“I’m a big fan of more wind and solar,” Mr. Mandelstam, a former wind developer, said. “But we haven’t yet figured out how to run a grid entirely on renewable energy. Until that happens, this project offers a reasonable way to keep the lights on, preserve jobs, and reduce the plant’s environmental impact.”
It remains unclear how many carbon capture projects will actually get built, particularly as Covid-19 roils the economy and oil prices plummet. The clock is ticking: Under current rules, the projects need to begin construction before 2024 to claim the tax credit.
Keith Martin, a lawyer at Norton Rose Fulbright who specializes in tax-financing deals for wind and solar, said he has seen increased interest in carbon capture from investors looking to lower their tax burdens. But, he added, there are still technical aspects of the I.R.S. rules, like how financial partnerships should be structured, that need to be clarified.
“The deals we are working on are largely stalled at the moment,” Mr. Martin said, “because the proposed regulations did not answer all the questions we have.”
In the wake of the pandemic, some policymakers have said that carbon capture may need a further boost. In a recent infrastructure bill, House Democrats proposed extending the tax credit’s deadline by two years and allowing direct payments to developers. Supporters hope that additional aid could help carbon capture go mainstream, much as federal subsidies have done for wind and solar.
“Getting this first round of projects up and running is critically important,” said Kurt Waltzer, managing director at the Clean Air Task Force, an advocacy group. “But if carbon capture is going to play a big role in decarbonization all over the world, in places like China or India, we’ll need to think on a much bigger scale.”