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Carbon capture must fall below $50 per tonne for large-scale viability – report

Carbon capture, utilization and storage technology costs must fall to less than $50 per tonne of carbon dioxide to become commercially deployable on a large scale, according to a recent report.

A $50/t credit under Section 45Q of the U.S. tax code in conjunction with a facility capturing carbon for $42/t could drive down the levelized cost of electricity for a coal plant to $20/MWh, according to a report sponsored by the U.S. Department of Energy and the U.S. Energy Association. And the DOE expects carbon capture costs to decline to about $30/t by 2030. However, should carbon capture costs remain high, closer to $66/t, the levelized cost of electricity for a retrofitted coal plant would total about $48/MWh.

To put those numbers in perspective, Lazard's November 2019 levelized cost of energy report said the levelized cost for coal-fired plants is between $66/MWh and $152/MWh and for combined cycle gas-fired plants is between $44/MWh and $68/MWh. The unsubsidized levelized cost for wind power plants is between $28/MWh and $54/MWh, and utility scale solar photovoltaic is between $36/MWh and $44/MWh.

Project developers can seek out the 45Q tax credit, which offers $50/t of captured carbon permanently stored in a geologic formation or $35/t stored permanently in oil fields through enhanced oil recovery.

"The combination of the 45Q credit and state tax and non-tax incentives can make [carbon capture, utilization and storage, or CCUS] projects competitive to new renewable projects," according to the report. The 45Q credit will become "increasingly attractive as retrofit costs for coal-fired generators and industrial applications fall below $50 per metric ton."

Advocates say the technology has a critical role to play in helping the world curb emissions and meet global climate targets while allowing baseload power sources, such as coal and natural gas generators, to continue operating.

However, many industry observers have asserted that the technology's costs must decline further to become economically viable. The Petra Nova project in Texas captures carbon at about $65/t, nearly half the cost of a prior facility. The Shand power plant retrofit project in Canada and the Enchant Energy retrofit project at the San Juan Generating Station in New Mexico are expected to capture carbon for $45/t and $41/t, respectively, according to the report.

The report said industry can help drive down costs across carbon capture systems through new technologies and "learning by doing," or building more projects to learn more efficient ways to produce the facilities.

Tax credits and other federal and state incentives can also help reduce costs. While the 45Q credit has stirred interest in carbon capture projects, the industry is still awaiting clarification on how to effectively implement the tax credit and only recently received guidance advocates said was critical to getting projects off the ground. Lawmakers have also introduced several pieces of legislation over the past year or so to help offer more certainty around the credit.

"The market potential for CCUS projects depends on the financial community's willingness to commit to CCUS projects," according to the report. "Increasing regulatory certainty along with lowering and narrowing the range of CCUS costs are critical to this."

Public perception also remains an obstacle for the carbon capture industry, especially the transport and storage segments, given opposition to fossil fuels and fear of leaks, the report said. To combat this negativity, the industry should analyze media coverage and market perceptions, including an investigation into "how the socioeconomic environment and extant path dependencies affect behavior among different investors," the report said.