Policy-Driven Potential for Deploying Carbon Capture and Sequestration in a Fossil-Rich Power Sector

ABSTRACT: In 2020, the Wyoming Legislature enacted House Bill No. 0200 (HB0200), which requires utilities to generate a percentage of dispatchable and reliable low-carbon electricity by 2030. This state requirement must take into consideration any potentially expiring federal tax credits, such as the federal Section 45Q tax credit. This study aims to examine the potential role of economic and policy incentives that facilitate carbon capture and sequestration (CCS) deployment. A unit-level retrofit analysis shows that deploying CCS at existing coal-fired power plants in Wyoming to meet the HB0200 emission limit would decrease the net efficiency by 29% and increase the levelized cost of electricity by 237% on the fleet average. The CO2 avoidance cost varies by unit from $65/t to 201/t, which reveals economic challenges for CCS retrofits. However, the current tax credit of $50 per metric ton of CO2 for saline-reservoir storage can lower the avoidance cost by 47% on the fleet average. The proposed enhancement of the tax credit to $85/t would offset the added cost for CCS deployment for a total capacity of 3.4 GW. Joint policy and economic incentives can encourage fossil fuel abatement to play a firm role in energy transition.

Automated summary

This study examines the potential deployment of carbon capture and sequestration (CCS) in existing coal-fired power plants in Wyoming to meet state emission limits. The study finds that CCS retrofitting would decrease efficiency and increase electricity costs, posing economic challenges. However, providing tax credits can offset the added cost and encourage fossil fuel abatement.