A new report from Columbia University’s Centre on Global Energy Policy has predicted which policy configurations would incentivise widespread deployment of carbon capture utilisation and storage (CCUS) in the US electric generation industry.
For the report, authors Dr. Julio Friedmann, Emeka Ochu, and Jeffrey Brown, examined a set of options and applied them to representative existing US power plant types – supercritical pulverised coal and natural gas combined cycle.
The authors then went on to look at two ownership/revenue structures: traditionally regulated, vertically integrated investor owned utilities and independent power producers selling to investor owned utilities under regulator-approved contracts.
In the report, the authors outline the governments options to make an energy project more economically feasible and modelled the financial performance of policy designs on various power plants based on fuel, generation technology, and ownership type.
Key finding from this analysis were:
- An effective ownership structure: While most techno-economic analyses provide engineering information about unit construction and operating costs associated with CO2 capture for any given facility and technology, the all-in full cost per tonne of CO2 captured varies substantially as a function of capital cost, debt-equity ratio, and other financial factors.
- 45Q tax credit: Recent amendments to the US tax code included amendments of the 45Q tax credit, which provides a non-refundable, transferable tax credit to taxpayers that capture CO2 and either store or use it. The value of the 45Q credit is statutorily expressed in $/MT CO2: the value per metric ton captured and injected in enhanced oil recovery (EOR) is $35/MT when the credit rises to its full level.
- Capital cost incentives: Because coal plants emit more CO2 per megawatt-hour than gas plants, CCUS retrofits on coal plants require more capital investment dollars up front: 90% capture requires approximately $1.8 million per megawatt for a coal plant and $800,000 per megawatt for a natural gas combined cycle plant.
- Revenue enhancement incentives: Among the policy options assessed, revenue enhancement and guarantees like production tax credits or contracts for differences appear to have the best finance and deployment outcome. Such approaches also can be transitionally easier for investors, owners, and operators and could have simpler deal structures. They also provide clear public benefit in that payment is contingent upon performance of CO2 emissions reduction through carbon capture and storage.
The full report can be accessed here.