Carbon capture with storage: a new frontier for biomass?

Friday, April 27, 2018

As power prices have dropped consistently over the past decade, partly due to government renewable energy credits awarded lopsidedly to wind and solar, we have worked to ensure our members are capturing the many public benefits provided by biomass power. Aside from shoring up forest-based economies in many parts of the country, biomass can be credited with providing an incentive for healthy forest management, and with utilizing materials that need disposal. Yet, our members are only paid for the kilowatts of power they are able to put on the grid—a value that fails to adequately compensate biomass power facilities, and doesn't account for the carbon benefits of biomass. Two recent developments, by Congress and in the state of California, may provide some additional benefits.

Earlier this year, Congress passed a much-hyped tax reform package. While the new tax brackets and corporate tax rates got the most media coverage, one provision in the bill could lead to drastic changes for some fuel-based energy technologies. The so-called 45Q provision establishes a tax credit per ton of carbon captured from power facilities. The legislation, sponsored by Sen. Heidi Heitkamp, D-North Dakota, was geared toward helping fossil fuel power generating stations benefit from reducing their carbon emissions, but it has potentially significant implications for the biomass power sector.

To be eligible for the credit, companies have to capture carbon dioxide produced from burning fuel, and then use it for a specified purpose: geological storage, enhanced oil recovery, or selling it commercially as a product, or a component of a product. The highest credit—up to $50 per ton—is awarded to companies that are able to store carbon dioxide geologically. The new law offers significant improvements over previous tax programs. The new program has an in-service date of 2026, and offers a 12-year stream of credits. This is in contrast to the previous 45Q, which was capped, and failed to offer any long-term certainty for investors in carbon capture.

While Congress enacted 45Q, the California Air Resources Board is busy amending that state's Low Carbon Fuel Standard. CARB's recently proposed amendment seeks to provide an enhanced carbon intensity score where alternative fuels, including power from biomass, deploy carbon capture and storage technology. Importantly, these same amendments also seek additional benefits for power producers, including biomass, where power is used as a fuel for electric vehicles.

We are working with our members to look closely at carbon capture in the context of 45Q and the LCFS. We’re also talking to coalitions and carbon capture advocates who can help us make sense of the new credit, and stay up-to-date on the new technology.

To be sure, there are still a lot of questions and obstacles to overcome before biomass can take full advantage of 45Q. For starters, the technology for capturing carbon is still very expensive, and even the high end of the credit probably doesn’t make carbon capture pencil out for biomass quite yet. But 45Q and changes to the LCFS could be an important next step in earning biomass power the compensation it deserves for providing long-recognized carbon benefits

Bob Cleaves is President of Biomass Power Association