AEE Ameren Corp

The Obama administration on Thursday abandoned a long-running plan to build a first-of-a kind "clean coal" power plant in Illinois and instead awarded $1 billion for a project intended to spur retrofits of older coal-fired power plants with technology to strip a host of pollutants from emissions.

The U.S. Energy Department said that the money would go to the FutureGen Alliance, the group that had backed the original "clean coal" project, along with Ameren Corp. (AEE), Babcock & Wilcox, and Air Liquide Process and Construction Inc. The money will help retrofit an Ameren coal-fired power plant and help establish a pipeline network to transport and store more than 1 million tons of carbon-dioxide a year in Mattoon, Ill.

"This investment in the world's first, commercial-scale, oxy-combustion power plant will help to open up the over $300 billion market for coal unit repowering and position the country as a leader in an important part of the global clean energy economy," U.S. Energy Secretary Steven Chu said in a statement.

The money will be used to outfit a 200-megawatt Ameren facility in Meredosia, Ill., with so-called advanced oxy-combustion technology. Oxy-combustion burns coal with a mixture of oxygen and CO2 instead of air to produce a concentrated carbon-dioxide stream for "safe, permanent, storage," the Energy Department said.

The original FutureGen project was intended to be the first commercial-scale project that combined technology to capture and store carbon-dioxide emissions with coal gasification, whereby heat and pressure are applied to coal, creating a synthetic gas that fuels turbines to generate electricity. But the FutureGen leaders struggled to line up backers, and some members of the alliance pulled out in order to start their own projects.

-By Siobhan Hughes; Dow Jones Newswires; (202) 862-6654; siobhan.hughes@dowjones.com

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