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CARBON CAPTURE ECONOMICS: House Democrats’ $1.85 trillion climate and social spending bill could make it economical for natural gas plants to trap carbon dioxide coming out of the smokestack before it can enter the atmosphere and warm the planet.
The legislation increases the value of 45Q tax credit from $50 per ton, as it stands in law now, to $85 per ton for industrial facilities and power plants that capture and permanently bury their carbon underground. The value rises from $35 per ton to $60 per ton for enhanced oil recovery projects, a more contentious process in which the captured carbon would be used to pull more oil from the ground.
Also importantly, project developers will have the option of “direct pay” to receive the full value of the tax credit, without relying on banks to finance them.
What it means: Raising the credit value by those amounts makes carbon capture economical for hard-to-decarbonize industrial uses such as cement, refineries, steel, petrochemical, hydrogen, along with natural gas and coal-fired power plants, according to an analysis done last month by the Clean Air Task Force.
By 2031, those enhancements have the potential to enable the removal of between 220–450 million metric tons of carbon from 70-140 plants.
“We will greatly accelerate C02 reduction and removal because of these new provisions,” Julio Friedmann, a senior research scholar at the Center for Global Energy Policy at Columbia University, told Josh.
Gas plants with CCS especially important: Let’s focus on the power sector, and specifically natural gas plants. Natural gas continues to be the most used U.S. power source, and there is no rush of retirements planned for gas plants as there is for coal. That makes widespread use of carbon capture for natural gas plants an important tool to reach President Joe Biden’s goal of zero-carbon electricity by 2035.
The previous level of the 45Q was too low to inspire much use of carbon capture on power plants. To date, seven potential carbon capture projects for natural gas power generation have been announced and six for coal power generation under the 45Q tax credit, according to a database kept by the Clean Air Task Force. But none are operational. Meanwhile, the one coal plant with carbon capture technology that has been built to date, Petra Nova, stopped operating this year.
One company has big plans: Calpine, a Houston-based firm that is the nation’s largest generator of electricity from natural gas, has big plans for retrofitting some of its fleet of more than 60 gas plants with carbon capture, storing the emissions underground.
Caleb Stephenson, Calpine’s executive vice president of commercial operations, told Josh that increasing the value of 45Q to $85 per ton for power plants that store carbon in the ground would mean “the potential is significant in terms of projects where the economics work.”
For example, Calpine is planning to build a carbon capture system to capture 95% of total carbon emissions from its natural gas combined cycle co-generation facility in Deer Park, Texas.
The Energy Department announced last month it is providing a more than $4 million grant to support engineering design on the project. DOE is also giving more than $5 million to support engineering work for a carbon capture system that Calpine is retrofitting onto its Delta Energy Center combined cycle gas plant in Pittsburg, California.
Stephenson said there are additional projects Calpine is planning beyond that which can be made economical from the more generous tax credits.
While Stephenson expects Calpine to run its gas plants less as more wind and solar get added to the grid, the company doesn’t envision a time “where we are retiring large swaths” of gas units.
“We won’t need as much production from gas, but the fleet will still need to be there. The grid will need firm, dispatchable resources to support renewables, which is why CCUS makes sense as a technology option,” Stephenson said.
A potential loophole: Calpine, along with Friedmann and other analysts, did note a potential loophole in Democrats’ legislation that could limit the scope of how many projects can benefit from the enhanced tax credits. The bill requires power plants to capture 75% of their carbon to qualify for the subsidies, a provision that likely won’t hamper Calpine’s plans. But it could broadly “undermine” meeting Biden’s decarbonization goals for the power sector, according to Jessie Stolark, public policy and media relations manager for the Carbon Capture Coaltion.
The coalition is pushing to have that provision removed in the Senate.
“Tax credits allow higher ambition and the more restrictions we place on them the less ambition we get,” Friedmann said.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Josh Siegel (@SiegelScribe) and Jeremy Beaman (@jeremywbeaman). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
ANOTHER BOON…GRANHOLM INTRODUCES CARBON REMOVAL EARTHSHOT: The Department of Energy announced a new “earthshot” initiative aimed at enabling removal and storage of carbon dioxide for less than $100 per ton.
“We know that we still have to decarbonize in other ways, but this is, as we say, ‘It’s not a silver bullet. It’s silver buckshot,’” Energy Secretary Jennifer Granholm said while discussing the initiative at COP26 this morning. “We have to do all of the above.”
The announcement didn’t specify any funding support from the department for the earthshot, but the bipartisan infrastructure bill in Congress provides money for the demonstration of direct air capture technology in the form of $3.5 billion to create four direct air capture “hubs” across the country. The partisan Build Back Better Act also provides for a new tax credit for as much as $180 per ton for projects that remove carbon from the air.
METHANE FEE TO SURVIVE HOUSE DEMOCRATS’ SPENDING PLAN: House Democrats may or may not deliver on Speaker Nancy Pelosi’s plan to vote on their climate and social spending plan today, along with the bipartisan infrastructure bill it is linked to.
But at least one key barrier for passage of the reconciliation bill has been removed after centrists from oil and gas-rich Texas who had been challenging a controversial methane fee vowed to vote for the legislation anyway, as Josh scooped last night.
As recently as yesterday morning, Texas Reps. Henry Cuellar, Vicente Gonzalez, and Filemon Vela had written a letter to Pelosi, obtained by Josh, warning the methane fee “unfairly targets oil and gas companies” and would “hurt U.S. competitiveness.” They also said the fee would increase the cost of natural gas used by consumers for electricity and to heat homes.
But by last night, Cuellar tweeted he would vote for Democrats’ Build Back Better Act on the House floor despite the methane fee remaining in the legislation because “no bill is perfect.”
Two people with knowledge of the negotiations confirmed to Josh that House Democrats, who can afford to lose only three votes if Republicans vote en masse against their climate and social spending bill, have enough support to keep the methane fee intact.
Unclear if Manchin will accept compromise: Texas Democrats had already won modifications to the methane fee, which was tweaked in later versions of the legislation to allow a ramp-in period before the fee is imposed and provide a dedicated funding stream to support companies installing methane monitoring equipment.
Even if it survives the House, it’s unclear if the compromise version can pass the Senate, where Democrats can’t lose any of their members.
Centrist Sen. Joe Manchin of West Virginia, who has helped defeat other provisions targeting fossil fuels, is the biggest question mark, although he has not come out in opposition to the methane fee.
REPUBLICAN MURKOWSKI JOINS COONS’ DELEGATION TO COP26: Sen. Lisa Murkowski of Alaska is joining a bicameral delegation hosted by Sen. Chris Coons, a Delaware Democrat, heading to COP26 this weekend.
Murkowski is the only Republican joining Coons’ crew, which includes nine other Democrats. Coons, the co-chairman of the Climate Solutions Caucus, says that makes it the first bipartisan congressional delegation going to COP26.
The delegation will speak on a pair of panels tomorrow on climate resilience and the energy transition hosted by the Atlantic Council. The event is also organized with help from the American Conservation Coalition, a youth conservative environmental group. Republican Rep. John Curtis of Utah, who is leading a first-ever GOP-only delegation to Glasgow, is delivering opening remarks at the event.
IEA: NEW EMISSIONS PLEDGES PUT 1.8 DEGREES WITHIN REACH: New national emissions pledges announced during COP26 could help limit global warming to 1.8 degrees Celsius.
“If they are met in full and on time,” that is, Fatih Birol, executive director of the International Energy Agency, says in a new note.
The conference has yielded some major new commitments, including a pledge from top-five global emitter India to reach net-zero carbon emissions by 2070, and another from chief coal producer Indonesia to phase out coal-generated power some time in the 2040s.
Birol notes, however, that 1.8 degrees exceeds the Paris Agreement’s lower-end target of 1.5 and called the collective short-term actions taken by governments “insufficient” to adequately affect climate change.
KERRY’S NEW MANTRA: ’JOB NOT DONE’: Climate envoy John Kerry was not ready to celebrate when he was asked this morning to respond to analyses showing new pledges made at COP26 — if implemented — narrowed the world’s path to holding warming to 1.5 degrees.
“Job not done,” Kerry said at a press conference in Glasgow. “The first part of the job of codifying the urgency will hopefully be done. But that’s just the beginning. This is a 10-year long race if we are being guided by the science.” That last part is a reference to U.N. scientists’ statement that the world must cut emissions by about 45% this decade to meet the more ambitious Paris target.
Kerry suggested that new pledges and commitments made this week, led by India setting a net-zero goal, means a “critical mass of countries” can keep alive the 1.5 degrees target even as other key emitters (hello, China and Russia) hold out on strengthening their pledges for this decade.
“Admittedly, yes, we will have huge follow-on tasks coming out of Glasgow,” Kerry said. “What we also have is a level of ambition and statement of goals we have never had before. We came here to keep 1.5 degrees alive and to have the finance lined up to facilitate this revolution.”
GLASGOW-BOUND REPUBLICANS BASH BIDEN: Reps. Garret Graves and Dan Crenshaw, who are part of the House Republican delegation headed for COP26 this weekend, argued that Biden’s policies are both raising energy prices and boosting coal emissions and called on him to “reverse course” in a letter to the president yesterday.
WHAT THE SUPREME COURT EPA EMISSIONS CASE COULD MEAN: The Supreme Court’s recent decision to hear arguments in a suit seeking to limit the EPA’s authority to regulate power plants’ greenhouse gas emissions could give fossil fuels a big break if the court were to rule in favor of petitioning coal companies and Republican-led states, as Jeremy reports for our latest magazine.
But even knowing the court’s considerable conservative bent, the likelihood of a big scale-back of the agency’s authority, either on statutory or constitutional grounds, is by no means clear yet due to some strange procedural circumstances in the case.
HIGH FERTILIZER PRICES SUGGEST HIGHER FOOD COSTS TO COME: A massive spike in fertilizer prices driven by the energy crisis is threatening a related spike in food costs, as growers are faced with a range of choices from increasing the costs of their products to maintain profit margins to shifting to less fertilizer-reliant crops.
The Rundown
Wall Street Journal One of America’s toughest CEO jobs: fixing PG&E
New York Times With climate pledges, some Wall Street titans warn of rising prices
New York Times A nuclear-powered shower? Russia tests a climate innovation
Calendar
SATURDAY | NOV. 6
11 a.m. The U.S. Center in Glasgow will host an event entitled “Congress’ Role in Enhancing U.S. Climate Leadership and Ambition,” which will be livestreamed here.
