Late last week, a leaner, if not greener, FutureGen project was approved to the tune of $1 billion, pulled from unallocated Recovery Act spending. Now billed as 2.0, the project adopts a new method, oxy-combustion, and a new top priority.

The original FutureGen, which appeared in 2003 and gobbled $1.8 billion before being cancelled in 2008, focused on a better way to burn coal. But the hurdles were too high and since 2008 the future coal technology in the U.S. had been muddled. The sudden by the U.S. Dept. of Energy announcement reflects how difficult it is to know how to deploy a carbon sequestration scheme correctly. The DOE wants a successful demonstration project, but it also knows that unlike many other projects this one will inevitably come under government scrutiny if things don’t progress quickly. They are going to want some some results by 2015 rolls around.

They’ll probably get them. The DOE’s National Energy Technology Laboratory recognizes that cost is a driving factor for this project, and have adopted an approach that’s less intensive, involving the retrofit of a 700 MW coal plant Meredosia, Ill., and the addition of a carbon capture unit.

The goals are different now, too. The hope with advanced coal gasification was that we would drastically reduce initial emissions from burning coal. Now, however, the priority to find a method to separate the coal from exhaust gas and pump it underground. For this reason, we can feel good about FutureGen 2.0’s chance, because sequestration is a proven technology that already works in some energy plants. But the expense of separating carbon dioxide from other components is high. Currently, we use amine-based solvents, but FutureGen 2.0 plans to transform coal into flue gas, from which hydrogen can be burned, leaving carbon dioxide.

But it’s still a very expensive process. Compared to conventional coal burning it’s about twice as expensive. The approach reminds me of the hoops that companies who operate in the tar sands of Alberta jump through to pull oil from the ground. In the least invasive method, natural gas is injected underground and burned, liquifying the solution and making it easier to pull the oil out. They get the oil, but they burn enough natural gas each day to supply a day’s electricity needs of millions of homes. Even the oil company executives admit that it’s a wasteful process. But with barrels of oil north of $50 a barrel it’s economically feasible.

The best return on our investment is still clearly nuclear energy, even when considering the associated costs. Wind and solar energy exist only because tax breaks encourage them, and it will be many years before they climb out of the 1% of generation bracket.

The U.S. is a coal-dependent country still, and that infrastructure will not be changed overnight. The best way forward is probably to retrofit existing plants with carbon capture devices. Now that carbon emissions have been tied to a cost structure and climate goals it’s inevitable. But it’s too bad we can’t continue to research a better way to burn the stuff instead of simply trying to get rid of the waste. That’s the approach that helped put the U.S. so far behind other countries in nuclear reactor technology.