooperative agreements under round-two and GAO’S past work has also shown that the funded round- one projects were experiencing coordination, equipment, and financing problems that have caused delays in completing project phases, cost overruns, and proposed project modifications.2 ‘Fossil Fuels: Commercializing Clean Coal Technologies (GAO/RCED-89-80, Mar. 29, 1989). “Views on DOE’s Clean Coal Technology Program (GAO/T-RCED88-47, June 22, 1988) and Status of DOE-Funded Clean Coal Technology Projects (GAO/T-RCED-89-26, Apr. 13,1989). Page 24 GAO/RCED-90-67 Clean Coal Technology .--. 1’ ’ 1 . Chapter 8 , Rest Projects Were Selected but Many Have Llmltatlons in Meeting WE’s Evaluation Crit.erh Not only did many of the 16 selected projects have limited potential to M ‘y Round-Two reduce nationwide emissions, but more than half of the 48 proposals Pro 7 osals Were Rated evaluated did not fair well in meeting this criterion. A large percentage We ‘k in Meeting of the 48 proposals were also weak in more than one area. For example, 60 percent of the proposals were rated weak in meeting two or more of Sev1 ral Criteria the evaluation criteria, and 50 percent were rated weak in meeting three or more criteria. As shown in table 3.2, both the selected projects and the overall universe of project proposals were rated weak by DOEin meeting the same comprehensive evaluation criteria. Table 3.2: Project Proposals Rated Weak in Mee ,Ing Certain Evaluation Criteria Number of proposals rated weak 46 / 16 Projects proposals , Criteria selected evaluated Nationwide emission reduction potential 9 27 i Commercialization plan 3 27 Technical readiness 2 77 Technical and management approach 2 16 Financial plan 1 14 Although not a problem in the selected projects, one other criterion in which 17 of the 48 proposals were rated weak was in the adequacy, appropriateness, and relevance of the demonstration project to enhance technologies, techniques, or processes, and to provide new information that would enable the private sector to make rational commercialization decisions. As noted in chapter 1, in December 1989, WE selected 13 projects under Funding of Future the round-three solicitation and expects to complete the negotiations for Rounds their funding by December 1990. This brings to 39 the total number of projects in the CCT program. Our past work has shown that problems have delayed finalizing project cooperative agreements, delayed comple- tion of various project phases, and extended the estimated completion dates for some projects. According to DOE,as of December 31, 1989, cooperative agreements had been signed with project sponsors for 13 projects (7 of the 11 round-one projects and 6 of the 15 round-two projects) and 3 of the 13 projects were in the demonstration phase-no projects had been fully demonstrated. Page 25 GAO/RCED-90-67 Clean Coal Technology Chapter 3 Rest Projects Were Selected but Many Have Limitations in Meeting DOE’s Evaluation Criteria In October 1989, under Public Law 101-l 21, the Congress appropriated $1.2 billion for funding rounds four and five of the CCT program, of which $600 million is to be made available beginning October 1, 1990 and $600 million beginning October 1, 1991. This legislation also stipu- lated specific dates by which requests for project proposals are to be issued and projects are to be selected. The request for round-four pro- posals are to be issued by June 1, 1990, and the projects selected by February 1, 1991; the request for round-five proposals are to be issued by September 1, 1991, and the projects selected by May 1, 1992. Consistent with the legislation, DOEplans to request round-four project proposals in June 1990. However, based on the current status of the 39 projects in the CCT program, it may be prudent to delay the planned solicitation and selection of additional projects until DOEobtains demon- stration results from some of the projects already in the program. This information could then be used to focus the remaining funds on the more promising technologies. The major drawback to delaying rounds four and five is that there could be some excellent project proposals that would not be considered for funding until a later date. However, if one assumes that the better projects would have been submitted during the first three rounds of the program, the chances of postponing the selec- tion of quality projects may not be that high-especially when one con- siders the shortcomings DOEidentified with the projects proposals that were not selected in round two. Although most of the selected round-two projects fell short of meeting Conclusions all of DOE'Sproposal evaluation criteria, they were the best projects sub- mitted for the mix of technologies that DOEwas interested in seeing demonstrated. However, many of the technologies selected for demon- stration may have limited potential for achieving nationwide emission reductions when used at existing coal-burning facilities. Also, some of the selected projects may have difficulties in successfully demonstrat- ing, and ultimately commercializing, their technologies. With the emission reduction emphasis placed on the round-two solicita- tion, DOEcould have selected more projects with greater potential to meet the emission reduction criterion. However, if DOEhad picked more projects with greater potential to reduce nationwide emissions from coal-fired facilities, it would have resulted in (1) the selection of lower- ranked projects demonstrating technologies similar to the projects that were selected, and (2) projects selected which may not be successfully demonstrated or commercialized because of weaknesses in other criteria. Page 26 GAO/RCED-90-67 Clean Coal Technology \, f chnpter3 Beet ProjecU Were Selectad but Many Have Limitadona in Meeting DOE’s JZvaluation Criteria This could indicate that WE may have problems in identifying and fund- ing additional promising clean coal technology projects in future rounds. DOEplans to request round-four project proposals in June 1990 and the fifth and final round in 1991. However, in view of the current status of the projects already in the program, and the problems experienced to date, we believe that the Congress needs to evaluate the pace and focus of rounds four and five of the program. It seems that an evaluation of the results of some of the current demonstration projects is needed before DOEsolicits and selects additional projects under rounds four and five of the program. This would allow DOEto make more informed deci- sions regarding the identification, selection, and funding of the more promising technologies in future rounds of the program and help ensure that the funds allocated to this program are effectively and efficiently spent. I Given the current status of projects in the CCT program and in view of Ma&em for the nation’s current budget constraints, the Congress may want to con- Cotisideration by the sider amending the clean coal technology provision of Public Law lOl- Congress 121 to direct DOEto delay requesting proposals and selecting projects for rounds four and five until DOEobtains demonstration results from some of the projects already under the program. Page 27 GAO/R~SO87 Clean Coal Technology Apghdix I I&t of Projects SelectedUnder the Clean Coal Technology Program’s SecondRound Sponsor Project Project location American Electric Power Pressurized Fluidized-Bed New Haven, West Virginia Service Corporation, ;;;%stion Repowering Columbus, Ohio The Babcock & Wilcox Coal Reburning for Cyclone Cassville, Wisconsin Companv, Alliance, Ohio Boiler Nitroaen Oxide Control The Babcock &Wilcox Demonstration of the SOX- Dilles Bottom, Ohio Company, Alliance, Ohio NOX-ROX BOX Post- Combustion Flue Gas Cleanup Process Bethlehem Steel Corporation, Innovative Coke Oven Gas Sparrows Point, Maryland Bethlehem. Pennsvlvania Cleanina Combustion Engineering, Innovative Clean Coal Springfield, Illinois Inc., Windsor, Connecticut Gasification Repowering Project Combustion Engineering, Post-Combustion Dry Yorktown, Virginia Inc., Windsor, Connecticut Sorbent Injection Technology Demonstrationa Combustion Engineering, WSA-SNOX Technology for Niles, Ohio Inc., Windsor, Connecticut Catalytically Reducing Sulfur and Snamprogetti, USA Inc., Dioxide and Nitrogen Oxides New York, New York from Flue Gas Otisca Industries, Ltd., Production of Compliance Oneida, New York; Syracuse, Syracuse, New York OTISCA FUEL Coal Water New York; Jamesville, New Slurry) and its L ombustion in York Retrofitted Industrial Boilers Passamaquoddy Tribe, Innovative Sulfur Dioxide Thomaston, Maine Thomaston, Maine Scrubbing System for Coal Burninq Cement Kilns Pure Air, Allentown, Advanced On-Site Flue Gas Gary, Indiana Pennsylvania ~- Desulfurization Process Southern Company Services, Advanced Tangentially-Fired Lynn Haven, Florida Inc., Birmingham, Alabama Combustion Techniques for Reduction of Nitrogen Oxides Southern Company Services, Advanced Wall-Fired Rome, Georgia Inc., Birmingham, Alabama Combustion Techniques for --Reduction of Nitrogen Oxides Southern Company Services, Demonstration of the Newman, Georgia Inc., Birmingham, Alabama Chiyoda Thoroughbred-121 Flue Gas Desulfurization Process Southern Company Services, Selective Catalytic Reduction Pensacola, Florida Inc., Birmingham, Alabama Technolo y for Control of Nitroaen 8 xides Southwestern Public Service Circulating Fluidized-Bed Amarillo, Texas Company, Amarillo, Texas Repowering Project TransAlta Resources Low Nitroaen Oxide/Sulfur Marion. Illinois Investment Corporation, Dioxide BGrner Retrofit for Alberta, Canada Utility Cyclone Boilers aProject withdrew Page 28 GAO/RCED90437 Clean Coal Technology Appendix II Description of Clean Coal Technologies DOEdefines clean coal technologies as any advanced coal-based system that offers significant potential for improved environmental and eco- nomic performance in utility and industrial applications. These technol- ogies remove harmful emissions from coal prior to the coal combustion process, during combustion, after combustion or by converting coal to a cleaner burning liquid or gaseous fuel. Pre-CIombustion Pre-combustion technologies pertain to coal preparation or coal-cleaning techniques that remove sulfur from coal before the coal reaches the Technologies boiler. Coal cleaning includes coal preparation and fuel upgrade. I Comt)ustion Technologies Combustion technologies include advanced combustion processes that // remove so, and/or NO, emissions while burning coal inside the combustor I or boiler. so, emissions are controlled by using an agent, such as lime- stone, to chemically react with and neutralize the so, while NO, emissions are reduced by controlled or multi-stage burning. Combustion technolo- gies may include retrofit technologies, which are added to existing power plants to reduce emissions, or repowering technologies, which replace or repower an existing plant’s boiler. Repowering technologies reduce emissions and have the potential to increase plant efficiencies. Examples of repowering technologies include atmospheric and pres- surized fluidized-bed combustion. Retrofit combustion technologies include limestone injection multi-stage burning, in-duct sorbent injection, gas reburning, and advanced slagging combustors. Post-Combustion Post-combustion technologies consist of advanced devices for cleaning Technologies the flue gases released from coal boilers. These technologies include advanced flue gas cleanup devices (which include combined SO,/NO, con- trol, NO, control, so, control-injection, and so, control-tailgas), in-duct sorbent injection, and advanced scrubbers. Coal Conversion The coal conversion process converts coal into a cleaner burning liquid or gaseous fuel. Coal conversion includes the following generic technolo- Technologies gies: coal liquefaction, surface coal gasification, underground coal gasifi- cation, and integrated gasification combined-cycle, a repowering technology. * Page 29 GAO/RCED-90-67 Clean Coal Technology Appendix III L Chronology of Major Events Related to the CCT’ Program’s SecondRound Date Major event December 7,1987 Selection official designated December 8,1987 Source Evaluation Board established December 22,1987 Public Law 100-202 sianed bv the Presidenta January 28,1988 Draft solicitation issued February 5, 1988 Public comments due on draft solicitation February 22, 1988 Final solicitation issuedb March 15, 1988 Pre-oroposal conference held May 23,1988 Closing date for receipt of proposalsb May 31,1988 Proposal evaluations started July 8, 1988 Sponsors of proposals failing qualification or preliminary evaluation notified July 29, 1988 Evaluations completed September 8, 1988 Board report issued to selection official September 27, 1988 Selection statement sianed bv selection officialb September 28, 1988 Selections announced BPublic Law loo-202 provided funding and other program guidance for round-two of the CCT program. bThe timing of these events was in accordance with Public Law 100-202,which established maximum time frames between the events. Page 30 GAO/RCED-9087 Clean Coal Technology \ Appenklix IV Crhria Used to Evaluate and SelectProjects I The project must be located in the United States. Quaiification Phase Evaluation Criteria The project must use U.S. coal(s). The sponsor must agree to provide at least 50 percent of total project cost with at least 50 percent in each project phase. The sponsor must have access to, and use of, the proposed site for the duration of the project. The sponsor project team must be identified and committed to fulfilling its role in the project. The sponsor agrees that, if selected, it will submit a plan to repay the federal government’s investment. The proposal must be consistent with the solicitation objectives. Preliminary Eva(uation Phase The proposal must contain sufficient technical, cost, and other informa- Crit$ria tion, as described in the solicitation, to enable comprehensive evaluation, The proposal must be signed by a responsible official of the sponsor. Comprehensive Evaluation Phase Criteria ~ ---. Technical -.l-__l-- Criteria National emission reduction The extent to which the technology, when used at existing potential coal-fired facilities, can reduce national emissions of sulfur dioxide and/or nitrogen oxide and reduce transboundary and interstate air pollution. Cost effectiveness The extent to which the technology, when used at existing coal-fired facilities, is likely to improve the cost-effectiveness -. of controlling sulfur dioxide and nitrogen oxide emissions. Technical .--- readiness ---. Technical readiness of the technology for demonstration. --- Adequacy, Adequacy, appropriateness, and relevance of the project to appropriateness, and contribute to the enhancement of technologies, techniques, or relevance of demonstration processes, and provide new information to enable the private sector to make rational commercialization decisions. Environmental, health, Adequacy and appropriateness of proposed approaches to safety, socioeconomic, and meet and exceed all environmental, health, safety, and other site-related asoects socioeconomic reauirements durina the oroiect. Technical and management Reasonableness and adequacy of the technical approach to approach design, construct, operate, and if applicable, dismantle the oroiect. (continued) Page 31 GAO/RCED-90-67 Clean Coal Technology Appendix IV Crltmla Used to Evaluate and Select Projects Business and management criteria Financial condition, plan, Adequacy and completeness of the plan to finance the and capability project. Sponsor’s commitment to Degree of priority placed by the team’s management on the project and project and subsequent commercialization. commercialization Commercialization plan Adequacy of the sponsor’s plan to commercialize the technology in the 1990s. Sponsor’s credentials, Credentials, experience, and commitment of the sponsor, key experience, and resources personnel, and other resources needed to support the project. Cost Criteria Project’s estimated cost Reasonableness, allocability, and allowability. Seiection Phase Criteria 1 Pragram Policy Factors The desirability of selecting projects for retrofitting and/or repowering existing coal-fired facilities that collectively represent a diversity of methods, technical approaches, and applications (including both indus- trial and utility). The desirability of selecting projects that collectively produce some near-term reduction of transported transboundary sulfur and nitrogen emissions. The desirability of selecting projects that collectively represent an eco- nomic approach applicable to a combination of existing facilities that significantly contribute to the transboundary transport of sulfur and nitrogen emissions in terms of facility types, sizes, and coal types. The desirability of encouraging the adoption of the technologies and considering giving preference to projects in states where the state’s rate- making bodies treat clean coal technologies the same as pollution-control projects. Page 32 GAO/RCED-90-W Clean Coal Technology Summary of Guidance Used in Developing Evtiuation and Selection Criteria DOE used the following guidance in developing its criteria for evaluating and selecting project proposals under round-two of the CCT program. DOE’S Assistance Regulations (10 CFR Subchapter H) prescribed the solicitation’s format and required that it contain the evaluation criteria, including the relative importance assigned to each criteria, to provide the basis for ascertaining significant distinctions among proposals. The regulations also required that if other factors were to be used in select- ing projects, they be specified in the solicitation. In addition, the regula- tions contained criteria, such as the overall technical feasibility of the project and the sponsor’s qualifications, that, to the extent applicable, were to be considered in evaluating proposals. Since the regulations were applicable to all assistance programs, the Board was permitted to develop additional criteria applicable to the program’s goals in addition to the criteria in the regulations. 1 The regulations required the Board to use, to the extent practicable, DOE Procurement DOE’S procurement guidelines in developing the so1icitation.l The Board, Guidelines the selection official, and others who participated in the preparation of solicitations and evaluation and selection of proposals are also to use these guidelines. The guidelines required the solicitation to contain the program’s evaluation and selection criteria, including its relative weights or importance. The guidance also stated that the criteria con- tained in the solicitation must be used to evaluate proposals and may not be changed without the approval of the selecting official and an amendment to the solicitation. Congressional requirements for the program were contained in Public Congressional Laws 99-190 and 100-202. The Conference, Senate Committee on Appro- Guidance priations, and House Committee on Appropriations reports accompany- ing these laws also provided guidance for the program. Public Law lOO- 202 incorporated the requirements of Public Law 99-190. This law authorized DOE to fund up to 50 percent of the project’s cost. The congressional reports contained guidance that was primarily techni- cal in nature and involved the technology’s emission reduction, cost- effectiveness potential, and applicability to existing facilities. The ‘Acquisition Regulations Handbook, Source Evaluation Board, U.S. Department of Energy, (May 1984). Page 33 GAO/RCED-SO-07 Clean Cod Technology Appendix V Summary of Guidance Used in Developing Evaluation and Selection Criteria reports also included general guidance, such as demonstrating a diver- sity of technologies, requiring the project to be located in the United States, and having the sponsor repay the government its investment if the technology is commercialized. In March 1985, President Reagan and the Prime Minister of Canada Spkcial Envoys on appointed special envoys to assess the problems associated with acid A&d Rain rain and to recommend solutions. In January 1986, the envoys recom- mended the following four project selection criteria.2 I . The US. government should co-fund projects with the greatest potential for emission reduction measured as a percentage of sulfur dioxide or nitrogen oxide emissions removed. I . Among projects with similar potential, funding should go to those that reduce emissions at the lowest cost per ton. . More consideration should be given to projects that demonstrate retrofit technologies applicable to the largest number of existing sources, espe- cially those that, because of their size and location, contribute to air pol- lution across the U.S.-Canadian border. . Special consideration should be given to technologies that can be used at facilities currently using high-sulfur coal. In March 1987, the President directed DOE to select projects consistent, as fully as practicable, with the envoys’ recommendations. In response to a March 1987 presidential directive, DOE established the Innovative Control Innovative Control Technology Advisory Panel on April 27,1987, with Technology Advisory the Under Secretary of Energy as Chairman. This Panel, which advises Panel DOE on funding and selecting projects for the CCT program, consisted of 39 members representing federal and state agencies, coal mining and utility companies, environmental and citizen groups, unions, the research community, and Canada. At its first meeting on September 30, 1987, the Panel was briefed on the program’s first solicitation, the draft appropriations bills, congressional and envoys’ reports, and comments from the four public meetings. Using this information, the Panel developed guidance for DOE to consider in developing the program’s project evaluation and selection criteria. This 2,Joint Report of the Special Envoys on Acid Rain (Jan. 1986). Page 34 GAO/RCED-90-67 Clean Coal Technology Appendix V Summary of Guidance Used in Developing Evaluation and Selection Criteria guidance was presented to DOEin December 1987 and covered the pro- ject’s technical and business and management aspects.” -- In March 1987, President Reagan asked the Vice President’s Task Force Vice President’s Task on Regulatory Relief to examine incentives and disincentives to the dem- For& on Regulatory onstration and deployment of new technologies. The Task Force recom- Reli&f mended that DOEconsider giving preference to projects in states that offer regulatory incentives to encourage such technologies. On January , 23, 1988, the President accepted this recommendation. 1 I To obtain the public’s views and comments on the program, DOE hosted a Public Meetings public meeting in each of the following cities in August and September 1987: Albuquerque, New Mexico; St. Louis, Missouri; Pittsburgh, Penn- sylvania; and Washington, D.C. The results of these meetings were sum- marized and furnished to the Board and the Advisory Panel for their consideration. “Report to the Secretary of Energy Concerning Factors to be Considered ~---in the First Innovative Clean Coal Technologies Program Solicitation (DOE/EH 0069, Dec. 1987). Page 35 GAO/RCED-90-67 Clean Coal Technology Applendix VI I @mparison of Guidance Used in Developing QUalification, Preliminary, and Comprehensive Evaluation and SelectionCriteria Source of Criteria DOE Congressional Advisory P.L. 99-190 regulations reports panel Zualification Criteria The project must be located in the US. X X ~~~,Ps;oject must use U.S. X The sponsor must agree to provide at least 50 percent of total project cost with at least 50 percent in each project phase ---_ X -~- The sponsor must have access to, and use of, the proposed and alternate site for the duration of the proiect X X The sponsor’s project team must be identified and committed to fulfilling its role in the project_----- X X The sponsor agrees that, if selected, it will submit a plan to repay the federal aovernment’s investment X Prelimlnary evaluation criteria ---.--_-- The proposal must be consistent with the solicitation objectives -__---l_ _..-- ~ X The proposal must contain sufficient technical, cost, and other information, as described in the solicitation, to enable comprehensive evaluation --.- X ____- -.- .--- - The proposal must be signed by a responsible official -----_____of the sponsor ___- X Source of Criteria DOE Congressional Envoys’ Advisory -.__- -- regulations reports -___ report panel Comprehensive -_.- evaluation criteria _______ ___._~..___..- Technical --___ __-- .- .--. __. --~-.. National emission reduction potential -_________-.___------.~ X - _____~~~. X X Cost X -.-- effectiveness . ..--.-___ ..-- X X Technical readiness X X (continued) Page 36 GAO/RCED-90-67 Clean Coal Technology Appendix VI Comparbon of Guidance Used in Developing Qulification, Prelimimuy, and Comprehensive Evaluation and Selection Criteria Source of Criteria DOE Congressional Envoys’ Ad::3 reaulations reports retbort Adequacy, appropriateness, and relevance of demonstration X X X Environmental, health, safety, socioeconomic and other site related asoects X X Technical and management approach X X Business and manaaement Financial condition, plan, and capability X Sponsor’s commitment to project and commercialization X X -__________ Commercialization plan X X -X Sponsor’s credentials, experience, and resources X X cost Reasonableness,allocability and allowability X Source of Criteria Congressional Envoys’ Advitix reports report Selection criteria - Program policy factor@ - The desirability of selecting projects for retrofitting and/or repowering existing coal-fired facilities that collectively represent a diversity of methods, technical approaches, and applications (including both industrial and utility) X X X The desirability of selecting projects that collectively produce some near-term reduction of transboundary transport of emitted sulfur dioxide and nitrogen oxide X X X ihe desirability of selecting projects that collectively represent an economic approach applicable to a combination of existing facilities that significantly contribute to transboundary and interstate transport of sulfur dioxide and nitrogen oxide in terms of facility tvoes and sizes and coal tvoes X X X aOne other consideration in selecting projects was to consider giving preference to projects in states where the state’s rate-making bodies treat clean coal technologies the same as pollution control projects. This consideration is based on the Task Force on Regulatory Relief recommendation to give such consideration and the Advisory Panel’s recommendation not to give any geographic preferences. Page 37 GAO/RCED-90-67 Clean Coal Technology Apdndix VII I MBjor Contributors to This Report j Resources, Marcus R, Clark, Jr., Advisor Cokununity , and Francis J. Kovalak, Assignment Manager Ecbnomic Debelopment Division, Wbhington, DC. lade@hia Re@ona1 Frank W. Imbrogno , Evaluator Office Y GAO/RCED-9087 Clean Cod Technology www Page 38 i Offit*ia.l hsintw
Fossil Fuels: Pace and Focus of the Clean Coal Technology Program Need to Be Assessed
Published by the Government Accountability Office on 1990-03-19.
Below is a raw (and likely hideous) rendition of the original report. (PDF)