The U.S. Department of Energy (DOE) recently announced a $3.5 billion funding opportunity to create regional Direct Air Capture (DAC) Hubs. The DAC Hubs program is one of four new programs announced by the Biden-Harris administration aimed at building “a commercially viable, just, and responsible carbon dioxide removal industry,” in the U.S. with funds from the Bipartisan Infrastructure Law (BIL).
Under the DAC Hubs program, DOE will invest $3.5 billion, over five years, to develop four regional DAC hubs that will accelerate the demonstration of commercial-scale process, transport, geologic storage, and conversion of CO2 from the atmosphere. The BIL directs DOE to select at least two hubs—to the “maximum extent possible”—for development in “economically distressed communities” with large coal, oil, or natural gas resources.
The first funding opportunity announcement (FOA) under the DAC Hubs program, DE-FOA-0002735, makes more than $1.236 billion available to begin “conceptualizing, designing, planning, constructing, and operating direct air capture hubs,” with additional funding opportunities to follow.
According to this FOA, each DAC hub is intended to:
- Facilitate the deployment of direct air capture projects;
- Have the capacity to capture and “sequester, utilize, or sequester and utilize” at least 1,000,000 metric tons of CO2 from the atmosphere each year, either from a single unit or multiple interconnected units;
- Demonstrate the capture, processing, delivery, and sequestration or end-use of captured carbon; and
- Potentially develop into a regional or interregional carbon sequestration or utilization network
The capacity required of DAC hubs is quite notable given the current state of DAC technology. According to an April 2022 report from the International Energy Association, the current global cumulative carbon capture capacity is just shy of 8,000 metric tons of CO2 each year, provided by just 18 facilities largely in Europe, Canada, and the U.S. The same report notes that the world’s largest DAC facility, located in Iceland, captures 4,000 metric tons of CO2 each year.
Three Options Available for Direct Air Capture Hub Funding
The FOA provides three different options for DAC hub funding, called Topic Areas, which vary based on technical maturity level. Each topic area is subject to cost share and technical requirements.
Topic Area One. This topic area focuses on early-stage efforts to explore the feasibility of potential hub locations, ownership structures, business model development, CO2 storage/use options, technology partners, stakeholder engagement, and community benefits. The FOA provides up to $3 million for up to 12 projects in this topic area. The FOA anticipates that projects in this topic area may last up to 24 months. Applicants in this topic area may be eligible for additional funding under a subsequent FOA for more advanced phases of development.
Topic Area Two. This topic area focuses on projects that have already completed some of the necessary feasibility-stage activities discussed in Topic Area One and are ready to pursue a front-end engineering design (FEED) analysis and advance permitting efforts. The FOA provides up to $12.5 million for up to 8 projects in this topic area. The FOA anticipates that projects in this topic area may last up to 24 months. Applicants in this topic area may be eligible for additional funding under a subsequent FOA for more advanced phases of development.
Topic Area Three. This topic area focuses on projects that have already completed a FEED analysis and are ready to move into the project development phase. The FOA provides up to $12.5 million for up to 8 projects in this topic area. The FOA anticipates that projects in this topic area may last up to 10 years.
Broad Applicant Eligibility, Partnerships Across Direct Air Capture Hubs Allowed
Public and private entities are eligible to apply, including DAC technology developers, nonprofits, academic institutions, state and local governments, and others. Parties are permitted to formally partner in the creation of multiple DAC hubs, subject to some ownership structure limitations.
Some Carbon Dioxide Removal (CDR) Technologies Ineligible for Direct Air Capture Hub Funds
Non-DAC Carbon Dioxide Removal (CDR) technologies are ineligible for federal funding from this FOA, though the technologies may be incorporated within a DAC hub. Ineligible CDR technologies include biochar, biomass burial, direct ocean capture, soil carbon sequestration, and afforestation/reforestation. CDR technologies may be eligible for tax incentives made possible by the Inflation Reduction Act.
Parties interested in applying to DE-FOA-0002735 must submit letters of intent by January 24, 2023, and full applications by March 13, 2023. DOE anticipates that awards will be announced in late summer or early fall of 2023.