The Biden administration is racing to finalize $1.2 billion in grants to spur the development of industrial installations that can pull massive quantities carbon dioxide out of the air.
But the Department of Energy’s bid to supercharge the nascent direct air capture industry is just getting started, with the ground rules for a $2.4 billion DAC hub funding competition set for release as soon as next year.
The outcome of that competition is expected to lead to the construction of DAC megaprojects in at least two more American communities and could have significant ramifications for the corporations, venture capitalists and environmentalists that are invested in the success of the emerging climate technology. Climate scientists believe widespread deployment of DAC and other carbon removal technologies will be necessary for the planet to avoid dangerously overheating.
So which companies and communities are most likely to be chosen for the remaining DAC hubs — and the billions of dollars DOE has set aside to help develop them?
Proposals that nabbed the biggest awards during the first funding round in August probably have a leg up on future DAC hub prizes, industry observers say, but technological advancements could result in some surprising winners.
The most important factor DOE will consider next time is probably “readiness,” said Peter Findlay, the director of carbon capture economics at the research firm Wood Mackenzie. “How are you solving — or at least covering up — the challenges you have going forward towards scale?” he said of the potential applicants.
Development teams that got the most money in the first round “have been able to demonstrate to the government that they’ve got a better plan to deal with costs and to deal with the scale-up, or they have enticing technology,” Findlay added.
DAC plants use fans, filters, piping and power to remove carbon dioxide from the atmosphere and store it underground. They could also use the concentrated CO2 to make products like concrete and carbon-neutral plastics or fuels.
DOE has tentatively committed to spending roughly $1 billion to defray the costs of constructing two of four congressionally mandated DAC hubs. The agency also promised to spend nearly $100 million to help advance 19 other DAC hub proposals in varying states of development.
Most of the winning DAC hub proposals were awarded $3 million or less to help fund early stage feasibility studies. Those are intended to examine potential hub locations, ownership structures, business models, carbon storage or usage options, and technology partners.
But five more advanced proposals won between $10.2 million and $12.5 million for front-end engineering design work. The so-called FEED studies will focus on the technical requirements of the projects and seek to estimate their overall costs.
The handful of projects in the engineering stage of development are aiming to build DAC hubs in California, North Dakota, Alabama, Wyoming and the Southwest's Four Corners region. Winning applicants include the oil company California Resources Corp., the carbon utilization firm Twelve and the Swiss DAC firm Climeworks, which operates the world's largest — and only — commercial DAC facility in Iceland. Climeworks is also developing DAC plants in southwest Louisiana — one of two large DAC hubs selected by DOE.
For any of those engineering-stage projects to win DOE backing as one of the last two hubs required by 2021 bipartisan infrastructure law, they would need to present a technologically and economically viable plan to initially capture at least 50,000 metric tons of CO2 per year and eventually scale up to 1 million tons of annual removal capacity. Climework's Orca facility, by comparison, is only capable of removing 4,000 tons per year.
"I think it would be reasonable for there to be a progression and for DOE to be looking at those five projects as contenders, certainly, for the subsequent two hubs," said Sasha Stashwick, the director of policy at Carbon180, a carbon-removal advocacy group that's taking part in the Community Alliance for Direct Air Capture proposal, which received $3 million from DOE to do a feasibility study of a publicly owned DAC hub in California's San Joaquin Valley.
DOE did not respond to a request for comment.
How many DAC companies will succeed?
At the same time, Stashwick argued that the DAC hub competition wouldn't be a make-or-break moment for most of the proposals and the companies involved.
"DAC deployment is not going to be limited to four projects," she said, noting that the hub funding program is helping to commercialize a broad range of DAC technologies.
"That's the whole intention behind federal deployment incentives: to de-risk the technology so that it can deploy in the marketplace in a way that's not as reliant on the public cost share," Stashwick said. "So I think it's totally plausible that some or even many of these projects will find pathways to eventually get built, even if they're not ultimately selected by DOE [for hub development]."
Findlay, of Wood Mackenzie, is less optimistic about the potential for a diversity of DAC technologies to succeed.
It's more likely, he argued, that only a few companies will master the design, manufacturing, construction and operational efficiencies needed to reduce the cost of removing carbon from around $700 per ton today to a price that's closer to what most companies and governments are willing to pay. The Biden administration, for instance, has proposed increasing the social cost of carbon used in some federal decisionmaking from $51 per ton to $190.
But the ultimate winners in the race to commercialize DAC could be startups that are currently only involved with feasibility studies.
"You might have some come from behind and leapfrog" the existing market leaders like Climeworks and Occidental Petroleum, Findlay said. The oil company is developing two major DAC installations in Texas, one of which was selected by DOE to be a regional DAC hub.
Early stage DAC hub proposals, he explained, could surpass those in the engineering phase if the technologies they're considering turn out to be radically cheaper or more efficient than others on the market today.
Yet there will also be losers, Findlay predicted.
"Some of these projects will remain really, really expensive and totally economically unfeasible," he said. "When people talk about a bubble in DAC, they're concerned that the prices won't come down. And so the idea that all 19 would be able to bring their costs down, that would surprise me."
Reporter Carlos Anchondo contributed.
