GAO Report on DOE Restructuring of FutureGenA February 2009 GAO report on the Department of Energy, FutureGen project describes how the decision to restructure the project in 2008 was based on inaccurate cost estimates.

While the initial $950 million estimated price was based in constant 2004 dollars, the later $1.8 billion estimate was a life cycle cost out to 2017 with inflation accounted for

If the same estimate process were used, the increased cost of the project would be $1.3 billion (not $1.8 billion), an increase of 370 million (+39%). Given the rising costs of steel, cement, labor, and the faltering economic conditions, the 39% price increase appears far more reasonable.

From the "Results in Brief" section of the report,

DOE did not use sufficient information to support its decision to restructure FutureGen. According to our recent work and best practices, a decision to terminate or significantly restructure an ongoing program should be informed by timely and sufficient information on the costs, benefits, and risks of such a decision. DOE did not prepare a comprehensive analysis of the costs, benefits, and risks of its decision to replace the original FutureGen with the restructured program. DOE made its decision based, in large part, on its conclusion that construction and material costs for the original program would continue escalating substantially in the indefinite future and that life-cycle costs were likely to double. However, according to economic forecasting organizations, such as DOE’s Energy Information Administration, significant cost escalations for building power plants, in general, do not typically continue in the long run. Also, DOE reached this conclusion by comparing its cost estimate for the original FutureGen ($950 million in constant 2004 dollars) with the Alliance’s 2006 estimated life-cycle costs for the program through 2017 (about $1.8 billion, considering inflation). In explaining his decision to restructure FutureGen, the Secretary of Energy noted that the projected program cost had “nearly doubled,” from $950 million to $1.8 billion. However, that assertion did not take into account a major difference between the two estimates: one was based on constant dollars and the other on inflated dollars. Our analysis indicates that the Alliance’s estimate in constant 2005 dollars would be approximately $1.3 billion—an increase of about $370 million, or about 39 percent, over DOE’s estimate, not a near doubling of costs. As DOE’s restructuring decision was not based on a comprehensive analysis of the associated costs, benefits, and risks, DOE has no assurance that the restructured program is the best option to accomplish the goal of promoting the accelerated and widespread commercial advancement of CCS. In contrast to the restructuring decision, FE identified and analyzed 13 other options for incremental, cost-saving changes to the original program, such as reducing the CO2 capture requirement. While FE did not consider all of these options to be viable, it either recommended or noted several of them for consideration, each with potential savings from $30 million to $55 million.