CCS Needs a Level Playing Field to Thrive

Under the new rules for the Clean Power Plan the EPA is now mandating the use of Carbon Capture and Sequestration (CCS) technology on all new coal power plants, but CCS is not given the kind of subsidies and support that are lavished on wind and solar. This lack of policy parity makes it very difficult for the CCS industry to move forward even though the technology is proven to work.

The EPA has even announced a new set of incentives within the Clean Power Plan that apply only to wind and solar projects called the Clean Energy Incentive Program. But CCS is only given unsupported mandates even though it has been widely identified as a critical technology for reducing greenhouse gasses. Without the kind of support that wind and solar industries have long relied on fuel their growth CCS will continue to struggle with low production and high costs.

The wind industry has greatly benefitted for many years from the Production Tax Credit (PTC) that provides 2.3 cents per kilowatt-hour produced to wind developers for the first ten years of a project. The PTC for wind expired at the end of 2014 and there has been significant lobbying pressure applied to get it reinstated. The fortunes of the wind industry have largely risen and fallen with the repeated expirations and extensions of the PTC since it was first enacted in 1992. Years when the PTC was in place saw strong growth in the wind industry, followed by major contractions in years when the PTC lapsed.

The solar industry has been supported by the federal Investment Tax Credit (ITC) for many years. The ITC is a 30% tax credit for solar systems installed on residential and commercial properties that is currently scheduled to expire at the end of 2016. According to the solar trade association SEIA, “The solar ITC is the cornerstone of continued growth of solar energy in the United States” and has been an important force in growing the solar industry in the past decade.

The Obama administration has been widely accused of waging a war on coal, and that perception is enhanced when observers can see that certain favored technologies like wind and solar are lavished with federal monies, while expensive clean coal technologies are mandated but left unsupported.

CCS could greatly benefit from similar tax credits that renewable energy technologies have long come to rely on. Existing incentives for CCS are extremely limited, despite the technology’s great promise and great expense. And no surprise, the CCS industry has been languishing despite the engineering success of demonstration projects such as the recent Boundary Dam coal power plant in Saskatchewan that is capturing 90% of its CO2.

Ultimately the best way to bring down costs for CCS will be to ramp up production, which has been the experience for the wind and solar industries as well as many other emerging technologies. We need to repeat the success of Boundary Dam many times over. The current paradigm where the Department of Energy funds individual projects with research grants is not sufficient or a substitute for industry wide incentive structures that would enable widespread investment.

There are many policies and incentives that could help level the playing field between CCS and other clean energy technologies. PTCs and ITCs can apply to CCS just as well as they apply to wind and solar. A PTC for CCS could follow along lines proposed by NEORI ( who has detailed a plan for a revenue positive tax credit that would earn income for the government by taxing the oil that is produced when CO2 is sequestered in oil fields. An ITC could apply to coal and natural gas power plants who invest in CCS. CO2 pipeline projects could organized as Master Limited Partnerships which has been very successful in the natural gas industry. And there is a wide variety of policy tools beyond these that could also be applied but CCS gets treated as the black sheep member of the clean energy family.

CCS is important enough to be mandated and is arguably the most cost effective method to reduce large quantities of CO2 from entering the atmosphere. CCS is also critical to the future of coal industry and all those who rely on it. We have seen how crucial federal support has been to growing the wind and solar industries, CCS deserves the same level of support.