Clearing the Air on Coal Carbon Capture and Storage
The Sierra Club retained Synapse to study the impact on coal plant economics of new tax credits for carbon capture and storage (CCS), which were increased and extended via the Inflation Reduction Act of 2022. This analysis was the first published investigation of coal unit economics if "partial capture"—CCS at a level below 75 percent of a facility's CO2—can qualify for tax credits under the amended tax code. To capture the costs and benefits of retrofitting a coal unit with CCS, Synapse developed a cash flow model that varied important parameters including coal unit size, the level of the tax credit, CO2 transportation and storage costs, and the rate of CO2 capture.
Synapse found that even at a capture rate as low as 22.5 percent, CCS can dramatically improve the economics of an existing coal power unit and encourage it to run more often. In some situations, this effect may increase the amount of CO2 that a coal unit produces overall, even after accounting for CO2 that is captured. Higher levels of CCS improve existing coal unit economics by an even greater margin. Synapse's analysis was submitted to the IRS in response to its request for comments on the new 45(q) tax credits in December 2022.