VatradeCoin Monitor

In the deluge of climate policy announcements this week at COP26, the United States released a long-term strategy for getting to net-zero emissions by 2050.

Speaking at the Glasgow conference, President Joe Biden described the plan as a “short-term sprint” to achieve near-term goals by 2030 and “a marathon that will take us to the finish line” of net-zero.

The plan relies on technologies that already exist on a large scale, like solar panels and batteries. But to get all the way to net-zero, the plan also includes technologies that are not close to wide deployment, like carbon capture and storage (CCS) systems for power plants and heavy manufacturing, and direct air capture (DAC) systems that suck carbon from the atmosphere.

The U.S. plan is far from alone in counting on carbon capture and direct air capture as essential ingredients for a net-zero economy. But it’s far from clear how much we can rely on either technology, because of high costs and questions about whether they will ever work on a large enough scale.

“We are generally very bad at knowing which technologies are going to get cheaper and which technologies are not,” said Catherine Hausman of the University of Michigan, whose research focuses on the economics of energy and environmental policy. 

What that means for policy, she said, is that the government needs to create incentives to develop technologies and have environmental regulations that encourage the use of low-carbon and zero-carbon technologies. But then researchers and entrepreneurs need to figure out what works through trial and error and competition.

One of the best examples of what she’s describing is how government research and regulations helped to nurture development of solar power, and then manufacturers figured out how to drive down costs.

The government may be on the cusp of a substantial increase in incentives for CCS and DAC systems. The $1 trillion-plus spending bill being considered in Congress includes an expansion of tax incentives under section 45q of the U.S. tax code, which gives a per-ton credit for stopping carbon from reaching the air or removing it from the air.

Greg Nemet of the University of Wisconsin told me he sees a major opportunity in developing direct air capture, which can include a variety of carbon-removal technologies. He has written extensively about the technological and market factors that helped to make solar inexpensive.

Direct air capture is early in its development, and the modular nature of some of the systems may allow for mass production, which would drive down costs, he said.

One example is the equipment being developed by Climeworks of Switzerland, which consists of modules that look like giant space heaters. The modules suck in air, remove the carbon and divert it underground. In September, Climeworks said it had completed construction on the world’s first direct-capture and storage plant in Iceland, with capacity to remove 4,000 tons of carbon dioxide per year. The plant cost $10 million to $15 million to build, which isn’t a lot compared to the cost of power plants, but also is only removing a tiny bit of carbon dioxide, the equivalent of the annual emissions of fewer than 1,000 cars.

While Nemet sees vast potential in direct air capture, he sees less upside in carbon capture, which is a process of removing carbon from the exhaust of a power plant or a factory, and then storing the carbon or finding some other use for it. Researchers have been studying this kind of carbon capture for decades and energy companies have been doing pilot projects and making other investments since the 2000s.

“The case for CCS is much weaker than it was 15 years ago,” Nemet said.

The few projects that have been built have struggled with high costs and many technical challenges. One prominent example was the Petra Nova project in Texas, operated by the energy company NRG, which captured carbon from a nearby coal-fired power plant. After years of development, Petra Nova went online in 2016 and then closed in 2020 following mechanical and financial problems. It cost about $1 billion, including at least $167 million from the U.S. Department of Energy.

Despite the reasons for concern about carbon capture, Nemet thinks there is a need for continued development of the technology for the economy to get to net-zero. He just doesn’t expect it to ever become inexpensive, so it is likely to be reserved for uses that do not have viable alternatives.

I’m focusing on these two technologies, but the U.S. plan has a variety of others, including the use of hydrogen for making liquid fuels and other uses, for which the potential is not clear.

But this talk of emerging technologies should not obscure a fundamental reality: Solar and wind are already affordable. They remain the two least-expensive options for generating electricity in the annual report issued last week by the investment bank Lazard.

Solar power has a global average cost of $36 per megawatt-hour this year, down from $37 in the prior year and $359 in the first edition of the report in 2009.

These numbers show the “levelized costs of energy,” a calculation that takes into account the costs of building and then operating the plants.

The global average cost for wind power is $38 per megawatt-hour, down from $40 in the prior year and $135 in 2009.

Meanwhile, natural gas power is $60 per megawatt-hour, up from $59 in the prior year but down from $83 in 2009. Others, like coal and nuclear, are much more expensive.

Running a grid with high levels of wind and solar is a challenge, requiring careful planning and the availability of energy storage and other resources to fill in gaps. But the low costs of wind and solar create huge incentives for grid operators and companies to figure out how to make it work, Nemet said.

“It just makes so much sense to do as much as we possibly can with these things that are affordable now and becoming cheaper and becoming better,” he said.

This economic reality makes it easier for negotiators at COP26 to envision a path to net-zero—not easy, but easier.

---

Other stories about the energy transition to take note of this week:

Taking a Closer Look at Climeworks’ Direct Air Capture Plant: The company that is pioneering direct air capture has been operating its plant in Iceland since September, showing what this technology looks like in real-world conditions. “It does give you extra satisfaction to know that you’re helping the planet instead of damaging it,” said Stephan Hitz, a service technician at the plant, in this story by Peter Wilson of The New York Times. 

Maine Voters Reject Power Line Project: A plan to build a power line to connect Quebec to Massachusetts has been dealt a blow by Maine voters. A clear majority of voters approved Question 1 on Tuesday, a referendum that would ban construction of the New England Energy Connect project, as Tux Turkel reports for the Portland Press Herald. Supporters of the line say they have grounds to challenge the referendum in court. Developers of the project have already begun construction, even though they knew this vote had the potential to prevent completion of the line. Opponents of the project feared that the line would harm the North Woods, and they didn’t like the idea of Maine serving as a conduit for Massachusetts to get inexpensive electricity. Supporters of the project said the referendum campaign was an effort by fossil fuel interests to limit the flow of hydropower into New England. Environmental groups were not unified on the issue as they weighed the value of preserving forest land against the need to increase the use of renewable energy.

Xcel Energy Sets Goal for Carbon Neutrality of Gas Utility: Three years after Xcel Energy set a goal of getting to net-zero emissions in its electricity generation by 2050, the company says it wants to reach a similar target for its natural gas system. Minneapolis-based Xcel aims to reduce emissions by replacing some gas with hydrogen and plugging leaks in its distribution, among other steps, as reported by Mike Hughlett of the Minneapolis Star Tribune. It’s not clear how those steps would get the company to carbon neutrality, which is one reason that environmental groups were pleased to see Xcel’s announcement but also would like to see more details.

Illinois Solar Companies Optimistic as Incentives Return: After a difficult year, Illinois solar businesses are excited to see that state incentives are returning after the governor signed a sweeping clean energy bill in September, according to Kari Lydersen of Energy News Network. “I was running on my last fumes. My solar opportunities were drying up,” said Lisa Albrecht of All Bright Solar. The state has restored and expanded support for rooftop solar and other clean energy, and some of the programs are now getting running. Companies like All Bright Solar are signing up new customers, and they may be able to salvage what previously was looking like a lost year.

Inside Clean Energy is ICN’s weekly bulletin of news and analysis about the energy transition. Send news tips and questions to [email protected].