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October 14, 2020
Article Published in Public Utilities Fortnightly Examines the Emerging Value of Carbon Capture, Utilization, and Sequestration Technology

Brattle Associate Kasparas Spokas, Senior Research Analyst Katie Mansur, and Principal Frank Graves have authored an article for the October 2020 issue of Public Utilities Fortnightly that discusses the value carbon capture, utilization, and sequestration (CCUS) technology can provide for utilities in meeting long-term deep decarbonization goals. The article, “Emerging Value of Carbon Capture for Utilities: From Retrofits to Deep Decarbonization,” builds upon an earlier Brattle study showing that opportunities currently exist to retrofit coal-fired power plants with CCUS at low net costs under specific circumstances. In the future, the economics of CCUS are likely to become more favorable, as the value of emission-free dispatchable energy in deeply decarbonized systems, which CCUS can provide, is likely to be very large.

For many years, CCUS technology has been heralded as a means to clean up power plants and decarbonize emission-heavy industrial processes that lack clean substitutes. However, development of CCUS for commercial power has been minimal due to policy risk, lack of economic incentives, and uncertainty of competing technology evolution. The recent expansion of US federal tax credits (45Q), which provide $35 or $50 per ton of CO2 emissions sequestered (depending on the storage approach), combined with the possibility for enhanced oil recovery (EOR) revenues in some locations, have created a material new incentive for CCUS.

The authors’ analysis finds that these incentives today could create net savings relative to no capture for coal plants in favorable environments, and they could offset much of the incremental costs of the CCUS equipment and operating penalties in in less favorable environments. Comparing the levelized costs per net megawatt-hour of power sold to the grid of a depreciated coal plant without and with a post-combustion retrofit, the authors find the 45Q tax credits provide roughly $50 per megawatt-hour if the capture facility is sized for the plant’s total capacity. Along with the EOR revenues, savings under these assumptions more than offset the costs of a carbon capture retrofit, resulting in substantial net-present value savings relative to the plant cost without capture.

The authors note that state commissions and legislatures have an important opportunity to further support utilities in CCUS’s development process by allowing them to consider various emerging technologies and develop early projects to gain experience – which will likely make new technologies more economical, better understood, and more valuable in the decarbonization toolkit.