DOE Risks Wasting ‘Significant Funds’ on CCS — Audit

by Carlos Anchondo and Jeremy Dillon (E&E News) The Department of Energy is at risk of wasting a significant amount of money on carbon capture and storage demonstration projects without greater oversight, according to a new Government Accountability Office report.

The report, released yesterday (December 20, 2021) by the watchdog agency, said although DOE has invested $1.1 billion in 11 carbon capture and storage (CCS) demonstration projects since 2009, only three of those projects ended up being built, with coal CCS projects “generally less successful” than projects at industrial facilities like chemical plants.

Two of the 11 projects dropped out in the planning phases, according to GAO, and did not receive DOE funding.

The coal CCS project that was built — the Petra Nova carbon capture facility in Texas — was the United States’ only large carbon capture project on a coal plant before it went offline in May 2020. NRG Energy Inc. cited low oil prices for the decision at the time (E&E News PM, July 28, 2020).

GAO highlighted “significant risks” to DOE’s management of coal CCS demonstration projects, citing the department’s decision to fully fund projects in their early stages, as well as taking a larger share of early stage funding than typical at DOE for such projects.

DOE also failed to adhere to cost controls aimed at limiting the department’s financial exposure, repeatedly continuing to fund projects that weren’t meeting required performance milestones, a GAO spokesperson said. That included amending original cooperative agreements to reduce a project’s cost-share requirement and increasing the government’s share, the report said.

As part of its findings, GAO recommended that Congress institute ongoing monitoring reports “to provide greater oversight and accountability of DOE CCS demonstration project expenditures.”

Groups including the International Energy Agency say carbon capture will be critical to meeting global climate goals, including for natural gas and sectors like steel and cement that are difficult to decarbonize.

In recent months, carbon capture advocates in the United States have pushed to increase the value of the federal tax credit known as 45Q for some types of facilities, which they say is needed to spur greater deployment of the technology, and have pushed back against proposed facilitywide capture requirements (Climatewire, Dec. 16). READ MORE

Excerpt from Washington Examiner: CCS TRIES TO CORRECT THE RECORD: ... But pro-CCS groups say the shortcomings had more to do with a want of policy support surrounding the demonstrations, not the technology itself, and emphasize the success of the two remaining industrial facilities.

Eight of the CCS projects to which DOE provided nearly $684 million in funding were for coal power plants. Just one was built, at the W.A. Parish Electric Generating Station in Texas, but it shut down in 2020 after just three years of operation due economic factors related to coal.

Jessie Stolark of the Carbon Capture Coalition cautioned against drawing broad conclusions from the topline results in the reporting, saying that the higher costs of capturing emissions from coal plants contribute to the projects’ failures, but that the costs of capturing emissions from industrial facilities are lower.

“It is important to understand that capturing CO2 from power plant flue gas costs significantly more than from hydrogen production and ethanol fermentation,” said Stolark, who is public policy manager of the 90-member strong coalition of businesses, labor groups, and NGOs advocating for carbon management technology. Stolark added that CCS failures within the power sector show there was too little additional policy report beyond cost-sharing.

“As a result, these projects were unable to secure necessary private financing at a time when natural gas prices were falling and anticipated federal climate policy never materialized,” Stolark said.

By contrast, two of the three industrial CCS projects examined in the GAO audit — one at an Air Products and Chemicals hydrogen production facility in Texas and the other an Archer Daniels Midland ethanol production plant in Illinois — remain in operation today, success contrasted with the difficulties facing power plant projects.

Stolark notes further the projects that failed were under development before 2018, when Congress expanded the 45Q tax credit for carbon capture and storage, suggesting it will help draw in better financing.

Where CCS stands now: CCS has been one of the few energy and emissions technologies to receive bipartisan support. The bipartisan infrastructure law authorized $2.54 billion CCS demonstration projects between fiscal years 2022-2025 but an attempt to do even more for the technology, including increasing to $85 per ton the credit for carbon stored in salt storage facilities as Democrats’ Build Back Better Act would do, remains stalled.

CCS also remains subject to the ire of some liberal climate hawks, who oppose it on the grounds that it allows for continued production and use of fossil fuels. READ MORE