July 28, 2010 / 8:09 PM / 10 years ago

US gives tax credit to Illinois clean coal project

* Tax credit worth $417 million

* Taylorville to get close to $3 bln in federal support

* Taylorville to cost about $3.5 bln to build

NEW YORK, July 28 (Reuters) - The U.S. government awarded a $417 million investment tax credit to builders of the 602-megawatt Taylorville “clean coal” power plant with carbon capture and storage in south central Illinois.

Tenaska, an Omaha, Nebraska energy company and the project’s managing partner, said in a release the award was “believed to be the largest ever granted to a single project.”

The credit comes from a program administered by the Department of Energy (DOE) and the Treasury Department.

The DOE determined the project could capture at least 65 percent of its carbon dioxide emissions. A report determined the plant would reduce Illinois’ CO2 emission by nearly 2 million tons per year, Tenaska said.

Last year, the DOE preliminarily selected Taylorville for a $2.579 billion loan guarantee. When finalized, the loan guarantee would put total federal support for the project close to $3 billion, Tenaska said.

Taylorville will cost about $3.5 billion to build and create about 2,500 construction jobs and hundreds of permanent jobs, Tenaska said. It will convert Illinois coal into natural gas and burn the gas to produce enough electricity for about 600,000 Illinois homes.

Since Illinois electric customers will pick up some of the cost of building the project, Tenaska said it will pass the federal tax credit savings on to those consumers.

The project is expected to add about 1.8 percent, or 6 cents a day, to a typical residential customer’s bill. But Illinois law does not allow power purchases from Taylorville to increase residential rates by more than 2.015 percent.

Customers will not see any impact from Taylorville on their bills until mid-2015, when the project is slated for completion.

Before starting construction, Tenaska said it still needs a few final approvals.

The Illinois Commerce Commission (ICC) is currently reviewing the Facility Cost Report, which was completed in February with funding from the Illinois Department of Commerce and Economic Opportunity.

And the Illinois General Assembly still has to give its final approval after it receives the ICC’s evaluation of the Facility Cost Report. (Reporting by Scott DiSavino; Editing by David Gregorio)

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