Fossil-Fuel Options for Power Sector Net-Zero Emissions with Sequestration Tax Credits

Abstract

Three of the main challenges in achieving rapid decarbonization of the electric power sector in the near term are getting to net-zero while maintaining grid reliability and minimizing cost. In this policy analysis, we evaluate the performance of a variety of generation strategies using this "triple objective" including nuclear, renewables with different energy storage options, and carbon-emitting generation with carbon capture and storage (CCS) and direct air capture and storage (DACS) technologies. Given the current U.S. tax credits for carbon sequestration under Section 45Q of the Internal Revenue Code, we find that two options: (1) cofiring bioenergy in existing coal-fired assets equipped with CCS, and (2) coupling existing natural gas combined-cycle plants equipped with CCS and DACS, robustly dominate other generation strategies across many assumptions and uncertainties. As a result, capacity-expansion modelers, planners, and policymakers should consider such combinations of carbon-constrained fossil-fuel and negative emissions technologies, together with modifications of the current national incentives, when designing the pathways to a carbon-free economy.