The Bipartisan Infrastructure Law (BIL) handed DOE nearly $90 billion to expend on the full range of decarbonization options.  The bulk of the funding to date has focused on avoiding carbon emissions from the start.  Among the prime areas of attention have been industrial efficiency, vehicle electrification, creation of a hydrogen fuel economy, a robust transmission system to move carbon free power from the wide open spaces where it is produced to the population centers where it is needed, and advanced reactor technology to restore U.S. leadership in the nuclear industry.  But fossil fuels are still a major part of the energy economy, as they will be for the foreseeable future.  Addressing legacy and ongoing carbon emissions is a crucial part of the climate change response, and DOE has recently turned serious attention to that challenge.

Three significant DOE announcements go to the heart of that challenge: 1) a Notice of Intent (NOI) to award $1.8 billion for direct air carbon capture (DAC); 2) another NOI to award $1.3 billion for point source carbon capture and storage; and 3) a novel carbon removal challenge program that is seemingly designed to reverse the “bad rap” early carbon credit trading programs developed.

Carbon removal technology is a core strategy to address climate change.  The Intergovernmental Panel on Climate Change notes that carbon dioxide removal is a key component of most, but not all, mitigation pathways that can limit warming to 1.5°C or 2°C.  However, the technology is not without obstacles.  The interconnected nature of capture, transport, and storage requires a “whole system” development approach.  Carbon removal technology must compete with lower-cost carbon mitigation strategies such as forestry projects.  Additionally, carbon removal technology invokes policy debates, with some arguing that climate policy should focus on reducing reliance on carbon-emitting sources in the first place rather than reducing the impact of carbon-emitting sources.  Nevertheless, it is clear that carbon capture technologies will play an important role in supporting flexible, low- or zero-carbon power systems, and that to be commercially viable, strategic government support may be necessary.

Perhaps DOE’s carbon capture initiatives are bringing up the rear of the BIL funding bonanza on the theory that they are programs likely to survive even if next year brings a radically different political environment and de-emphasis of climate concerns.  Whatever the reason for the timing, these initiatives are important additions to the climate-response portfolio.  They demonstrate that, over the coming months and years, DOE is stepping up its investment in these areas and inviting industry to do the same, given that these funding opportunities will be subject to either a 30% or 50% cost share obligation.  Potential applicants should watch for these initiatives when they are published and consider applying for the substantial government funding available.

1. Direct air capture funding

Direct air capture (DAC) removes CO2 from the ambient air instead of at the source where is produced.  Because it can remove CO2 regardless of source, including legacy CO2 already in the air, DAC is increasingly viewed as an important tool in the global decarbonization effort.  A significant problem with DAC, however, is cost—it is far more energy intensive to remove CO2 directly from the air than from a point source and therefore more expensive.

DOE is stepping in to help with some of that cost.  It has announced that, by the end of 2024, it would issue a funding opportunity for $1.8 billion to support three broad areas related to DAC:

• Funding host sites or platforms for shared CO2 post-capture processing for DAC developers early in commercialization, with individual awards up to $250 million,

• Funding for mid-scale commercial DAC facilities with a capacity of 2,000 to 25,000 tons per year, with individual awards of up to $50 million, and

• Funding for large-scale commercial DAC facilities with a minimum capacity of 25,000 tons per year, with potential awards up to $600 million to support the development of DAC hubs.

The NOI contains limited detail on what will qualify and what will be required in applications, but DOE stresses that it “aims to provide applicants with flexible and comprehensive pathways” to spur commercial DAC facilities.  Projects may propose a variety of carbon off-take applications, including permanent geologic storage or utilization, so long as the majority of captured CO2 will not be vented.  DOE also notes that there will be subsequent, recurring funding opportunities to take advantage of rapidly developing technology in DAC. 

Under the BIL, DOE awards of $100 million have become almost commonplace, but awards on the scale of as much as $600 million demonstrate the seriousness of DOE’s goal of creating regional DAC hubs in support of the Biden Administration’s goal to remove between 400 million and 1.8 billion tons of CO2 from the atmosphere annually by 2050. 

2. Point source carbon capture

The second recent carbon management NOI previews a funding opportunity for up to $1.3 billion total, again with three distinct topic areas:

• Carbon capture and storage (CCS) demonstrations of advanced technology systems that, at commercial scale, can operate at a 90 percent capture efficiency for at least 1,000 hours. 

  • Qualifying projects must also include transport and geologic sequestration.

  • DOE will be looking for capture at a coal-fired generation or combined heat and power facility and for capture at an industrial facility.  Natural gas-fired facilities are excluded in this round, although DOE notes that could change in future funding rounds.

  • An applicant under this topic area must have already completed a pre-FEED study on the project it proposes.

• “Transformational” carbon capture technology  that, to date, has only been tested at bench scale. 

  • The ideal projects will be pilot scale demonstrations at both power generation and industrial facilities, with a goal of 90 percent capture efficiency and 95 percent CO2 purity, which DOE hopes can show substantial cost and performance improvements over what is commercially available today. 

  • The desired project outcome would demonstrate readiness for commercial scale application.

• Networked CCS demonstrations, so that large emitters can collaborate and jointly plan for commercial-scale carbon management facilities. 

  • Applicants must be partnerships comprised of emitters in reasonable proximity, at least one developer of CO2 transport, and one developer of a CO2 storage system in reasonable proximity. 

  • Funded activities under this topic area include planning, contracting and permitting activities, but not construction. 

  • The idea behind the demonstration of shared facilities is to unlock economies of scale for the network participants, resulting in substantial reductions in cost.

DOE’s goal with this upcoming funding opportunity is to support the design, construction, and operation of mid-scale carbon capture and transportation systems that will lead to eventual commercial scale facilities.  DOE plans to issue the Notice of Funding Opportunity in the first quarter of fiscal year 2025.

3. Voluntary carbon dioxide removal purchasing challenge

The third NOI is for a novel carbon dioxide purchasing challenge to encourage organizations to purchase high-quality, permanent CO2 removal (CDR) credits.  This “Challenge” will involve two prongs:

• For potential credit buyers, DOE will ask for any organization or government that discloses its GHG inventory to join the Challenge by purchasing and retiring permanent CDRs annually, starting no later than 2025, and disclose to DOE every associated CDR purchase for a public inventory.  Credit buyers will not be required to purchase a minimum volume.

• For potential credit suppliers, DOE will offer to evaluate a new round of credits using the process implemented in Phase 1 of DOE’s CDR Purchase Prize.  No financial prizes will be available to credit suppliers, but DOE will publish a list of qualifying organizations offering CDR credits.

DOE has identified several factors inhibiting the growth of voluntary CDR credit markets, including insufficient incentives, high prices compared to emission reduction credits, complicated procurement, and small opaque existing voluntary carbon markets.  By engaging potential CDR credit suppliers and buyers in this Challenge, DOE hopes to aid the build-out of the CDR marketplace.

For assistance in connection with these opportunities or for answers to additional questions, please contact Mary Anne Sullivan, Senior Counsel, or Cameron Tarry Hughes, Associate.

Authored by Mary Anne Sullivan and Cameron Hughes.