The U.S. Energy Dept. has decided to abandon its original plan for the FutureGen 275-MW coal-fired power plant to test advanced carbon-capture and storage technologies. The agency announced Aug. 5 that will instead use its $1 billion in federal stimulus funding to refit and repower an existing plant in western Illinois to capture carbon dioxide.

The money will go to members of the FutureGen Alliance, made up of U.S. and overseas utilities, powerproviders and other firm, as well as to Ameren Energy Resources, Babcock & Wilcox and Air Liquide Process & Construction to install new equipment at a 200-MW Ameren unit in Meredosia, located in the Illinois River Valley. The agency has dubbed the new plant FutureGen 2.0.

“This investment in the world’s first, commercial-scale, oxycombustion 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,” said Energy Secretary Steven Chu.

DOE had planned on building a new plant in Mattoon, Ill., but required that the FutureGen Alliance provide about $400 million to $600 million, an amount the group has struggled to raise.

The carbon captured at the Meredosia plant will be shipped by pipeline and stored at the Mattoon site, DOE said. The agency estimates that the network will transport and store more than 1 million tons of captured CO2 per year. Project construction is set generate 275 contruction jobs and 75 permanent ones, says the agency The Mattoon site will be used to conduct research on site characterization, injection and storage, and monitoring and measurement.

“The new project stays true to the original goal of dramatically reducing pollution and providing thousands of good paying jobs in our state.” said Sen. Dick Durbin (D-Ill.).

DOE also moved closer Aug. 5 to losing $1.5 billion in loan-guarantee authority for low-emission energy projects, as the Senate passed a bill that would provide $26 billion in emergency funding to states for school teachers and other personnel. The cuts at DOE were part of the reductions in existing government spending made to take care of the states’ needs.

The bill (H.R. 1586), which passed the Senate 61-39, now goes to the House, where Speaker Nancy Pelosi plans to recall her colleagues from their August recess to act on the measure. Cancellation of $1.5 billion for the DOE program would be “devastating” to the development of renewable energy and place in limbo about 14 projects awaiting final approval by the Office of Management and Budget, renewable-energy industry officials said.

Solar Energy Industries Association Vice President Daniel Adamson called the funding cut “pretty extreme.” He add that “We’re going to see some significant negative impacts if it is sustained by the House.”