The current state of U.S. carbon capture
With several months still to go, 2022 is shaping up to be another year full of exciting developments for both point source carbon capture and direct air capture (DAC). In the U.S., interest in developing carbon capture projects continues to grow, with a new capture project going into operation in North Dakota. Additionally, recently enacted policy supports in the Inflation Reduction Act (IRA) will complement provisions in last year’s Infrastructure Investments and Jobs Act to further drive this growth in projects in the U.S. These policies begin to make carbon capture projects viable for hard-to-abate industries such as cement and steel, as well as in the power sector and DAC. This policy support for early projects will spur innovation that further reduces costs for this important decarbonization technology. On the whole, the U.S. is now on track to reduce emissions 32%-42% below 2005 levels.
To keep pace with these developments, CATF has updated our project map, adding in operational capture projects, expanding the scope of the map to include projects in the Middle East and North Africa (MENA) region, and a global view.
Trends in U.S. carbon capture development
- Over the summer, the carbon capture retrofit at Red Trail Energy became operational. This ethanol project in North Dakota was originally announced in 2019 and is expected to capture 180,000 tonnes of CO2 per year for storage in the Broom Creek sandstone formation. This storage site is 6,400 feet below the surface and is capped by thick shale formations.
- Earlier this month, Competitive Power Ventures announced new a 1.8 GW natural gas combined cycle power plant with carbon capture in West Virginia. The project announcement specifically credits the 45Q enhancements in the Inflation Reduction Act as making this project possible. The project is expected to have 90%-95% capture rates and create 1,000 union construction jobs.
- So far in 2022, 27 new projects have been announced. Of these 27 new projects, six were DAC projects, nine industrial (two cement, one iron), seven power plants, and five storage projects. As you can see in Figure 1, the vast majority of projects in 2021 were concentrated in the industrial sector. This was largely driven by numerous ethanol projects enabled by the development of CO2 pipelines in the Midwest. So far in 2022, project announcements have been much more uniformly distributed. When we compare announcements by tonnes of capture capacity, 2022 is slightly ahead with 33 million tonnes of announced capacity compared to 28 million in 2021.
Cumulative Project Announcements by Sector
- To store captured CO2, eight announced projects would use saline storage, two (non-EOR) utilization projects, and one using dolomite/sandstone formations. The majority of new announcements (16) have not indicated the type of storage that will be used. While many operational and previously announced projects have relied on enhanced oil recovery (EOR) for storage, none of the announcements so far in 2022 have specified EOR. Out of 126 total U.S. projects that CATF tracks on this map, 55% intend to use saline storage, 20% EOR, 3% utilization, and the remainder are unknown.
- Louisiana, Texas, and Indiana saw the most project announcements with six, five, and three respectively. The rest were spread among Alabama, California, Florida, Illinois, Kentucky, Washington, West Virginia, and Wyoming. This follows the trend of interest in carbon capture in the Gulf, Midwest, and West Coast that we have seen in previous years.
2022 has been a landmark year for climate policy, including policies needed to advance carbon capture. Our Policy Manager, Matt Bright, unpacks the IRA provisions in further detail in his recent blog “The Inflation Reduction Act creates a whole new market for carbon capture.” Here is a brief overview of what the IRA did for carbon capture:
- Increased the value of the 45Q credit to $85 per tonne of CO2 captured from a point source and sequestered in saline storage. EOR and utilization increased to $60 per tonne. The credit value was also raised to $180 per tonne for CO2 captured from a DAC facility and used for saline storage. EOR and utilization increased to $130 per tonne.
- Allows for direct payment of the credit for the first 5 of the 12 years of eligibility as well as allowing for transferability of the credit.
- Extended the deadline for a qualifying project to begin construction from 2026 to 2033.
- Lowered the minimum capture threshold from 500,000 tonnes of CO2 per year for a power plant and 100,000 tonnes of CO2 per year for industrial and DAC facilities to 18,750, 12,500, and 1,000 tonnes of CO2 per year, respectively.
These updates, in combination with the infrastructure provisions in last year’s Infrastructure Investment and Jobs Act, will unlock carbon capture as a decarbonization option for many hard-to-abate industries and the power sector. With these updates, we can expect to see many more projects announced later this year and going forward. The announcements will likely continue to skew towards saline storage due to the higher credit level and may include some industries that are currently underrepresented such as chemical, cement, and steel production.
Policy support and, ultimately, the deployment of carbon capture projects are key to decarbonizing the U.S. economy. It is also important to recognize that innovation in carbon capture and DAC in the U.S. will move decarbonization efforts forward internationally. It is truly an exciting time for carbon capture technology and for climate change mitigation efforts.